In our experience, there’s a fairly clear-cut answer to this question: it has to be the CEO. And while it’s inevitable that organisational structure will evolve as a company scales, it doesn’t necessarily make sense for this to apply to Product. Take TransferWise, now valued at over $1bn, as an example. There, the Product function reports directly into Co-Founder and CEO Kristo Kaarman. He encourages his Product Managers to think just like mini business owners; who better than the CEO to inspire visionary, customer-led thinking?
The product function is often an extension of a CEO: vision, ideas and customer. That means separating the two is rarely in a company’s best interests. Successful businesses such as Just Eat, Ovo Energy and Zoopla have hired CPOs (Daniel Read, Mark Lee and Lydia Goldberg) who’ve been fundamental to their success, and trained teams of people in their mould. These talented individuals are future leaders and CEOs, making the CEO the best person to nurture and support them.
Less than two years ago, the prospect of finding top CPO talent in the European market was a challenging one. Product was viewed as a Marketing function, which stemmed from hiring into established corporate structures such as Vodafone and Barclays, whose Engineering functions were largely offshore and dispersed. Product was a discipline within marketing, had little or no influence over business strategy, and Product managers rarely had technology backgrounds. As businesses have become more tech-led and the start-up scene in Europe has boomed, we’ve seen this trend reverse. Product leaders now have a broad skill-set across business, marketing and IT, which is both hugely encouraging and strengthens the argument that they should report into the CEO.
Why not the CMO or CTO? At a simplified level, a CMO is tasked with driving audience growth and the company brand. By contrast, a CPO needs to evaluate every part of the customer experience, picture every eventuality and solve complex problems. The two characters and functions should have complementary skill-sets, but one shouldn’t overpower the other. In B2B businesses, marketing also tends to have less prominence than product and tech, meaning the latter two usually work together more harmoniously, as seen at Conversocial with David Stobs-Stobart and Colin Howe.
There’s an argument for a CTO to own the Product function given how closely the two interact –this is certainly the case in many larger businesses. But in reality, it doesn’t tend to happen in early-stage tech businesses. The reasoning has less to do with org structure and more to do with the motivations of individuals themselves. Whilst often ‘techie’, CPOs are very business-focused, they’re motivated by great consumer experiences and money-making activity, not cool tech. On the rare occasions that Product functions are absorbed by the CTO, they’re exceptionally strong and very experienced, as in the case of Made.com’s Jonathan Howell.
Driving growth (summed up as revenue and audience) is the number one priority for most early-stage tech start-up CEOs. Before series A funding, the CEO will likely have detailed involvement in every function within the business.
Post-series A, they’ll likely use funds to hire senior people and spend some time reorganising the structure into a scalable model. These C-level hires should ideally function as self-managing peers into a CEO, handling day-to-day detail between them and leaving the CEO free to fundraise and strengthen the brand.
Creating more time for a CEO in an early-stage business can be the difference between success and failure. Growing a peer-level structure like this will encourage behaviours and consistency in the business, letting the CEO step away from time-consuming detail.
Why not change?
The most successful tech businesses, Google and Facebook, understand that they survive and thrive because of their customer audience. The Product function is effectively the voice of the customer, and changing its prominence in the organisation would be extremely damaging. Change is, of course, inevitable, and there are compelling arguments for a Product function to report into a CTO (although less compelling ones for the CMO).
But ultimately it comes down to supply and demand: the supply of fantastic Product professionals is on the rise, and so their demands have increased. The mini business owners that TransferWise is nurturing want to report into the CEO – the person with the greatest ability to teach and inspire them. CPOs know how well their skill-set prepares them for ultimately leading companies, making the CEO most suited to managing and shaping their talent.
Post produced in partnership with James Goodrich, Managing Partner at Albany.