As a product manager, you need to do just two things

One of the biggest lies in product management is agile.

That may sound like heresy, but hear me out…

I actually love agile. It’s a great approach to reducing the risk of developing and shipping software. It’s a better software development methodology.

But on its own it doesn’t solve the problem of providing a capital efficient method for discovering, validating, delivering, and growing a marketable product.

Which is EXACTLY what product management is all about.

Many product managers are like this:

I love this cartoon because it describes where so many product managers are stuck. And it resonates with me personally, because it describes where I was as a product manager many years ago when I was still trying to figure out what the heck was this product management thing I was apparently doing!

So many product managers are struggling to make a meaningful impact. They’re hustling, they’re busy in the trenches writing stories, managing backlogs and releases, worrying about SCRUMs and sprints and story points…

Of course, these are important activities. But they’re not the things that REALLY create impact producing business results.

In other words, if you ONLY focus on those tactical activities all the time, you won’t be doing the things that truly create and deliver customer value.

Over the years, I’ve worked on a number of different types of software and digital products and services, and have also been fortunate to have worked with and mentored 100s of product innovators.

And so I’ve learned a few things. And what I’ve learned is actually surprisingly pretty simple.

Because the most impactful product managers all follow a similar pattern for how they align product strategy with company goals and deliver business value time and again.

In order to understand this — to understand the true value product managers bring — we need to understand what is product management.

What is product management?

There have been many attempts to define what is product management and what a product manager does.

Most are all pretty good. But they tend to be convoluted (at least to me), and not easily explained.

Over time, I’ve come around to a simpler, but far more powerful, definition of what is product management, and what it means to be a strategic product manager.

And to understand what product management is about, we need to talk about what is product innovation.

Innovation is, of course, what fuels a company’s growth long-term. So in a for-profit company, any innovation must create growth for that company.

Growth comes from creating value for customers. Customers who find value in what the company has to offer, pay for that value. (Or generate value for the company in such a way that a 3rd party will offer to pay for it.)

So, in other words, quite simply, product innovation is about creating monetizable customer value.

Now, that’s not just a bunch of MBA-speak. Those three words are very important: “monetizable customer value”.

Or said differently: creating customer value that can be monetized, i.e., that results in creating value for the business.

In his book, Scaling Lean, Ash Maurya talks about two conditions that must be met for in order for any product to succeed represented as follows:

Credit: Ash Maurya

The first is called the Value Equation. This means you must create more value for customers than you capture back, because if your customers don’t perceive to be getting back more value than they pay for your product or service, they won’t keep coming back, and you won’t have a business.

Credit: Ash Maurya

Said a different way: creating customer value seems obvious enough. But it’s not enough to just create customer value — you need to create enough value that customers are willing to pay for some or all of it. Or the customers themselves represent a valuable commodity that someone else is willing to pay for the value they represent.

And in a profit-making enterprise, this is typically in the form of revenue.

Now, the first equation is important, but not enough. The second condition to satisfy is the Monetization Equation.

Credit: Ash Maurya

Quite simply this means your ability to deliver that value must cost less than your ability to capture it.

Or, to put it even more straightforwardly, revenue — cost = profit!

(I guess you could also call this the profit equation.)

So product innovation is not just about the next shiny new object or sexy new app for the sake of it. True product innovation — one that creates value for your customers AND for your business — is one that creates so much value for your customers that you can monetize it in some fashion, preferably with customers paying you at a price point that exceeds your ability to deliver that value.

THIS is what we mean by creating monetizable customer value

Every product needs to satisfy these two equations, which means product innovation is about solving both these two equations.

And in fact, savvy product leaders and teams will want to institute some sort of methodology or process around this — a repeatable and sustainable innovation process to constantly uncover new opportunities to create customer value that can fuel business growth for the company. In other words, an ongoing customer value monetization process that’s constantly looking at maximizing both the value equation and the monetization equation.

So if we think about the tactical activities a product manager does, like writing stories/requirements, managing backlogs and releases, user testing, etc…

Or if we think about the more strategic things product managers may do, like communicate the product strategy and roadmap, monitoring KPIs, pricing, go-to-market, etc…

Those are all means to an end — that end being creating customer value that can be monetized.

This leads us to a nice, concise definition of what product management is about:

Product Management is about sustainably managing and growing the customer value monetization process

What this means is that the BEST product management teams and the BEST product managers are continuously working on maximizing BOTH these equations — the value equation and the monetization equation.

At the highest level, these are the TWO THINGS that you, as a product manager, need to be focused on to drive innovation and deliver business results.

The two things product managers need to focus on

As such, the best product managers think and act beyond tactical activities like backlog grooming, sprints, requirements and stories, releases, user testing, etc.

Again, these activities are important, but in and of themselves they don’t drive innovation and don’t deliver business results.

The best product managers think strategically:

  1. They think about monetizable market opportunities.
  2. They think about tying their activities to business results that matter — acquiring new customers, increasing LTV or ARPU, speeding time to market, etc.
  3. They think about the “whole product” — not just the core software app itself, but also how to market, sell, deliver and support that product to customers

This 1-page Product Canvas succinctly captures all the key elements of a product strategy. And this is what the best product managers, and the best product management teams, for that matter, are constantly thinking about.

This is what’s meant by the “whole product” — that is, the overall product strategy, not just the bits and bytes that make up the core product itself.

The best product managers are thinking strategically about every aspect of the product strategy. And even when they’re managing an existing product:

  • They’re continuously re-visiting the value proposition, making sure the product is delivering on its promise to customers…
  • They’re making sure the product is delivering ROI and constantly measuring success…
  • And when they’re considering new features to enhance the existing product, they’re looking at the same critical elements — who’s it for, what problem is it solving, what’s its value proposition and competitive differentiation, and how will it deliver ROI.

The best, most strategic, most impactful product managers are able to be strategic while executing tactically, proactively define their roles and the value they bring to their companies rather than wait for it to be defined for them, and align product strategy with company goals to deliver business value time and again.

They do this by focusing relentlessly on creating customer value that can continuously deliver benefits to the business.

You either ROI or die

Let’s face it:

Accounting is boring as isht.

