In pursuit of efficiency and improved customer outcomes, many firms are implementing a Product Operating Model (POM). Books such as Transformed by Marty Cagan have created a cult-like wave of POM hype and associated tools, products, and services. But is a Product Operating Model right for you?

What is an Product Operating Model?

A Product Operating Model (POM) is a style of operating model that organises a company's teams, processes, and technology around a product, aligning everyone to deliver customer value continuously and efficiently, moving from project-based work to a product-centric, lifecycle approach with empowered, cross-functional teams focused on outcomes. It bridges strategy and daily operations, ensuring alignment on customer needs, fostering innovation, and improving agility through iterative feedback-based iteration, unlike traditional structures focused on functional silos.

In the right situation, implemented well, it can

  • Improve adaptability & innovation: Faster decision-making and adaptation to market changes.
  • Enhance customer satisfaction: Deep focus on solving user needs.
  • Increase alignment: Connects business strategy with daily execution.
  • Greater efficiency: Streamlined processes and clear accountability.

The key here is in the right situation, implemented well.

product operating model

Commoditised

I have been involved in the Agile movement since 2002. I saw agile emerge as something with the potential to truly deliver better products, better business outcomes, and better workplaces. Then I saw it mature and quickly become commoditised, hyped, and sold. Agile became a buzzword, and all of a sudden, Deloitte was Australia’s preeminent agile transformation firm, and McKinsey could reduce your organisations cost base by 30% with Agile.

Every executive suddenly wanted agile, and the word got generously sprinkled in strategies, mission statements, job descriptions, and executive updates. Everything was agile, and agile was needed for everything.

Agile

 

Now that everyone was “going agile”, the problem of scaling agile arose. Agile was based on small teams so now enterprises needed to know how to scale it.

And with perfect timing, along came SAFe, beautifully packaged, thoroughly detailed, one-size-fits-all solution. All you had to do was install SAFe, and you would be agile! The agile community was appalled.

Around the same time, Henrik Kniberg & Anders Ivarsson open-sourced a whitepaper, sharing how Spotify, a music streaming business they were working at, had approached agile organisational design. It quickly became known as The Spotify Model, and people started implementing it in their businesses, ignoring the explicit warning from the authors not to copy it, as it was designed for their particular businesses at a specific point in its journey.

SAFe and The Spotify Model were exactly what the large, latecomer, consulting firms wanted – a productised version of agile that could be sold to all those executives wanting a quick and easy shortcut to “go agile”. Even better, as a productised package, it could be delivered by cheap, inexperienced graduates. It didn’t matter that Spotify was the model for a streaming music startup. It didn’t matter that SAFe ignored what the business currently already had in place. Suddenly, agile could be everywhere and everyone could be an Agile Coach.

Agile was finally compatible with the Big Consulting model.

And now the same is happening with the Product Operating Model. In a similar frenzy, we are seeing organisations rush to implement a Product Operating Model without adequate consideration.

The Cookie-Cutter Trap: Structure Without Strategy

There is a certain attractiveness in copying what someone else has done. It feels less risky, because someone else has already done it, right?

Wrong. This is the trap. And every day we talk to organisations that have been burnt by this, costing millions in failed transformations, disrupted teams, and abandoned initiatives

The mistake is treating operating models as one-size-fits-all solutions. They aren't. Many organisations implementing a Product Operating Model haven't stopped to ask whether it's the right model for them.

We recently worked with a company that made this exact mistake. Over a century, they'd built a remarkable business, based on a deep, trust-based relationship with their customers. Some staff knew customers personally. Claims adjusters had the authority to make exceptions because they understood the context. Their competitive advantage wasn't product or innovation—it was intimate customer knowledge and the ability to customise solutions.

So what did they do? They implemented a Product Operating Model because that's where the industry was moving. They broke their services into “products” and around these. The structure looked right. It was what everyone else was doing.

When we asked them, "What has made you successful?" the answer wasn't "our products”.  It was “understanding our customers” and “going the extra distance to serve them." They were not a product-centric company. They were a customer-centric company. A customer-focused operating model would have been far more powerful than a product-centric one.

 

Getting Your Strategic Foundation Right

There are many different types of operating models, with the Product Operating Model (POM) as one of them, but before you choose which operating model, you need to understand what you're trying to win at. Two simple tools that can help with this are the Playing to Win model, and the Value Disciplines model.

