Product-Led Teams: How Outcome Teams are Replacing Functional Silos

Have you ever undergone a reorganization in your company and found yourself thinking and acting differently towards your colleagues? 

In this article, we will explore how organizational changes can impact business growth and how to learn from the errors and successes of fast-growing product-led companies.

We’ll walk through: 

• How fast growth can lead to hidden problems.
• How departmental silos waste time and money.
• Why cross-functional teams lead to growth.
• Characteristics of effective cross-functional teams.

Then I’ll share two case studies from Supercell and Wayfair. 

But first, I’d like to share an experience I had working at a product-led company.

I was a Product Manager and worked alongside a Product Marketing Manager who had a different VP. We were responsible for the same product line, so we worked together. 

He was smart and did his job, but we didn't see eye-to-eye on a lot of things. We met every couple of weeks, but it wasn't until there was a  structural reorganization that we were put under the same VP. 

After that, everything changed. 

After the reorganization, we had the same responsibilities as before, but we started meeting almost daily and truly collaborating. 

My respect for him grew. 

He later shared that he also had a positive experience working directly with me. 

This made me realize:

Change the system, and you change how people act. Change how people act, and you change how they think.

How fast growth can lead to hidden problems

Another example comes from a company I worked with a few years ago. They had initially grown really fast, reached product-market fit, produced multiple products, and expanded into multiple countries. 

But when they hit 100-200 employees, the momentum started to slow down: their growth, pace of innovation, and productivity slowed down. Even when they shipped new features, they were not hitting the same targets as before. 

The company struggled. 

After a one-on-one with the CEO, he told me, “ Bruce, I don't think the real problem is the roadmap. I think the real problem is culture.” 

He thought that because they had grown rapidly and hired so many people in such a short period, they hadn't hired the same caliber of talent, dedication, and entrepreneurial spirit as they'd had in the past. 

I met and worked with some of these people, but I didn't think that was it. 

I wanted to know what was really happening on the ground and how it compared to how things were in the past. So I reached out to employees. 

What I learned was that they had significantly grown their departments. 

They had expanded the sales, product, architecture, design, engineering, and marketing teams.

Asking further questions, I learned that the leaders of those departments were solely focused on their own department and lost sight of the big picture. 

Here’s how departmental silos kill growth

The company’s new feature release cycle revealed an issue in its organizational structure.

First, sales identified a gap in the marketplace. 

Then, they would hand it off to the product, who would define a solution. 

Afterward, the architects would receive the solution. They would say, “Well, that's not quite right!” 

They would redesign it. 

Then they hand it off to design, who says,  “No, the customers won’t  understand that!” 

So they would redesign it again.

After multiple steps like this (and delays), engineering would be under enormous pressure to deliver something quickly. They would build what they could with the time they had and budget constraints. By the time they built it, it was so far removed from the original problem. 

By the time sales tried to sell it, the product would immediately flop and the gap between the original idea and what was shipped was enormous. 

Sales would perceive that gap in the whole process, and as a result, start from the beginning. 

This isn’t the first time I’ve seen this. Rapid growth leads to the specialization of roles. That specialization leads to functional departmental silos, which leads to communications traffic and overhead that slows everything down. 

Since part of the problem was the multitude of communication points between different departments, the company hired professional communicators and coordinators to manage handoffs. This resulted in more communication, which slowed the process down even more. 

The situation was even worse than it appeared.

Since entire teams were performing certain functions instead of one person, the number of communication channels was multiplied by the number of initiatives and the number of people in play.

Soon, a gigantic tangled traffic of communication throughout the organization slowed everything down to a near standstill.  

As a result, they shipped even less frequently and less effectively. 

Ultimately, we traced this back to departmental silos. They were the problem. 

How cross-functional teams can lead to growth

With the problem abundantly clear, we started to ask ourselves:

What if we set up a team of people that included all the necessary functions and would be responsible for a product, project, or initiative from beginning to end?

So we turned the organizational structure on its side. These new teams would be responsible for ensuring that something effective was shipped on a timely basis and meeting the goals set for the project.

This is what we call cross-functional teams.

With cross-functional teams, the necessity for cross-team coordination is no longer necessary.

Here’s how this plays out.

B2C Organizations

In B2C organizations, cross-functional teams have different functions. They may have content and analytical people, and they may be organized by stage of the funnel (i.e., activation and retention). 

Airbnb uses cross-functional teams to grow its user base. Each team is dedicated to solving a problem (i.e., increasing traffic, improving onboarding, and increasing retention).

B2B Organizations

B2B teams are frequently organized by customer needs, either by a segment of customers that have a common need or by one need that a given segment of customers has, depending on the scale of the organization.

Regardless of whether it's B2B or B2C, it is effective to organize with teams with all the resources necessary to make a saas product management plan successful.

Characteristics of effective cross-functional teams

Cross-functional teams reduce communications overhead and commit people to reach goals while working within their small team. 

The fundamentals of cross-functional teams

1. They should be complete: They have all the resources, skills, and authority to create a strategy, make decisions, and execute those decisions to make the product successful. 

2. They should be dedicated: Each member should not be shared with other teams. They are available full-time on this particular product. 

3. They should be long-lived: These teams should work together as long as the product, segment, or the stage of the funnel needs work, which could take months or years. 

4. They should be autonomous: Additionally, they should not be dependent on other teams and should be able to determine their own direction. 

With cross-functional teams, the lines of communication become automatic, so you don't have to have excessive meetings, memos, or documentation. 

The product-led team hangs together, communicates organically, and focuses on the product to make it successful. Ultimately, you bring them together holistically.

By applying this model throughout the company with multiple products and initiatives, each initiative had a dedicated, complete, and autonomous team. 

Case Study 1: Supercell

There is a tiny Finnish games company, Supercell, whose organizational structure abides by the principle of cross-functional teams. 

They’re broken down into teams of five to seven people – marketers, engineers, saas product management people, designers, and artists. Each team is responsible for a game; they design, create, market, and ultimately make it successful.

At one point, Supercell was the fastest-growing game company in the world.

Clearly the model works and scales well.

Case Study 2: Wayfair

Wayfair doesn’t measure its success on the number or the quality of images they produce. Instead, they focus on their business results metrics.

For example, to verify the images are of good quality, they measure ‘add-to-cart’ rates to verify that the images are accurate. Then they measure return rates.

More than 100 people dedicated the results. The team consists of designers and photographers, as well as saas product managers, engineers, and analysts. 

The new role of the General Manager.

The new General Manager role is a growing trend in product-led companies. General managers have all the traditional responsibilities of SaaS product management but with additional responsibilities.

Here’s how General Managers differ from product managers:

• They own one or several products for a market segment. 
• Product Management reports to them.
• They direct all necessary resources.

 HubSpot, Wayfair, Trip Advisor, Shopfully, Toast, and LogMeIn organize this way. 

After working with Wayfair and reorganizing to include a General Manager, I asked the CEO how it was going. 

He said: 

 He was thrilled with the results. And so was everybody else in the company. 

We changed the system, and we changed how people acted. We changed how people acted, and we changed how they thought. 

Did we defund the department? 

Not exactly.

There is still a CTO of these companies. And I asked one CTO after the reorganization had been in place for his thoughts on how things had changed in the organization for him. 

He said: 

That's the key to success in changing the culture within the organization, by setting up the system for success and setting it up for being product-led.