Assets. Liabilities. Cost basis. Accrual. GAAP. Cost principle. Double entry system…

This is boring

Finance is not much funner… In fact, it can downright make your head spin…

Liquidity. Risk tolerance. Asset allocation. Dollar cost averaging. Capital asset pricing…

What the heck is he talking about?Eh?

As a product manager, why in the world would you need to know how to do financial analysis?

Actually, there are some excellent reasons why. And you ignore them at the risk of your “brilliant” product idea dying a painful death.

First, the exercise of financial analysis forces you to think long and hard about the viability of your product idea.

It can help surface major issues early on or support your hunch that what you’re wanting to work on actually has some potential.

Second, if you’ve got an idea for a new product or new major feature, you’ll need to articulate to your stakeholders the market opportunity and ROI for it.

They’ll want to understand your assumptions about the market opportunity, and what will be the key revenue or ROI drivers.

Third, these financial analyses, once done, can serve as a strategic roadmap for execution. They allow you to track benchmarks, and you’ll be able to quickly assess where you are vs. where you thought you’d be.

So many product managers are unable to do this effectively. And, as a result, their product ideas die. Don’t let this be your fate.

The good news is you don’t need to torture a spreadsheet for days and weeks with crazy unfounded assumptions to produce some silly made up 3-year projection.

It comes down to 3 core financial analyses that need to be understood:

  • Market sizing
  • Net Present Value (NPV)
  • Internal Rate of Return (IRR)

I talked about market sizing — it’s importance and how to do it — in a previous post. So let’s talk about the other two.

Remember: When you go ask to have your product idea funded, it means you’re trying to convince people that YOUR idea is the best place for the company to spend its money vs. something else.

So it’s almost certain your finance department is going to be in charge of running the numbers on your product idea. This means it’s important to understand how the finance department is going to evaluate the financial merits of your product idea.

NPV and IRR aren’t really that complicated once you learn them.

So here’s a quick primer to help you start using them TODAY:

Net Present Value (NPV)

To understand NPV, we first need to talk about weighted cost of capital.

Since you’re eventually going to have to work with your finance department on the numbers, you need to understand your company’s cost of capital so you can ensure that you’re going to get the best deal possible.

A simple way to think about cost of capital is that it’s the cost of the money used to pay for funding a business endeavor, which is exactly what your product idea is, of course.

The money may come from debt, like a bank loan. In this case, the cost of capital is the interest rate the bank charges you for the loan, called the cost of debt.

Alternatively, the money may come from equity, like from investors. In this case, the cost of capital is the return these investors expect, called the cost of equity.

Most companies have a mix of debt and equity on their balance sheets.

So the weighted cost of capital is typically a weighted average of the cost of their debt and the cost of their equity.

Let’s go through a simple example:

  • Let’s say your company’s cost of debt is 3.5% and cost of equity is 10%
      • In other words, the company is paying 3.5% interest on its loans and its investors are expecting a 10% return
  • Let’s also say your company’s capital structure is 70% equity and 30% debt (i.e., the percentage of debt relative to the percentage of equity the company uses to finance its operations)
  • So your company’s weighted average cost of capital = (70% * 10%) + (30% * 3.5%) = 8%

How is this related to Net Present Value?

The weighted cost of capital is used to calculate the NPV of a business investment.

And the higher the cost of capital, the lower the expected profitability of your product.

So you definitely want to know what your company’s cost of capital is and what assumptions are going into calculating it.

Net Present Value (NPV) is a way of assessing the profitability of an investment by factoring in the present value of any future cash flows your product projects to generate over a given period of time, like 3 or 5 years.

Let’s explain via another simple example:

  • Let’s say you deposit your money in a savings account at your bank, and you earn 10% interest on your money.
  • So $1,000 today would earn you $100 in a year — in other words, your $1,000 today will become $1,100 next year.
  • This means $1100 next year is the same as $1,000 now.
  • So the present value of $1100 next year = $1,000 at the discounted rate of 10%.

Note that the interest rate you’re earning in your savings account is also called the discounted rate when calculating the present value of your future earnings.

So to calculate NPV, your finance department will:

      1. Calculate the present value of future cash flows your product is expected to generate over a specific time horizon (i.e., revenue over 3 or 5 years)…
      2. Subtract from it the present value of the initial investment needed for your product and any future expenditures projected to be incurred over the same time horizon

NPV = present value of future cash inflows – present value of future cash outflows

NPV is pretty easy to calculate in Excel. In fact, it has a formula for it.

Internal Rate of Return (IRR)

Now that you know what NPV is, this one is easier to explain…

The IRR is the interest rate at which the net present value of all the cash flows from an investment equal zero.

So the idea is that the higher an investment’s IRR the more desirable it is to undertake that investment relative to other projects (assuming all other factors are equal).

BTW, this is also pretty easy to calculate in Excel — it has a formula for IRR too.

So let’s say you calculate the IRR of your product idea is 92%. Is this good or bad?

That depends on the IRRs of the other projects competing for the same dollars!

Additional thoughts on NPV and Cost of Capital

The cost of capital should vary depending on the type of product initiative you’re pursuing.

If it’s truly a new product innovation, a higher number could be justified, since the project is going to be riskier, but may be worth it.

For a line extension, a relatively lower rate could work, since it’s relatively less risky.

Either way, do your homework, and then sit down with your finance counterparts and understand what values they’re using and why.

You don’t need to be a finance genius, but you do want to be able to negotiate with them intelligently. You may or may not win the day, but you will gain their respect, and at least everyone will be aligned on how to value your product idea properly and in relation to other projects the company is investing in.

Bottom line: yeah, finance may be boring, but it doesn’t need to be confusing, and it’s super important. Rockstar product managers understand that it’s well worth their time to learn, and get decent enough at it to be able to justify and defend their product ideas.

When I built products the stupid way

In 2007, ProductRepair (name changed), a market leader in its industry, was facing some serious threats:

A rapidly maturing business.

New “digitally native” entrants with greatly enhanced data collection abilities.

A 100% call center based customer service model, with an escalating cost per interaction.

Service partners with increasingly divergent strategies.

Legacy IT infrastructure that made it difficult to compete.