Playing to Win

Playing to Win frames strategy as a small set of deliberate choices about where to play and how to win. Those choices only matter if the organisation is designed to support them—through appropriate capabilities, decision rights, funding, and governance. In that sense, the operating model is what turns strategy from intent into repeatable execution.

 

Strategic Product Operating Model choices

  • Where do you play? What markets, customer segments, and channels define your business? What are you truly excellent at serving? The insurance company played in commercial insurance for medium-sized businesses—they'd spent a century deeply understanding that specific segment.
  • How will you win? Which value discipline is your competitive advantage? Are you winning on cost? On innovation? On deep customer relationships? The insurance company's answer was crystal clear: customer intimacy. That was their moat, their defensible advantage.
  • What capabilities must be in place? Only once you've answered the first two questions do you consider your operating model. If you're winning on customer intimacy, you need a model that gives frontline teams customer context and real decision-making authority. If you're winning on product innovation, you need rapid experimentation and creative autonomy. If you're winning on operational excellence, you need process discipline and cost accountability.

The mistake many organisations make is to stop at these choices and assume alignment will follow. In reality, strategy only becomes real when it is embedded into how work is structured, funded, governed, and led every day. Your operating model is therefore not a downstream design exercise — it is the mechanism that makes your where to play and how to win choices visible in the behaviour of teams and leaders.

 

Value Disciplines Model

Treacy and Wiersema identified three fundamental value disciplines on which organisations compete, and in working with organisations across industries, we've seen that understanding these disciplines is critical to choosing the right structure.

 

 

  1. Operational Excellence: You win by being the low-cost provider. Your operating model emphasises efficiency, process optimisation, and continuous cost reduction. Think Pak n Save, or McDonald's —companies that have structured themselves entirely around ruthless efficiency. Every process is standardised. Every cost is examined. Their entire organisation is built to execute flawlessly at scale.
  2. Product Leadership: You win by being first to market with the most innovative solutions. Your operating model emphasises speed, creativity, and rapid commercialisation. Apple and Tesla didn't ask for permission to break conventions; they asked for funding to experiment. Their structures prioritise R&D, rapid iteration, and freedom to fail fast.
  3. Customer Intimacy: You win by delivering deeply customised solutions tailored to individual customers. Your operating model emphasises relationships, empowered decision-making at the frontline, and flexibility. At Radically, we have built our entire business around understanding what individual customers need. Our team have the authority to make decisions because they understand the customer context better than anyone else.

The key point is that you cannot excel at all three.

The resources, processes, incentives, and cultures that make you brilliant at one actively work against excellence in the others. You have to choose. And once you've chosen, your operating model must be designed specifically to support it.

The critical insight of the Value Disciplines model is not the labels themselves, but the trade-offs they force. Each discipline demands fundamentally different structures, decision rights, incentives, and leadership behaviours — which means trying to pursue all three inevitably creates tension, confusion, and mediocrity. Clarity about how you win is, therefore, a prerequisite for designing an operating model that actually works.

Designing and Implementing the Operating Model

We work with organisations that recognise the importance of designing an operating model that fits their business and will optimise their ability to deliver their strategy.

This isn't about implementing a predefined model. It's about undertaking the complex heavy lifting of deeply understanding the organisation—the history, market, people, and capabilities—making strategic choices and then co-creating an operating model that flows from that understanding.

This involves a holistic redesign of the

  • Governance: the framework to plan and prioritise work, translating organisational strategy into a clear cadence of objectives, goals, and delivery plans that align day-to-day activity with desired outcomes.
  • Structure: In an operating model, organisational structure defines how work is divided, coordinated, and governed so that people and responsibilities are aligned to deliver the organisation’s strategy and value proposition.
  • Leadership & Culture: the behaviours, values, and practices modelled by leaders and adopted across the organisation, shaping the environment, mindset, and lived experience of how work gets done.
  • Ways Of Working: the practices, processes, methodologies, and behaviours that define how work is planned, executed, and managed, creating clarity and consistency in how people collaborate, communicate, and deliver organisational goals.
  • Future Capabilities: the skills, processes, technologies, and structures an organisation must develop to enable its strategy, adapt to change, and remain competitive as market demands evolve.

