So, product organizations rise or fall based on the quality of the products they sell, right? Not so fast. The consumer landscape is no meritocracy. A product can succeed through business acumen, good planning, and clever marketing—even without addressing what consumers want, need, and do not want to live without.

However, many product organizations have sacrificed the careful planning and focus on user centricity that can sell or set customer expectations. As complex digital products became exponentially more difficult to manage, product organizations embraced Agile and minimum viable product (MVP) cultures that moved them from thinking to doing. The focus on features, iteration, and incremental improvements has created more complexity and silos for organizations—while eliminating the opportunity to develop an effective vision for the future of their product.

Product teams have never shipped more, but in many organizations the operating system they run on is still tuned for projects, not durable products and outcomes.

What do we mean by “product”?

Here, “product” is anything an organization creates and offers to its customers, including traditional physical products, digital products, and services. Things like websites are components of channel experiences, but are often not considered products, per se. However, for the purposes of this piece, websites are considered digital products. The loose nomenclature of what is considered a product has contributed to organizations losing their focus.

Should my company be a product organization?

Structuring a company as a product organization can make sense, but not every company should. If the core strategy of your business is to focus on developing, selling, and improving products, it aligns organizational resources to the product with a clear focus that can drive market success. In considering how to structure your business, product companies should weigh several factors:

• Market dependence: Success is tied to market demand and shifts, and technological changes can affect profitability.
• Innovation pressure: To stay relevant, there is a need for continuous innovation and iteration, which can require considerable resources.
• Risk concentration: If offerings are not diversified, more is at risk if a product encounters major challenges.
• Product lifecycle management: Launching, growing, maturing, and sunsetting a product requires strategic planning.
• Competition: Competition can be fierce, and differentiation is not optional.

Over time, the traditional structure of product organizations became inefficient, which led many to break out into functional silos such as design, engineering, and marketing. This division of teams produced a host of problems:

• Communication and collaboration challenges: Teams in different silos struggled to communicate and collaborate effectively, leading to delays, rework, and frustration.
• Slow decision-making: Decisions often flowed through a long chain of command, slowing response to market changes.
• Focus on features, not customer outcomes: Traditional product organizations prioritized delivering new features over solving customer problems, producing overloaded products with unused capabilities.
• Misaligned metrics: Siloed product orgs created mismatched expectations between groups. In the absence of a holistic view, teams aligned to metrics that did not tell the full story of success.

Another contributor to the problem is that product managers bore the dual responsibilities of delivery and iteration while also taking on the long‑term product vision—something that cannot be done well without business strategy chops. Efforts to improve through continuous delivery became more tactical and less strategic. The product manager sat several tiers below those who fashioned the long‑term digital product strategy, and product teams became disconnected from shaping the strategic vision.

Product strategy has to exist as a horizontal layer that touches every part of the product organization.

Breaking out of entrenched trends

Going forward, product orgs need to break out of the trends they are entrenched in and reimagine what a product company should be. Rethinking how they behave means embracing new frameworks, methodologies, and mindsets that promote innovative thinking. It will require strategic thinking from the entire team that puts the focus back on the end user.

Anticipation cannot be the only change product organizations make. The digital landscape continues to evolve with new demands and requirements that require organizations to excel at adaptation as well. Product strategy needs to exist as a horizontal layer that touches every part of the product organization. The next big shift in organizational structure will be to focus heavily on flexibility, collaboration, and technology‑driven models. Several key trends are emerging:

• Flat organizational structures: Emphasis on self‑management, small teams, and frequent reiteration. These structures favor flexibility and adaptability and have fewer hierarchical levels.
• Emphasis on purpose and values: Organizations form around a core purpose or set of values that help attract and retain aligned employees, boosting morale and productivity.
• Use of AI and automation: Automation streamlines basic tasks, allowing employees to focus on more strategic initiatives and stay connected in modern remote environments.
• Decentralization: Technology enables decision‑making power to be distributed throughout the organization, improving agility and responsiveness.
• Product‑led growth (PLG): The product becomes the primary means of acquiring and converting customers, requiring deep understanding of user journeys and a commitment to responding to feedback and behavior.
• Horizontality: Avoid siloing product management apart from engineering, design, and marketing. Horizontal ownership and governance increase oversight of business‑driving product work and how ecosystems achieve outcomes.
• Education and iteration: Embrace the feedback loop—ideate, iterate, input, repeat—and distinguish between mere improvement and true advancement.
• Focus on outcomes: Rather than chasing constant incremental improvements or new features, ensure efforts are oriented toward commonly understood goals. Siloed organizations frequently fail here by impeding alignment on outcomes.