To tackle this, the company’s product management team proposed an innovative and bold “interactive customer web portal” (remember: this was 2007), thus transforming the company’s traditional “brick & mortar” type business model into a “21st century digital model”.

The vision was pretty cool actually. The strategy was to provide:

  • “An integrated closed-loop customer experience.”
  • “Comprehensive product setup and support.”
  • “Enhanced full-service customer support.”
  • “Interactive multi-channel communication.”
  • “Cross-sell and up-sell platform.”

(Yes, those were the actual words used in the presentation to the CXOs.)

The benefits were the usual stuff: increased value-add, improved customer satisfaction and retention, call reduction, after-sale revenue opportunities, “big data” insights, etc.

The new digital business was to have five core capabilities:

  1. A product “locker” for the the user to keep track of their purchases
  2. Self-troubleshooting
  3. Live chat and email support (again: 2007, so pretty new stuff back then)
  4. Request service on their malfunctioning product, with real-time claim adjudication, and service status and resolution
  5. Up-sell/cross-sell platform

As an ambitious young product manager, I was put in charge of building and launching this bold new digital capability.

Our (my) approach was classic:

A month spent writing a PRD and an RFP to source a development partner.

$10,000 spent on “consumer research”.

$320k in 6 months spent to get to “First Release”.

Another $10,000 spent to produce a flashy “demo” that we could showcase at the Consumer Electronics Show.

Over $1 million spent in a year to add features, fix bugs, and re-design the system.


E.P.I.C. Fail.

Delivery was late. Customers hated it. Sales was unhappy. Execs were angry.

It wasn’t just that we took a waterfall development approach vs. agile…

It’s that we made a terrible business decision: we decided to deliver our entire product vision in our first release.

This “build it all” approach added a tremendous amount of needless risk to our delivery and strategy.

If you’re reading this shaking your head, laughing at me, I know, I know…

In the new world of agile/lean, we’re all much savvier to the benefits of an incremental and iterative approach to product development.

Credit: Jeff Patton

Needless to say, I learned my lesson (the hard way, I might add)…

And yet, turns out, product managers still struggle with this.

See, it’s not a choice between waterfall vs. agile. It’s not a project management problem.

It’s not even a software development methodology problem.

It’s a business innovation problem.

That’s why when I recently saw this question posted by Ganesh on a PM community, my past flashed before my eyes, and I knew I had to help him out.

Here’s his question:

I need some advice around building a service incrementally around user needs.

We’re building an online service that has the following needs (in priority): Cereal, Beef, Vegetable, Fruit. (Shardul’s note: Names of actual needs not listed here to protect any confidentiality concerns.)

As Cereal is the number 1 need, my idea was to design and build this need out and test it with users while further researching what users wanted around Beef. Once we have more information around Beef, we can then incorporate that into the Cereal prototype, thus building it out like building blocks. And repeating this cycle till all needs are met and the service is built out incrementally.

The opposite is that we research ALL the needs in one sprint, and find out what people want. Then build the whole page, which has all the needs together. I can see how this would be positive in terms of seeing the entire picture, and keeping the content in context of each other. But my concern here is that we miss out the details.

Any advice would be appreciated.

Maybe you’ve been faced with a similar dilemma…?

Here’s the answer I gave to Ganesh, verbatim (though, with the food groups):

In case you can’t read the text in the image…

Ganesh, since I don’t know the complexity of your service (I don’t want to assume just because you’ve listed four functions that “seem” straightforward that there isn’t complexity), allow me to share an approach we took on a previous job I did as a thought provoker.

My inclination is always to get product to customers as fast as possible without compromising on quality and ensuring every release attempts to deliver real user (and business) value.

With that philosophy in mind…

I’d consider asking a Designer to sketch out the “whole picture”, like a clickable mockup or prototype (no “plumbing” behind it) and see if I can get some qualitative user feedback on it. I’d take this option if I believed that this could be accomplished relatively quickly.

Once done, I’d actually consider going ahead and building and delivering the Cereal functionality first because you stated it’s the #1 need, and I can get users to actually use the thing and start getting real feedback on it allowing me to focus on usability improvements (because they will be needed.)

I can then prioritize these needs along with the remaining functions on my roadmap/backlog for delivery. For example, my next release could strictly be usability improvements for Cereal, or these + an increment of the Beef need (assuming there’s value in delivering it in increments), or Cereal usability improvements + Beef in its entirety. (I’m assuming here Beef is second most important after Cereal.)

By having my designer sketch the “whole picture” upfront and sought user feedback on it, I’ve hopefully reduced the risk of wholesale design changes downstream. (Though, it’s still possible.) Even if there are changes that need to be made to the Cereal feature as you get user feedback and look to add the other features, a competent designer should be able to manage the process (since they’ve already done the “whole picture”) in concert with you, and determine the best approach to releasing them to the user.

This allows me to accomplish all three of my needs: design for the whole picture, get product to users as quickly as possible, and start acting on user feedback.

I would opt not to have the designer sketch the “whole picture” if it was going to take a long time (like a month).

The crux of my answer is a strong proclivity for getting product to customers as fast as possible without compromising on quality, and ensuring every release attempts to deliver real user (and business) value.

It’s a philosophy that has guided every product I’ve worked on since that debacle back in 2007. #ProdMgmtHardLessons

The one skill your boss wants you to have (and how to do it)

When I announced my new product management course, Idea To Revenue Masterclass, I asked the folks who manage product teams — Directors, VPs, SVPs of Product — what they’re looking for in their product managers.

The responses I got were eye openers.

Here are some of the replies I got, with certain parts bolded by me that I think are super important:

“A well balanced product manager knows how to take a concept from ideation to delivery. I find some are strong in one but not the other.”

“Our product managers need to learn to drive product innovation by deeply understanding the ecosystem in which our customers operate, address the most pressing customer needs, and ensure we deliver business and customer value and drive company revenue.”

“Currently, our PM team is not leading. They mostly focus on fixes to the current products. They need to be more strategically driven, and be able to size the market opportunity for new ideas. As a result, to be honest, our executive team is not comfortable empowering our product managers to make decisions, and so priorities keep changing constantly.



In other words, they want product managers who can be strategic product leaders that can drive innovation and deliver business results… not just be backlog grooming sprint release operators.