 

We recently worked with a large Australian energy company on exactly this challenge. They needed to accelerate delivery and respond faster than competitors in an intensely competitive market. But the real work wasn't picking a framework. It was understanding their business design: where they play, what makes them unique, and how they actually win.

The result? A custom operating model built around value streams, explicitly designed for their context and strategy. Not a template. Not something copied from a tech company. Something that worked for *them*.

The outcome speaks for itself: $6M in cost savings, dramatically accelerated delivery, reduced silos, and—crucially—people who actually understood why the structure existed and how their work mattered.

That's what happens when operating model design starts with strategy, not with structure.

op model flow

 

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Getting It Right

Getting your operating model right is utterly transformative. When your operating model reinforces your competitive advantage, something shifts. Strategy reaches teams. Execution becomes efficient. And your organisation moves with clarity and speed, not confusion and drift.

We've seen organisations transform when they finally align structure with strategy. Mercury and TrustPower merged two organisations with distinct cultures. Instead of imposing a template, we worked with their leadership to understand what unified success would look like—then designed an operating model to enable it. The judges called it "a masterclass in laying the right foundations for success." It won NZ Business Transformation of the Year.  The judges called it "a masterclass in laying the right foundations for success." It won NZ Business Transformation of the Year.

Origin Zero faced a familiar challenge: it had a clear strategy to accelerate customer-centric energy solutions and support the transition to cleaner energy, but its existing operations — built around entrenched processes and functional silos — were slowing decision-making and limiting responsiveness to customer needs. Radically worked with Origin Zero to redesign their operating model, shifting teams into cross-functional Value Streams that reduced hand-offs, empowered teams to make faster decisions, and brought end-to-end accountability closer to the customer journey. The results were tangible: the organisation became more responsive to market changes, internal alignment improved, Value Streams became self-managing, and customer satisfaction increased as the teams were able to deliver clearer, faster, and more tailored solutions to evolving customer demands.

Summary

The Product Operating Model isn't bad. It is one of the possible operating model options to consider, once you’ve done the preparatory work.

Before you implement a model, ask: What has made us successful? What are we uniquely good at? Which value discipline is our edge?

Answer those questions first, then choose your operating model. Everything else will be faster, cheaper, and actually work.

Because the organisations that win aren't the ones that copied the best structure. They're the ones who designed a structure that reflects who they are and how they actually compete.

Many leaders I meet tell me the same story: “We’ve tried agile. More than once. It never worked the way we were promised.” These conversations often lead to the bigger question of why agile fails at scale—why the same methods that work well for small teams often break down when applied across an entire organisation.

On the surface, the problem appears to be an execution issue. Teams adopt agile practices, but the benefits don’t translate into business outcomes. Dig deeper, and the issue is systemic. Governance, planning, and prioritisation — the core management controls of the enterprise — are still wired for a different era. They’re optimised for certainty and prediction, not adaptability.

Until those controls are reframed, agile remains stuck in pockets of the organisation, never fully connected to strategy or outcomes.

At Radically, we’ve seen this pattern across organisations of every size. The ones that finally crack it aren’t those that double down on ceremonies or tooling. They’re the ones that reimagine governance as a bridge between the executive table and delivery teams.

Research confirms this as one of the key reasons why agile fails at scale. In a BCG study, 86% of “truly agile” companies made significant changes in governance, compared to only 38% of those that stalled in “illusory agility.” In other words, structure and process changes aren’t enough — governance is the differentiator.

 

Why Agile Fails at the Enterprise Level

Agile almost always starts at the delivery layer. Teams adopt new ways of working, leaders run pilot projects, and early wins are celebrated. However, when it's time to scale, friction sets in.

Executives still expect certainty in annual plans. Governance forums still reward compliance over outcomes. Prioritisation occurs through negotiation and politics, rather than through strategic clarity. The result is misalignment: delivery runs fast, but it isn’t connected to where the organisation is really trying to go.

 

We saw this at a large New Zealand bank. Six years after implementing a new agile operating model, they were struggling to execute their strategy effectively. Half of the bank worked on agile projects, while the other half worked on traditional projects. Governance evolved into a patchwork of fixes to address immediate problems, resulting in unnecessary complexity and friction. The core issue wasn’t whether agile worked — it was that the system of governance couldn’t translate strategy into coordinated action.

