The Roadmap to Product-Led Success: Transforming Your Financial Model
Become a product-led organization, they said. It’ll be more effective, they said. Well, THEY were right, but they also never said it would be easy. And do you want to know which important element of transformation is often forgotten, much to the detriment of the overall success of the initiative? Shifting the financial model. I know, not the sexiest piece of the puzzle, but an absolutely critical component that gets left for “later” all too frequently.
In this article, you’ll learn why transforming your financial model is necessary to become a high-functioning product-led organization, as well as the mindset shifts required to unlock increased efficiency, flexibility, and long-term value creation.
The Financial Model’s Role in a Product-Led Organization
Organizations that are successful at adopting a product-led model have figured out how to reconfigure the org’s processes, structures, and resources to achieve their business objectives and integrate digital technologies into various aspects of a business.
Part of that reconfiguration includes the financial model.
Typically, most organizations follow an annual (capitalized) funding model where priorities and budgets are set by an internal budgeting function. But trying to follow that model as a product-led org is like having a foot in two different canoes—neither is ever quite synched up and, most often, they can feel at odds with one another and totally unstable. Sure, you might make some progress, but your org will never reach its full potential that way.
The problem with an annual funding model in a product-led org is that the budget is allocated toward specific projects and then goes away/resets at the end of the year. But if a product-led org is truly focused on creating value for the company and the customer, initiatives aren’t necessarily time bound. They have different time horizons and need ongoing support, which creates friction in an annual funding cycle that starts and stops despite a team’s progress.
The Product-Led Financial Model
In a transformed financial model, funding isn't just allocated once a year based on priorities set by a small group of decision-makers. Instead, funding is directly tied to teams and capabilities supporting ongoing strategic objectives, not just one-off projects within the fiscal year.
You can still set budgets that show how much you’re investing within a certain timeframe, but instead of tying dollars to projects, you’re tying funding to priorities and teams that are aligned to the strategic outcomes you’ve set for the business.
Funding for teams might flex up and down over time depending on high-, mid-, and low-level priorities, but it leaves the specifics of delivery—the what and how—to the teams.
This is a major mindset AND work shift.
In Conclusion
Let’s acknowledge that this stuff is HARD. That’s why so many organizations leave the financial model for later, especially since it's not as shiny or instantly gratifying as other aspects. But if you neglect your financial model during a transformation, you're essentially hobbling your own progress.
It takes time, effort, and a willingness to challenge the status quo—your organization’s budgeting processes have likely been around longer than you have. But for those who take it on, the rewards are immense. You'll have clearer alignment between strategy and funding, more flexibility to adapt to changing priorities, and more empowered teams.
That said, it isn't a quick fix. When companies decide to take on the financial model, it can take several annual cycles to hit its stride. In my experience, 15-18 months is a typical timeframe for clients to fully make the switch. The process must begin in the C-suite with the executive team observing and analyzing how project dollars are being spent and how teams are allocated against running the business.
Nobody likes to talk about this aspect of transformation, but just because we aren’t talking about it doesn’t mean it isn’t there and in need of your attention. And, really, it should be on every leader’s radar as they navigate the broader operating model transformation and shift toward becoming a product-led org.
For related reading, check out these resources: