As consumer preferences shift faster than ever, consumer products (CP) companies must respond with speed, agility, and accountability. Despite high levels of technology investment, CP leaders worry their organizations still struggle to innovate at pace or reallocate resources effectively. In Bain & Company’s latest executive survey, one of the top concerns cited was the operating model.

That’s the backdrop for a large global CP manufacturer’s recent decision to transition from siloed project-based work to a product-based operating model. Struggling with widespread duplication of efforts within the organization, unclear accountability, and a central operational hub rated poorly by stakeholders, the company decided to move to a structure that gives cross-functional teams end-to-end ownership of digital products. Importantly, those teams will be supported by stable funding and given a mandate for continuous improvement.

What is product operating model?

Once the domain of tech companies, product operating model is spreading across industries, reflected in a tripling of mentions of the term in analyst earnings calls over the past five years (see Figure 1). In simple terms, it is an operating model that focuses business and technology talent on important work that delivers clear outcomes for the customer.   

In CP companies, product operating model is helping to move technology from something seen as a necessary support activity managed for cost to a critical accelerator of growth. 

Does product operating model work for consumer products companies?

In this model, product teams own everything from design through delivery and launch to maintenance. The benefits to CP companies include:

• effective integration of business and IT through persistent, cross-functional teams
• increased user centricity, with improved responsiveness to market changes, consumer needs, and business function demand
• continuous funding of prioritized technology investment based on strategic business impact
• faster delivery of new products to market
• a good balance between product innovation and maintenance
• improved resource allocation and reduced waste, increasing overall business value and maximizing returns on technology investments
• increased ownership and accountability, with performance measured by impact delivered
• higher team motivation and job satisfaction

The results are significant. Companies using product operating model have achieved up to a 60% reduction in product development time and a 36% reduction in development costs. Most importantly, they deliver better customer experiences and generate greater business value from their technology investments.

Overall, consumer products leaders using product operating model report being 1.2x more likely to get the right business value from their tech investments and 1.6x more satisfied with their product model adoption.

E-commerce websites and direct-to-consumer apps are often an ideal early testing ground for product operating model. As many CP companies edge closer to the consumer and fast-changing trends, websites and apps provide a frequently updated digital environment with close customer interaction in which to work out sticking points. For example, website and app deployment helped a beverage company identify challenges faced by its teams of technology and business experts in determining who is responsible for what.

Along the way, companies fine-tune the model. Albert Heijn, the Netherland’s largest grocery chain, ties its product teams to clear business metrics to ensure every tech investment drives impact. Walmart uses a “four-in-the-box” approach that brings business, product, user experience, and tech leaders together on every initiative decision. These teams have innovated faster, including launching new products such as 30-minute delivery in China.

And even within the same company, the model may be deployed in slightly different ways. A consumer electronics retailer opts for broader product team scopes and fewer dedicated product managers in its HR department, where technology is SaaS-based and tech investment is lower. But in retail media, which gets high levels of tech investment, the company uses focused teams led by specialists in advertising, pricing, and integration.

There are challenges to adopting product operating model, of course. Consumer products companies cite a lack of talent or technical expertise, system constraints, and unclear roles and responsibilities as key barriers to adoption.

How to adopt product operating model across the enterprise 

Adopting product operating model starts with changing how work is done in an organization. This includes defining a set of enterprise-critical products, assigning owners and teams to them, and then reshaping how those teams engage with the rest of the business. Many companies start with a diagnostic assessment of their current performance across several dimensions—for example, funding processes, tracking value, product team practices, and cross-functional collaboration—and then compare their results to competitive benchmarks.

This helps identify opportunities that companies then prioritize and assign to cross-functional teams to address.

In addition to implementing the standard product model best practices, high-performing organizations emphasize three strategic priorities:

1. Shift the mindset and incentives. Break down functional silos that separate business and tech by building cross-functional teams focused on product outcomes. Then reward team members based on product impact and business value created.
2. Empower product managers with end-to-end ownership. Cross-functional teams should act as unified groups focused on specific customers or consumer outcomes. Ensure product manager roles are held by top talent and train them in the skills needed to lead these efforts. Companies whose executives believe their product managers have the right skills are three times more likely to report getting the right business value for their technology investment and delivering best-in-class customer experiences, according to Bain & Company research.
3. Start small, then scale. Pilot in areas with modern technology and fewer barriers—such as marketing—to prove the model. Then use early wins to refine the model and scale it.

Flexibility is one of product operating model’s greatest strengths. As adoption deepens, companies begin to move faster, operations grow stronger, and investments are more effective. Product operating model becomes the basis on which tomorrow’s leaders can set themselves apart—by meeting today’s demands and seizing tomorrow’s opportunities.