Having worked with 100s of product innovators and numerous software and digital products and services, I’ve learned that the best product managers think and act beyond tactical activities like backlog grooming, sprints, requirements, stories, releases, user testing, etc.

These activities are important, but in and of them they don’t drive innovation and don’t deliver business results that matter.

The best product managers think and act strategically — that is to say:

  • They think about and pursue monetizable market opportunities.
  • They think about and actively work at tying their activities to business results that matter — acquiring new customers, increasing LTV or ARPU, speeding time to market, etc.
  • They think about the “whole product” — not just the core software app itself, but also how to market, sell, deliver and support that product to customers — and execute accordingly.
The Whole Product

Product Canvas – downloadable here

It’s this strategic perspective that then drives their tactical day-to-day activities.

In this post, I’m going to talk about one of the ways — one of the most important ways, actually — that the best product managers impact business value:

Validating the market opportunity for a product idea.

The best product managers know that to pursue any product idea it must be a problem worth solving. In an earlier post, I talked about how there are 3 criteria any product idea must satisfy in order for it to be worth pursuing:

  • It must solve an urgent problem for a customer.
  • The problem must be pervasive — that is, enough customers must feel that pain or have that need.
  • Customers must be willing to pay to have the problem solved. Or, more specifically, they must be willing to buy your solution to their problem.

This is what it means to have a monetizable market opportunity. And being able to identify these opportunities (and then execute on them) is exactly what the product team leaders above are looking for in their product managers.

Unfortunately it’s a big area where many product managers fall short.

Why is it important to analyze the market potential for a product idea?

Because quite simply, if enough people aren’t experiencing the problem and are willing to pay for your solution, then the market potential for your product idea isn’t big enough, and it’s not worth pursuing it. Period.

viable_product_ideaSo you need to find out before investing considering capital and resources in developing the product or capability whether there may be a market for it.

Also it:

  • Establishes whether the business opportunity for your idea is reasonable.
  • Informs how you look at, analyze, understand, and segment the market.
  • Demonstrates an understanding of your customers’ pain points and the value of your solution.
  • In turn, informs how to enter the market — your go-to-market strategy, pricing model, etc.
  • Provides optics for the growth of your product — a sounding board to measure your financial model and your progress against it.

This isn’t just for brand new product ideas alone. It applies to new feature ideas for existing products and other product expansion ideas as well.

Any new feature or capability must deliver both customer value and business value. There has to be some clear ROI for adding a new feature to a product. Perhaps the new feature will help up-sell existing users to a higher pricing plan. Or maybe help accelerate new customer acquisitions in your target market segment. Or reduce churn and increase lifetime value. Or maybe it will help improve customer satisfaction leading to increased retention.

Your company has a choice of whether to focus its resources on developing feature A or feature B. In fact, it has a choice of whether to have its resources focused on your new feature idea or something else entirely.

So it’s important to vet whether there’s enough of a market demand for that feature before investing engineering cycles building it.

There are several common mistakes product managers make in estimating market potential. Let’s talk about these and then go through specific examples of how you can calculate the market potential for your product idea.

Common mistakes in estimating market size

Your market is NOT “everyone” or “anyone”, as in “everyone who drives a car”, or “every business that needs a CRM”, or “anyone who uses social networks”, etc.

Heck, the market for this blog isn’t “everyone who reads blogs”!

In fact, it’s not even “every product manager” out there. If you’re a product manager for a hardware product, it’s nice to think there may be nuggets in these posts that could help you, but I’ll tell you straight up I don’t specifically target you. So if you find zero value in these posts, that’s cool with me.

Even for a new feature for an existing product, your market potential may not be “all our existing customers”. For example, not all customers using your messaging service may be interested in archiving old messages.

You need to drill down and get specific about the true size of your market. Otherwise, your executives and Board will question the validity of your product idea — and, frankly, your credibility.

To make this super tangible, let’s talk through how you can size the market for a new product and a new feature.

Assessing the market size for a new product

The most common way folks do this is what’s called the “top-down approach”. This approach uses a broad market size figure and whittles it down to the target market.

It typically goes something like this:

  • Let’s say your product is an analytics algorithm that can decide the sentiment of a Twitter stream.
  • You find that IDC (or Gartner, whatever) says the market for big data technology services is $6.2 billion. You estimate that the portion that’s for sentiment analytics software is 20% = $1.24 billion.
  • With your existing sales and marketing channel, you believe you could realistically reach 25% of this market = $310 million.
  • But there are 10 other competitors in that same reach. So assuming you can capture 15% of the market, your target market share = $46.5 million.

Now, if you read that and are feeling uncomfortable, yeah, you should.

‘Cos it sounds squishy, right?

That’s why I’m not a big fan of the top-down approach:

  • The broad market size figure used as the starting point in the top-down analysis often includes different market segments, so it’s easy to forget to take some of these out of the estimate.
  • You’re extrapolating without direct customer validation. So top-down can come off as a bit optimistic (and even fuzzy).
  • When extrapolating, you’re typically using a percentage off a very large number, like 1% of a billion dollar market, but it doesn’t take into consideration which 1% or how you’ll get this 1% with your specific product.
  • Plus, how do you know if a 1% market share is the right success criteria for you?

As such, the top-down method can give you a false sense of comfort.

(Plus, smart execs will see right through it and tear it apart.)

Instead, a “bottom-up” approach is better. This approach builds up the total addressable market by using the main variables of the revenue model — typically total number of potential customers multiplied by what they typically spend or are willing to spend.

It requires more effort, because you’re evaluating where your product can be sold, the sales of comparable products, and the slice of current sales that you can carve out.

(BTW, this is where your customer persona and primary market research really comes in useful. You can use them to identify how many customers are in your target market, and extrapolate from there.)

Let’s go through an example:

Your product is an app that helps people play basketball more regularly by helping them find the right place, time and people.

You’ve discovered that people pay to book time at basketball venues, and your idea is to charge these venues a fee for referring basketball players who use your app.

You interview 10 basketball venues, and discover they typically get 100 bookings per month, each booking consists of 10 players, and each player typically pays $50 to play.