 

Reframing Agile as Strategy, Not Delivery

Enterprise Agile isn’t a methodology – it is an operating model.

That shift in perspective is crucial. When leaders see agile as “just delivery,” it gets siloed at the bottom of the organisation. But when it’s treated as a way to operationalise strategy, it becomes the connective tissue between intent and outcomes.

This is how Mercury approached their integration with Trustpower. Instead of layering agile on top of existing structures, we redesigned the operating model itself. That meant aligning governance forums, planning cadences, and leadership behaviours so that strategy could flow seamlessly into delivery. The result? The programme was judged NZ Business Transformation of the Year, with one judge calling it “a masterclass in laying the right foundations for success”.

The Missing Middle: Where Scaling Models Go Wrong

Here’s why agile fails at scale: scaling frameworks try to standardise the enterprise to fit the model. Business units are redesigned to map neatly against value streams, or governance is rebuilt around a predefined cadence. It looks neat on paper, but rarely sticks in practice.

Why? Because organisations resist being forced into someone else’s structure. People know when controls have been imported rather than designed for context. The “missing middle” — the layer between executive intent and team delivery — becomes a battleground of resistance.

Recent research comparing SAFe, LeSS, and other scaling models found little difference in outcomes once team maturity and organisational size were controlled. In other words, no model guarantees success. What matters is how governance and organisational design are tailored to the context.

What works instead is using organisational design and governance as the careful stitching that connects strategy to execution. Fit-for-purpose controls respect context: they flex with the nature of the business, the regulatory environment, and the culture. Instead of forcing delivery teams to bend to the model, they create connective tissue that allows executives and teams to operate as one system.

 

Fit-for-Purpose Controls: Governance, Planning, Prioritisation

For agile to work at scale, management controls must evolve.

Governance
Traditional governance is designed to eliminate variance. It locks in plans, tracks deviations, and escalates exceptions. In adaptive organisations, governance shifts to alignment. The question isn’t “are we on plan?” but “are we on strategy?”

This means governance forums that focus on outcomes, not outputs. It means a regular cadence of alignment where executives and teams can course-correct based on new information, not just report against last year’s assumptions. Without clarity in governance channels, strategy fulfilment suffers.

Planning
Annual planning cycles are too blunt an instrument for today’s pace of change. By the time budgets are locked, the context has shifted. We help organisations move to rolling, adaptive planning. This enables executives to establish strategic intent and empowers teams to adapt delivery as conditions change.

At Origin Energy, this shift was transformative. By redesigning governance and planning, they reduced internal friction, increased cross-team alignment, and built the ability to respond faster than competitors.

Prioritisation
Most organisations don’t have a prioritisation problem; they have a clarity problem. Without a clear definition of value, decisions default to politics, personalities, or pet projects.

Modern operating models solve this by linking prioritisation directly to strategy. Work is continuously assessed against outcomes, not effort.

At a large bank we are working with, one breakthrough moment occurred when we simplified their model, allowing 95% of work to be prioritised within defined value streams. This created both speed and confidence in decision-making.

Together, governance, planning, and prioritisation form the real backbone of agility. They are the management controls that keep organisations both adaptive and accountable.

adaptive and accountable

 

The Leadership Reframe

Agile fails when leaders see governance as control. It succeeds when leaders see governance as clarity.

The real challenge isn’t getting teams to run sprints or adopt stand-ups. It’s creating a system where executives, managers, and teams are aligned around outcomes, with the freedom and discipline to adjust course.

That takes courage. It means letting go of old rituals of certainty and replacing them with practices that feel less familiar, but far more effective. It means designing governance not to protect the past, but to accelerate the future.

The organisations that have done this — Mercury, Origin, ASB — are now delivering strategy faster, with lower cost, and higher engagement. They’re proof that agile does work at scale, but only when leaders are willing to reframe the controls that shape how work gets done.

 

Ready to Reframe?

If you’re a manager responsible for your organisation’s system of work, the opportunity is clear. Reframing governance, planning, and prioritisation isn’t just about fixing delivery. It’s about building a modern operating model that finally connects strategy with outcomes.

You don’t need to do this alone. Through the Adaptive Leadership Collective (ALC), we bring together NZ business leaders who are solving these very challenges. It’s where the conversation about performance and transformation is happening.

Join us — and start reframing agile where it really matters at the strategic level.

