Transforming Enterprises: From Hierarchies to Agile Teams

I like to describe the product team as the bridge between business objectives and technological capabilities, addressing customer needs while staying aligned with company strategy. This critical role becomes increasingly vital as organizations adapt to the demands of modern digital transformation.

In my last article, we explored methodologies such as human-centered design to address real customer needs, and emphasized the necessary shift from a top-down approach to a bidirectional interaction between users and multidisciplinary teams. In this article, we’ll examine how that shift impacts enterprise structures, capabilities, culture, and governance.

Enterprise Architecture: Origins and Evolution

The concept of Enterprise Architecture (EA) first appeared in 1987 with J.A. Zachman’s "A Framework for Information Systems Architecture," published in the IBM Systems Journal. Initially a framework for organizing complex IT systems, EA has evolved into a strategic tool that aligns business strategy, processes, technology, and information to achieve organizational goals.

However, aligning EA with agile and customer-centric approaches requires a fundamental rethinking of how organizations operate. What does a customer-centric, agile organization look like? How can an organization redesign its architecture to support these goals? And how can product teams drive this transformation?

Top-Down Hierarchical Organizations: How They Operate

To understand the need for change, it’s crucial to analyze the traditional top-down hierarchical structure. These organizations can be visualized as a pyramid:

1. At the Top – The Executive Committee: A small group of leaders responsible for the company’s strategy and success. They make decisions for the entire organization, control operations, and enforce policies and processes to provide structure and guidance.

2. At the Bottom – The Workforce: The operational core that performs the value-adding work. These employees create products, deliver services, and transform ideas into deliverables that drive profit and growth.

3. In the Middle – Managers: Acting as intermediaries, they help the few at the top to reach everyone at the bottom. Managers transmit decisions from the executive level to the workforce, they are delegated power and influence from the top through budgets definition, they impose deadlines and provide task-specific information on a need-to-know basis while collecting progress reports to inform leadership decisions. Managers ensure accountability through standardization of processes, reports, and tools.

This structure worked well during the 20th century when the primary focus was on optimizing manufacturing processes and controlling costs. However, in today’s VUCA (Volatile, Uncertain, Complex, Ambiguous) environment, this rigid approach poses significant challenges:

• Limited Innovation: The emphasis on control and perfection creates a psychologically unsafe work environment where failure is not tolerated, stifling creativity and innovation.

• Bureaucratic Overload: Processes are overly standardized, reducing the workforce to task execution rather than problem-solving and ideation.

• Information Loss: To simplify decision-making for executives, complex projects are often reduced to oversimplified metrics (red/yellow/green flags, for example), disconnecting leaders from the product or project’s true nuances.

• Siloed Departments: As middle management layers grow over time (some studies say close to 10% per year), they often exacerbate organizational silos, reducing interactions and communications. Different departments may work at cross-purposes, leading to misaligned objectives.

For example, IT departments may prioritize 99.9% system stability, imposing months-long freeze periods where no software deployments occur. Meanwhile, product teams may push for continuous delivery to enhance digital customer experience, while sales teams may develop initiatives focused on analog channels. These misalignments lead to inefficiency, frustration, and top-level decisions disconnected from operational realities.

Agile, Team-Based Organizations: A New Model

Agile organizations restructure around teams rather than vertical hierarchies, creating a horizontal model where collaboration, autonomy, and accountability thrive. In this structure:

• Teams Are Cross-Functional and Multidisciplinary: Each team includes all the competencies required to achieve its mission.

• Teams Are Co-Located: Physical proximity encourages communication and collaboration.

• Teams Are Dedicated: Members are fully committed to the team’s objectives, avoiding competing priorities and tasks.

• Teams Are Stable: Stability allows teams to develop trust and high performance over time.

• Teams Are Autonomous: Teams decide how to work and solve problems to achieve their goals.

• Teams Are Accountable: Responsibility for product and service quality lies with the team itself.

While executives still play a leadership role, their responsibilities shift significantly in agile organizations. Instead of controlling operations and making any decision, they focus on enabling teams by:

• Providing a clear vision and defining priorities and objectives (for example, through OKRs: Objective and Key results).

• Ensuring transparency by democratizing information and making it accessible to all teams. At the same time, teams are able to spread the information they create. 

• Empowering teams to innovate and take risks by creating psychologically safe environments where failure is part of the learning process. Trust between teams and hierarchical levels is key. 

Middle management also transitions from enforcing compliance to supporting teams by:

• Offering feedback on deliverables or multiple options scenarios.

• Resolving impediments beyond the team’s scope of influence.

• Facilitating access to necessary resources, tools, work environment improvements and training.

• Shielding teams from external disruptions, such as conflicting stakeholder demands or disturbing intruders.

• Encouraging collaboration between teams and stakeholders.

• Providing access to customers and users to get feedback on needs and pains resolution.

Visually, this transformation can be represented as a shift from a vertical hierarchy to a flat, collaborative structure. Teams are no longer just “doers” but become “thinkers.” Initially at the bottom, they are placed in the center and empowered to think critically and innovate, fostering solutions that address real customer needs while staying aligned with the company’s vision. As for middle management and top executives, they are responsible for the good health of the company operating system. They encourage creation of communities, forums or chapters, integrating members of various agile teams to discuss long-term architecture strategy, delivery process, long-term work environment, among others, and to share knowledge and experience between the teams.

The Role of Product Teams in Digital Transformation

For traditional companies, digital transformation is more than just digitizing processes or developing new software. It’s about fundamentally rethinking enterprise structure, governance, culture, and capabilities.

Product teams play a central role in this transformation. Positioned between business and IT, they act as facilitators of change, introducing methodologies like:

• Human-Centered Design: Ensuring that solutions address real customer pains.

• Agile Development: Emphasizing iterative, user-focused product creation.

• Data-Driven Decision-Making: Using metrics and insights to guide actions.

By collaborating with operations, finance, IT, and strategy teams, product teams help create cross-functional environments where innovation thrives. They ensure that business objectives, customer needs, and technological capabilities are aligned.

The journey from a hierarchical organization to an agile, team-based model is neither quick nor easy. It requires a fundamental shift in mindset, culture, and operations. Product teams, with their unique position at the intersection of business and technology, are critical to this evolution. By championing agile methodologies and fostering collaboration, they can lead organizations through the complexities of digital transformation and into a future defined by innovation and customer-centricity.