Product-centred organisations: key to implementing your sustainability ambition

More and more companies are setting targets for sustainability; one in five companies even aim to become net-zero. A good ambition, but unfortunately the gap between sustainability ambition and implementation is often too big to work towards it quickly. That gap is partly due to the organisational form. By redesigning your organisation from your product*, you create space to close that gap.

*Note: I am talking about 'products' here, a 'product' can be either physical or a service and focuses on creating value in a particular situation.

The two 'extremes':

1. Functional organisations: 'greening'

At Elemental, we know what companies are up against in their quest for effective annual plans. We support organisations in creating and implementing plans that not only focus on short-term results, but also contribute to sustainable, long-term value creation. Together, we ensure that your strategy is clearly defined and practically implementable. We help companies turn their vision into a concrete course, with a clear direction and measurable long-term impact. We achieve this by developing a structured process, closely involving the right stakeholders, both internal and external. In addition, we help develop a structure that ensures goals are continuously evaluated and adjusted where necessary. This keeps your organisation flexible and able to respond effectively to changes in the market.

If your organisation is organised by function (e.g. marketing, sales, purchasing , operations) then sustainability will manifest itself through improvements within each function. There will be a switch to green electricity, charging stations at parking spaces and efficiency gains in energy-intensive activities such as e.g. production.

What this means for a company's sustainability is that a lot of energy is mainly put into 'greening' the status quo. This form gives a lot of room to take first steps, but further sustainability often requires a different business model.

2. Product organisations: 'sustaining'

The 'other' way of organising is around your products (or services). Every product has an end-to-end team that develops, sells, delivers and services their product (and business model). So you often see this form in startups too; the whole organisation is one team around a product.

Teams in this organisational form can immediately make changes based on new insights. An example: Willicroft made a Vegan alternative to cheese from cashew nuts. Having recently realised that cashew cultivation consumes a lot of water and has poor working conditions, they will switch to beans and lentils as the basic raw material before the end of the year.

This speed and freedom of choice arises when teams own their product. For example Haier has also fully embraced this model (unfortunately not from a sustainability perspective), each team within Haier works as its own company delivering the best possible product/service. With this organisational form, you give teams the freedom to radically make the product more sustainable by using different raw materials, using a different solution or even choosing a different revenue model.

Mixed variants:

3. Matrix organisations: 'incremental improvement'

Mixing these forms creates a matrix at some companies. Roles are linked to a function as well as to a product. A strategy is drawn up from both sides. This can lead to complexity that hinders innovation.

Especially in larger organisations, the organisation becomes cluttered. For teams, it becomes important to include the 'right' people in a change, such as sustainability. This shifts the focus (unconsciously) to internal politics rather than external impact.

4. Product-centred: 'greening and preserving'

The other option to combine the two 'extremes' is the Product-centred organisation. In this, you make sure that for each product (or service) there is a team that leads on design, production, marketing and service. There are functional parts of the organisation, but these are purely facilitative to the product teams.

One example is Patagonia. They have teams for the different product categories. These teams are totally focused on making the best products for their customers ('best' also means sustainable by definition). Supporting them is, for instance, the logistics team. Logistics is not distinctive for the different teams and is therefore organised as a function.

This mix puts the product teams first, thus allowing for real sustainability at business model level. In addition, from shared, non-distinctive functions, part of the organisation can quickly go green. The challenge here is to make choices: which product teams will be there and which non-distinctive functions will we have?

Conclusion

The product-centred organisation will be the best form for most organisations. By putting the product teams at the centre, the business model can change sustainably. Supporting some functions can green the current model. A strategic combination for both the short and long term.

Two things remain crucial in this model:

First, product teams (and impact) should be leading, so teams need real mandate.
Second, the functional parts of the organisation should be chosen with care, and follow in the needs of the product teams, while preserving their own domain as far as possible.