We see this pattern all the time: a large organisation embarks on a major transformation, and the first instinct is to redesign the structure. Boxes and lines shift, new competencies are defined, and frameworks are rolled out. On paper, it looks solid. But on the ground, frustration builds, trust erodes, and the transformation loses steam.

The truth is simple but often overlooked: competency follows culture. Without the right leadership behaviours and cultural environment, competencies don’t take root. Leaders who underestimate this reality risk building models that look right on paper but never take hold in practice.

The Misplaced Focus on Structure

When a CEO or executive team hits “go” on a transformation, structure feels like the most tangible lever. It’s visible, easy to communicate, and quick to draw. The assumption is: if we design the right operating model, the rest will fall into place. But structure alone doesn’t change how people show up to work. It rarely addresses whether people feel safe to challenge decisions, whether they take ownership, or whether unhelpful norms get flushed out.

We’ve seen this play out. At Origin Energy, a new operating model unlocked speed and alignment, but it was leadership’s decision to lean into cultural shifts that made it real. Executives deliberately modelled cross-team collaboration and ownership. That behaviour set the tone, ensuring the redesign translated into faster delivery, stronger engagement, and renewed trust.

Origin’s story reflects a wider pattern we see across clients: structure is necessary, but never sufficient. Radically’s operating model framework highlights five interconnected elements: governance, ways of working, future capabilities, leadership and culture, and structure itself. Focusing on structure without addressing leadership and culture is like rehearsing the script but never coaching the cast.

Leaders as Cultural Architects

Here’s the crux: transformation lives or dies by how leaders behave. They are the cultural architects. Every meeting, every decision, every reaction to failure either reinforces or undermines the desired culture.

Competency is downstream of culture. When leaders role model openness, curiosity, and accountability, those behaviours cascade into teams. When they default to control, defensiveness, or ambiguity, no amount of training will embed the competencies written in the playbook.

During the Mercury–Trustpower integration, success hinged less on the mechanics of merging two businesses and more on leaders embodying the new culture. A large-scale leadership uplift program gave executives the skills and presence to be visible role models. Their consistency reduced ambiguity and built trust at a time when uncertainty could easily have fractured the organisation.

In our experience, the leaders who make the biggest difference are not just decision-makers, but also translators. They help their teams make sense of what’s happening, reduce ambiguity, and connect the change to something meaningful. That clarity and consistency are what build the foundation for growth capability.

As one client put it: “You can’t automate clarity. You have to earn it: in how you lead, how you engage, and how you listen.”

Transformation as an Invitation, Not a Destination

Another common trap is treating transformation as if it has a finish line. “Once the new structure is live, we’re done.” But transformation isn’t a program to deliver. It’s an invitation to lead differently, to embed new habits and mindsets that endure. And just like fitness or any other personal change, this takes sustained effort. That’s where Radically Sustain comes in: a service designed to help leaders and teams build the discipline, rhythm, and reinforcement needed to keep new behaviours alive long after the program ends.

That shift in perspective is critical. Real change sticks when it feels like growth, not an exam. People adopt new ways of working when leaders consistently embody them, not when they’re broadcast from a stage.

We often say: resonance beats rollout. You can roll out processes at speed, but unless people see, feel, and believe the change, adoption won’t last. Leaders create resonance through stories, presence, and consistency; not just metrics.

What Leaders Should Take Away

  1. Stop over-engineering competencies. Skills won’t stick if the cultural soil is barren.
  2. Invest in leadership behaviours. Presence, role modelling, and psychological safety matter more than polished frameworks.
  3. Treat transformation as ongoing. It’s not a project to finish but a muscle to keep strengthening.
  4. Anchor culture in your operating model. Don’t treat it as the soft stuff to get to later. It’s the hardest, most valuable lever you have.

Final Word

If you’re pouring energy into structure and competency frameworks while underplaying culture and leadership, you’re building on sand.

The transformations that last are those where leaders consistently demonstrate clarity, conviction, and connection.

Because in the end, transformation isn’t about structure. It’s about people seeing leaders walk the talk - and choosing to follow.

If your transformation feels heavy on structure but light on culture, it may be time to rebalance. Let’s talk about how to anchor leadership and culture at the centre of your operating model.

Please feel free to connect with me via my email kevin@radically.co.nz or connect with me via LinkedIn.