So the total value of monthly bookings at any given venue = $50 * 10 * 100 = $50,000 or $600k per year. And if there are 2,000 venues in your target market, that’s a total market of $1.2 billion.

You find that 70% of venues (1,400) have already signed deals with your competitors, leaving you with 600 unsigned venues. You believe you could steal 10% (140) of already signed venues — so if you signed up all 740 (i.e., 600+140) of these venues, that’s a serviceable market of $600k * 740 = $0.44 billion or 37% of the total market. (It may reasonably take several years to do that, of course.)

You feel confident all 10 of those venues you had interviewed could be initial customers. You extrapolate that there are about 200 venues just like those, i.e., they fit your customer persona. You could target them in the first year, giving you a target market of $120M (27% of your serviceable market and 10% of the total addressable market).

While there are undoubtedly some assumptions inherent in this analysis (and many dependencies to achieving those targets), this type of analysis is much more useful.

For one, it gives you more grounded assumptions to use to extrapolate to the broader market. It’s less likely to include non-addressable revenue since your basis is to start from your primary market research. Finally, it forces you to consider how you’ll be able to attract and acquire customers — for example, you’d love to sell internationally, but if that’s unrealistic for several years, you can’t really factor that in. On the other hand, you can focus your go-to-market efforts specifically on targeting that initial $120M in the first year.

You can also play with the variables to get a sense of best-case and worst-case scenarios. For example, what if you could steal 20% of already signed venues? Or only 5%? What if there are only 100 venues like the 10 customers you interviewed? What if it takes longer to acquire any of those 600 unsigned venues?

Assessing the market size for a new feature

Now, for a new feature or capability for an existing product, how you analyze the market size depends on your goals for the new feature — things like accelerate new customer acquisition, up-sell existing customers, penetrate an adjacent market segment, etc.

For the sake of simplicity and illustration (and because this post is getting pretty long), let’s assume the goal is new customer adds — e.g., this feature is the key missing ingredient that has prevented new customers from purchasing your product till now.

Let’s say your product is targeting a $50 million market and currently generates $5 million in revenues. It’s been successful with early adopters, but now you want to expand within your target market to “early majority” type customers (in the technology adoption curve).

You’ve identified a new feature that your product would need to have to attract this group of customers, and your problem hypothesis testing validated the pain point it solves. From this work, you’ve built a customer persona to target for the new feature, and through further market research and analysis, have identified that 25% of your product’s current target market fit that persona (i.e., they have the same problem).

Your total market opportunity is 25% of your product’s target market * your product’s price (assuming no change).

You believe it could be possible to capture 10% of those customers in the first year. So your target share of market is 25% of your product’s target market * your product’s price * 10%.

Again you could play with the variables for best-case/worst-case scenarios. For example, what if you captured only 5% in the first year? Or 20%? What if it only 15% of your product’s current target market fit the persona?

Once you have your market size, what next?

Play around with the assumptions and variables in your analysis. For example, try different pricing levels, or vary the percentage or number of customers.

This analysis shouldn’t take you very long — you’re merely trying to estimate the opportunity to get a quick sense as to whether there’s a market opportunity for your product idea. If you’re spending hours or days torturing a spreadsheet, you’re spending too long on it.

Of course, you don’t know definitively whether customers will actually validate your product idea, let alone buy it. But you want to do this exercise at this stage because you’re essentially trying to answer if there are enough customers in the market with the problem you’ve identified, and how much revenue you could potentially target if they’re willing to buy?

In other words, is it big enough? If the market opportunity is too small, if there aren’t enough monetizable customers, it’s not worth going after, and you’ll be faced with a pivot. (And a pivot isn’t a bad thing.)

* * *

The best product managers understand that to really drive innovation and deliver value to their businesses they need to be thinking and acting strategically.

As part of that, they understand they need to be testing and validating whether a product idea is worth pursuing before investing major capital, budget or resources on it.

A critical part of that validation exercise is assessing the market potential for a product idea. Doing so exposes important assumptions inherent in the initial product strategy hypothesis. It helps product managers justify the product idea to themselves and to their internal stakeholders, and serves as a reality check for the product idea.

This kind of analysis it NOT about arbitrarily picking a large number out of thin air and then working some Excel magic to rationalize the number. As I’ve shown, there’s a grounded way to approach it.

And, as a result, should the market opportunity for the product idea have potential, it allows for a more actionable way to pursue it.

As Ash Maurya has correctly said:

“While we all need a ballpark destination to justify the journey, it’s not the destination itself but the starting assumptions and milestones along the way that inform whether we are on the right path or need a course-correction.”

To your product success!

The Top Strategies For Doing Customer Interviews That Get You Real Insights

We all know a core responsibility of a product manager is to constantly and consistently bring the customer perspective into the business.

That means customer interviewing is a critical skill for every product manager.

I must admit, earlier in my career I totally sucked at it.

I had no plan. I often just winged it. I asked the wrong questions. I was a poor listener. I talked more and listened less. I tended to get too excited about my product idea and go into pitch mode instead of focusing on the customer’s problems. And I was very guilty of confirmation bias.

Fortunately, with lots of practice, over time I got better. As I did, I accumulated a list of the best strategies that I use even today to conduct an interview that helps me extract real customer insights.

Get the Entire List of 25 Customer Interview Strategies >>

So in this video I share 5 of the best customer interview strategies:

Use these 5 powerful tips to supercharge your customer interviews to extract every ounce of goodness from them:

  1. Set an objective. Know what you want to get out of the interview — that is, what is it you want to learn and come away with?
  2. Have a script. Having a script will help guide your interview with the customer, be better prepared and purposeful in your interviewing, and make sure you achieve the objective you’ve set out.
  3. Ask “Why?” — a lot. This is by far the most important question in your arsenal. It allows you to go deep, get inside the mind of your customer, understand their motivations, get to the true nature of the problem they’re trying to solve, and how they actually value their solutions.
  4. Ask for examples. Asking for an example forces your customer to get specific rather than speak in generalities, giving you tangible evidence of a customer’s problem, and allowing you to momentarily “live in their world”.
  5. Focus on listening. Cannot stress this enough! The biggest thing you can do is to TALK LESS AND LISTEN MORE. Your purpose is to get THEIR perspective — not promote your point of view, explain yourself, defend your idea or debate. The only times you should look to speak is when you need to clarify something or need to ask a follow-up question.