Several product companies have reevaluated

In 2012, Spotify structured its product organization around cross‑functional Squads, Tribes, Chapters, and Guilds. Each Squad is a nimble and autonomous team focused on changes and course corrections for specific tasks or products, such as music discovery or personalization. Tribes are essentially departments, Chapters are specialized groups that focus on skills or disciplines (such as design or development), and Guilds are more informal communities unrelated to specific product work. This model is a flat‑hierarchy Agile structure designed to encourage flexibility, collaboration, innovation, and engagement.

However, since adoption, the delegation of decision‑making related to Agile processes was never fully realized—at least partially because of an unmet need for Agile coaches.

Arguably, this was a case of “transformation theater” where a company claims to undertake a digital transformation but does not enact substantive changes to enhance business outcomes. Some key characteristics of transformation theater include:

• Superficiality: Declaring changes that are never fully integrated into business workflows.
• Insubstantiality: Creating an innovation mirage through press releases and social posts rather than real change.
• Prevarication: Announcing change externally while lacking internal commitment from all relevant stakeholders.
• Cultural stasis: Focusing on surface‑level tech while avoiding comprehensive culture change.

Organizational change and digital transformation can be long and grueling processes, and it may take longer than expected to see ROI. Producing transformation theater, however, can undermine a company’s credibility and make that ROI unattainable. True and lasting change aligns people, processes, and technology to the organization’s strategic goals. In the worst cases, attention centers on transformation as a process rather than a shift to valuable business outcomes.

A better way

Microsoft successfully restructured itself in the 2010s. Facing evolving market demands and technological advancements, CEO Satya Nadella led the company through several strategic shifts. A move to cloud‑based services not only prompted internal change, it also catapulted Microsoft into a leadership position in the space.

Dismantling silos was a key factor in reversing internal competition and inefficiency. Microsoft also had the vision to recognize that a shift away from desktop computing would unlock the potential to provide better experiences. By becoming platform‑agnostic, Microsoft could drive revenue growth with its applications, increase its stock value, and become more adaptable to market changes.

Unlike Spotify’s empty promises, Airbnb followed through with structuring its product organization around cross‑functional pods. By pioneering innovations in its business model, Airbnb leaned into a holacracy‑like model—a kind of flat org—in which teams were organized around projects that could be iterated upon. Each pod was responsible for a specific customer journey, such as the booking process or the post‑trip experience. These small, nimble groups were empowered to make decisions and take action without navigating a long chain of command.

Another giant in the industry, IBM, made dramatic changes over the past five years. The company created a new standard for how a legacy product organization can rethink its business model and structure. Rapid technology changes and increasing competition in cloud services, artificial intelligence, and data analytics forced IBM to focus on high‑value, high‑growth areas to stay competitive.

In April 2020, Arvind Krishna became CEO and led a restructuring that began with the sale of non‑core segments to focus on hybrid cloud growth and AI. IBM had already invested heavily in its hybrid cloud platform through the acquisition of Red Hat in 2019. Much like Microsoft and Airbnb, restructuring became an opportunity to be both nimbler and more thoughtful. These changes augmented financial performance and repositioned IBM as a fierce competitor, ready to capitalize on enterprise trends like flexible and scalable solutions.

Rethinking the structure of product organizations is certainly a challenge, but the rewards will almost certainly justify the effort. It requires a significant change in mindset and culture. Organizations can adopt flexible strategies and structures, lean on existing technology investments, and focus on cross‑functional teamwork and customer‑centricity. This will likely require a courageous redefinition of roles and responsibilities across the company.

As the examples of Microsoft, Airbnb, and IBM demonstrate, the benefits are clear: product organizations structured around cross‑functional teams are more agile, adaptable, and customer‑focused.

Product organizations must make a concerted effort to bring strategy back to product strategy. It is essential for success in the contemporary world. Whether an organization lacks alignment and vision, cannot get ahead of rapid market changes, or wrestles with resource constraints, boldly embracing structural shifts can lead to significant competitive advantage—ensuring the product organization not only survives, but evolves and thrives in the digital age.

Reorganization is not about theater—it is about building a product structure that can respond to uncertainty with clarity, speed, and a ruthless focus on outcomes. If your product organization feels busy but misaligned, it might be time for a braver structural rethink.