Get the Entire List of 25 Customer Interview Strategies >>

Follow these strategies and you’ll become a pro at conducting truly insightful customer interviews.

Watch the video above, download the full list of customer interview strategies, and please share in the comments below what strategies you’ve developed to conduct truly insightful customer interviews.

How Do You Become A Good Product Manager?

This is the BIG question, isn’t it?

We all want to be the best at what we do.

And product managers are no different. We want to be good. Great. Awesome.

And we want to be recognized for it!

We want to launch products people love. We want customers to love it. Our company’s to grow from it. Our teams to feel pride in it. Competitors to fear it. And our executives to love us for it.

So how does one become a good product manager?

Unfortunately, there’s no one size fits all answer to this. There’s no silver bullet or 3-step process that guarantees you will become a good product manager. (Let alone a great one!)

But it’s one of the most frequently asked questions. It gets asked at ProductCamps. It’s asked on Quora in different ways. And it’s one I’ve been asked countless times by folks I’ve mentored, by peers, even CEOs and senior executives.

Lots of knowledgeable and seasoned product management practitioners have weighed in on this. Some really good perspectives from some really smart, successful product managers.

So today I weigh in with my perspective. While there’s no single universal answer, I do believe there are some key principles or strategies you can adopt to become a really effective product manager.

And that’s what I share in today’s video.

Through product management gigs in startups and Fortune 100 companies, I’ve come to identify seven principles that help me as a product manager in any situation:

  1. Get to know your customer.
  2. Get to know your product.
  3. Learn the business.
  4. Learn the market/industry.
  5. Learn how to execute.
  6. Find mentors.
  7. Invest in yourself. That is, look to constantly upgrade your skill set.

The last two are really the key to unlocking your full potential as a product manager.

Are any of these new to you? These are sort of “no brainers” to me now, but looking back, if I’m honest with myself, I probably focused a bit too much on #2!

It can take time to master these, but I’ve come to realize they’re paramount to successfully execute as a product manager.

You can read my original answer on Quora, as well as some great answers to another similar question on Quora.

Watch the video and then please leave me a comment below on what do you think it takes to be a good product manager?

Here’s to all of us becoming great product managers!

The Most Important Thing You Need For Your Product To Succeed

Have you ever felt like there is no clear direction for your product?

That you keep getting jerked around building features to satisfy the latest customer opportunity?

That your product can do a lot of things, but it’s hard to articulate exactly what it does in just a few short sentences?

Maybe your product is trying too hard to be all things to all people?

Or maybe folks are constantly asking you why…

Why are we building these features?

Why are we selling to those customers?

Why is the customer wanting our product to do something else?

The reason for this often boils down to a simple truth:

The product lacks a coherent vision.

Having a product vision is quite possibly the most important thing you need for your product to succeed.

Yes, strategy is important.

Yes, execution is important.

But it all starts with having a vision for your product.

Without a product vision, how will you know where you’re going and why?

So every product starts with a vision to make it real. It’s foundational to the success of any product. It’s your north star. Without a coherent product vision, even a seemingly “great” product idea will fail in the market!

I decided to put my thoughts on this into a video.

So here it is. In it, I talk about:

  • What is a product vision.
  • Why it’s important.
  • How you can craft one for your product.

I cover this in depth in this video:

Creating a product vision doesn’t have to be hard. You don’t need to write some fancy vision statement, nor do you need torture yourself by trying to come up with the perfect elevator pitch.

You can actually start simply and immediately by defining four things:

  1. Who is your customer?
  2. What problem are you solving for them?
  3. What is your solution to that problem?
  4. What is your value proposition — i.e. that ultimate benefit you’re trying to deliver to your customer.

This is something you can do today. Right now. It can take less than 20 minutes. Even 5.

It doesn’t have to be perfect. It just needs to be done.

I talk about it in the video.

Over time, as you learn from the marketplace, as you learn from customers, you’ll refine the vision. That’s a good thing.

Watch the video, and when you’re done, please leave me a comment on what challenges you’ve had to face because your product lacked a proper product vision.

Then be sure to grab this quick fill-in-the-blank worksheet below to help you create the product vision for your next great product idea!

Grab Your Copy Of The Fill-In-The-Blank Product Vision Worksheet >>

Do You Have A Problem Worth Solving?

In order to pursue any product idea — a new product, or a new feature for an existing product — you must make sure it’s a problem worth solving.

If it doesn’t solve a tangible, real problem that lots of people are facing, and are willing to pay to have solved, it’s not worth spending your time on it. Move on to your next great idea.

So how do you go about figuring out if your product actually solves a problem that’s worth solving?

And what makes a problem worth solving?

In their book, Tuned In, authors Craig Stull, Phil Myers and David Meerman Scott talk about this in detail.

In order to know whether your product idea solves a problem that’s worth solving, it must it must satisfy the following criteria:

  1. Is the problem urgent?
  2. Is the problem pervasive?
  3. Are customers willing to pay to have the problem solved?

These three questions need to be answered before investing a ton of money or resources into developing and launching your product.

If the answer to any of these questions is “no”, then you need to pivot.

Let’s talk about each of these in turn.

Is the problem urgent?

Any product idea you’re pursuing must solve a problem people really care about. It needs to be a real pain point, a critical need, or a super important job for them.

The pain may manifest as costing them money, time, resources, effort, credibility, or some other significant inconvenience or frustration. Even perhaps emotional or physical pain.

The need or job could be social (look good, gain status, etc.), emotional (feel better, feel more secure, etc.), or functional (an important job that must get done).

If it’s truly a pain point or priority need/job, people will have expended time or effort to have tried to solve the problem. They may even have “hacked” together their own solution, or spent money on trying to solve it. This is what’s meant by the problem being urgent.

But why does this matter? Why is it so important to validate the urgency of the problem?

Because nothing is more frustrating than working yourself silly trying to solve a problem that either doesn’t exist yet or that people describe as “not a big deal”.

Here’s an example:

I hate taking out the trash.

I have to do it 2x a week, put it out on my driveway in the evening so the garbage truck can pick it up first thing the next morning.

I especially hate doing it in the winters when it gets really cold.

Is it a job I need done?

Most definitely!

Is it a pain?


But have I done anything to solve my problem?


I keep complaining about it. But I’ve done nothing to change the situation.

It’s just not a priority for me — it’s just not urgent enough.

As product people, we’re naturally wired to look for solutions. So we quickly and easily fall in love with our solutions.

(Thanks, Ash Maurya, for representing this first on your Lean Canvas.)

But we need to care about PROBLEMS.

So if you’ve got a product idea, you need to first care about your customers’ problems.

This is true whether you’re thinking about your next new feature or a wholly new product.


Customers don’t care about your solution. They care about their problems.

Just make sure the problem is an urgent one.

Is the problem pervasive?

The urgent problem needs to be one felt by a large enough number of people to make it worthwhile for you to develop and sell your product.


Say one product will cost $1,000 to make, and only two people in the whole world will pay you $10,000 each for it, and another product costs $10,000 to make, but 10,000 people will pay you $10 each for that one.

Which product is better worth your time?

Quite simply, if enough people aren’t experiencing the problem, then the market potential for your product idea isn’t big enough, and it’s not worth pursuing your product idea. Period.

Even for a new feature, you need to size the market opportunity for it.

Your company has a choice of whether to focus its resources on developing feature A or feature B. In fact, it has a choice of whether to have its resources focused on your new feature idea or something else entirely.

So no matter whether you’re pursuing a new feature or a new product, make sure it’s solving a problem that’s pervasive.

Are they willing to pay to have the problem solved?

This is critical — you may find a lot of people are complaining of the problem you’ve identified… but are they willing to pay to have it solved?

Most people have all kinds of problems that they’re just not willing to pay money to solve.

For example, I may whine about taking out the trash, especially in the bitter cold of winter.

And it becomes an urgent enough problem that I finally get my teenage son to do it. (Hey, it builds character.)

And lots of other people may be doing the same thing as me.

But neither they nor I are willing to pay to have someone come to our house twice a week to put the garbage out by the curbside.

Even for an existing product, a new feature must be able to create some tangible business value. Will customers pay for the new feature? Will the new feature justify a higher price for your product? Will it increase customer lifetime value, or accelerate new customer acquisition?

As long as you’re in a profit-making enterprise, it’s worth solving an urgent and pervasive problem only if the people with the problem are willing to pay for your solution.

Are you done? Not quite…

In order to decide whether to pursue your product idea or not, you need to consider a couple of additional things.

First, it’s possible that your company may have (likely has) a point of view (spoken or unspoken) on what it considers worthwhile revenue opportunities.

For example, at a $7 million company, a $50k opportunity could get the CEO’s attention…

…But at a $500 million company, anything less than $250k may not get much interest.

If so, it’s important to consider whether your product idea meets this threshold to be worthy of consideration.

Second, your product may have specific strategic business goals, such as driving new customer revenue, or generating expansion revenue from existing customers, etc.

If so, you’ll need to evaluate whether your product idea contributes in a meaningful way to achieving those goals.

In other words, is there enough monetizable value in your product idea?

If your product is currently generating $50 million in revenue with a goal to grow 15% in the next year, and you estimate your product idea could drive $500k in additional revenue, that means it will contribute less than 7% toward that goal.

Whether that’s good enough will depend on how it compares to other ideas that contribute toward achieving the goal, or whether it can be combined with other ideas in some rational way as part of a theme — then it will come down to how the theme in its entirety contributes toward the goal.

So to recap:

To pursue any product idea, make sure it’s a problem worth solving.

This means the problem must be urgent and pervasive, and your target customers must be willing to pay to have the problem solved.

Furthermore, your product idea must have enough monetizable value to contribute meaningfully toward your company’s strategic goals.

Fortunately, it’s not that difficult to learn how to do this. 🙂

The secret ingredient to getting product innovation done

So you’ve probably heard of “earlyvangelists”.

(No? Read this post by Steve Blank, who coined the term.)

In Lean Startup circles, we hear a lot about finding this special breed of customers. Why?

Because they’re the ones willing to make the initial bet on the startup. They’ve bought into the startup’s vision and potential. They’re not just buying a version of the product, but the entire vision of the startup. This is what keeps them committed even if the startup screws up a few times.

They are the true visionary customers talked about in the technology adoption lifecycle.

So a lot of focus is put in identifying, finding and nurturing these earlyvangelists in the form of testing customer and problem hypotheses, testing solution hypotheses, finding problem/solution fit, creating an MVP, and getting true customer validation by finding a handful of customers who are actually willing to pay you for your solution — the “earlyvangelists”.

Now, juxtapose this with traditional product management.

When I started out in product management, I was introduced to the technology adoption lifecycle. I read about it in books. People talked about it in conferences. “You must find those visionary customers and early adopters,” experts said in their presentations.Cool.


Problem was: no one taught me how to get these magical customers.

Business school didn’t teach me how to get earlyvangelists.

Product management didn’t teach me how to get earlyvangelists.

Instead, what I was told was to develop a business case. Write an MRD. Create a business plan.

Business school told me I was supposed to do this. Smart consultants and well-meaning senior executives and mentors reinforced this. Elaborate PMO processes required this.

Want resources for your product idea? Show us your business case.

So what’s wrong with that? On the surface, it made sense. Unlike a startup, which is searching for a sustainable business model, a company is executing an existing business model.

On the surface, it made sense. Unlike a startup, which is searching for a sustainable business model, a company is executing an existing business model.

Shareholder returns, customer value, and employee paychecks depend on the successful execution of this business model.

So the company needs to evaluate its investments in terms of risk to this business model. A company needs to know whether to dedicate its resources to project A or B. To do that, it needs to know which has the better payoff.

Good intentions.

But here’s what actually happened.

Product managers began spending loads of time writing multi-page MRDs, crafting business case slideware, and crunching through multi-year financial “projections”. These documents were filled with unvalidated assumptions or HiPPO driven convictions.

“How the heck can I figure out whether customers will buy the product before it even exists?” they’d ask. “How can I figure out how much money it will make when no customer has bought it yet?”

The product manager would torture the spreadsheet, try and convince finance of adoption rates and growth trajectories based on mere guesses, and go to Engineering/IT for estimates.

“You need to give me requirements,” Engineering would say. “If they’re not documented, there’s no way I can give you estimates.”

So the product manager would then start writing an MRD / PRD / BRD / <stick your 3-letter acronym here>. Ah, the joy…

And under pressure to get “accurate” estimates, they’d pack in as much detail as possible, essentially guessing at the features and functionality that would be needed.

And every minute the product manager spent preparing the business case, writing the MRD/PRD or torturing the spreadsheet was valuable time not spent with customers.

So it’s no surprise that in a recent survey filled out by over 40 product managers who enrolled in my online course, Idea To Revenue Masterclass, they listed the following as their biggest product innovation challenges:

#1 Biggest Innovation Challenge: Testing product ideas without having a product.

Meaning testing with both customers and internally within their organizations. They need ways to test their understanding of the market, as well as evaluate the revenue potential for a product opportunity, but without having a product already.

“My number one product management challenge is creating business requirement documents on new products and demonstrating a return on investment for 1/3/5 years without releasing the product.” — survey response

#2 Biggest Innovation Challenge: Alignment, buy-in and communication.

How many people does it take to change a lightbulb?

(Or maybe the question is: how many people does it take to get approval to change the lightbulb? Ha!)

This challenge is a close second to the first. Product innovators are challenged with communicating product strategy to get buy-in, getting executive support for their product plans, aligning teams within the company to support new products, and managing communication across multiple stakeholders.

“In a growing organization, with lots of ‘people of interest’, communicating what you are building and why is a huge challenge.” — survey response

In a blog post titled, Why Internal Ventures are Different from External Startups, Henry Chesbrough argued:

The internal venture must fight on a second front at the same time within the corporation. That second fight must obtain the permissions, protection, resources, etc. needed to launch the venture initiative, and then must work to retain that support over time as conflicts arise (which they will).

#3 Biggest Innovation Challenge: Resources.

We can never have too many resources, can we? 🙂

Working with resource constraints is a fact of life. But product innovators feel this acutely so.

They’re pushed to accelerate time to market, yet are challenged with selling the business case for the right mix of resources to do just that.

And, of course, this leads to the chicken-or-egg dilemma from challenge #1:

We need a product to test whether customers value it…

But we need customer validation in order to get the resources to build the product!

“My #1 product planning challenge is getting and retaining key resources to minimize time to market consistent and aligned with company priorities.” — survey response

So what’s the solution?

This brings us back to “earlyvangelists”…

Lean practices can and should be adopted and adapted to pursue product innovation inside companies. But product innovators actually need to find two types of earlyvangelists:

  • Earlyvangelist customers.
  • Internal stakeholder advocates, a.k.a. “internalvangelists”.

One of the biggest factors that can derail any new product endeavor is lack of internal support. In product innovation, lack of stakeholder traction can often be a bigger roadblock than customer traction.

These stakeholders not only may have access to essential information and resources but also be able to influence key decision makers whose support is critical to the success of your product initiative.

The larger the organization you work in, the more stakeholders you’re likely to have. It’s important to identify who these folks are and make sure you’re not only bringing them along but in fact converting them into advocates — evangelists — for your product initiative.

Product management didn’t teach me how to get internalvangelists.

The good news is that a lean approach that fuses customer development methods with sound product management practices can be used to get early customers AND build the business case, create alignment, and cultivate internalvangelists iteratively.

Lean product management can get you “earlyvangelists” and “internalvangelists”.

Here’s an example:

Customer learning driven investment strategy

The approach calls for spending plenty of time with customers in a methodical way, systematically testing assumptions at each phase, while also having regular check-ins with folks internally.

Each stage is informed by learnings from the previous stage — “mini business cases”, if you will, at each milestone, instead of wasting time writing a big tome of a business case up front.

Requirements for delivery need only be done when there’s a clear signal to do so. For example, if you find there’s no problem/solution fit, no need to write detailed requirements to build out an MVP or do financial projections. Only on achieving problem/solution fit does it make sense to spend the time doing those activities.

This customer learning driven approach makes for a more market-informed investment approach to the product strategy. This makes it easier to garner, maintain and accelerate stakeholder buy-in, because:

(1) Each investment stage is grounded in real customer data, resulting in less assumptive and more empirically based investment asks.

(2) Smaller continual investments that deliver continuous tangible ROI throughout the process are easier for folks to digest and support than a large bloated one upfront.

(3) Stakeholders continually feel involved in the process, increasing confidence to persevere.

There are surely other variants to this approach. The point here is that lean principles can be fused with sound product management practices to:

  • Test product ideas without a product.
  • Build the business case iteratively.
  • Get alignment and buy-in, and create internalvangelists.
  • And get those magical earlyvangelists!

The Keys To Productive Brainstorming


(c) Rob Cottingham, used via a CC BY-NC 3.0 license

Let’s face it: brainstorming has gotten a bad rap. And deservedly so.

How many of us have been part of a “brainstorming meeting” that turned out to be a total waste of time? Too many people. A purposeless agenda. Meandering conversations that go nowhere. And no follow-up afterward. Sound familiar?

In fact, doesn’t “brainstorming meeting” sound like an oxymoron?

The irony is brainstorming is actually an important tool to uncover creative solutions to thorny problems. Brainstorming broadens one’s perspective, allowing for new and unexpected ideas. It fosters collaborative thinking and the sharing of ideas, uncovers unexpected questions, and encourages creative exploration. These are important ingredients to fueling innovation.

If done well, brainstorming can be an invaluable tool for any product manager, entrepreneur or innovator.

So the problem really is that most brainstorming sessions are simply not conducted well. (OK, most are conducted really badly.)

So when Essay.Expert shared the following infographic on “Keys To Constructive Brainstorming”, with some useful tips on effective brainstorming techniques, it was a great reminder of how useful brainstorming can be if done right.

I particularly like tip #2 as it increases the likelihood of greater engagement during the brainstorming and continuity after.

Keys To Constructive Brainstorming

(c) Essay.Expert

What brainstorming practices have you seen successfully applied in your work?