What's Our Primary Job as a Product Manager?
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One of the biggest lies in product management is agile.
I appreciate agile as a software development methodology. When done well, it’s a fine approach to reducing the risk of developing and shipping software and managing the D side of R&D investment.
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 feel stuck.
So many product managers feel like they’re struggling to make a meaningful impact. They’re scrambling in the trenches writing stories, managing backlogs, and worrying about sprints, story points, and velocity.
Sure, these are important activities. But they’re not the things that truly create impact producing business results.
So what are the things that create impact?
Let’s start with what product management really is about.
Product management is about creating sustainable monetizable customer value.
In his book, Scaling Lean, Ash Maurya talks about two conditions that must be met in order for any product to succeed.
Create Value means our product must create value for our customers. It needs to relieve pain, solve a problem, enable them to complete a job, or deliver a desired outcome for our customers.
Capture Value means we need to have a process to capture some of that created customer value back into the business. In other words, it needs to generate revenue.
Deliver Value means we need to have a process to deliver that value to our customers - how the customer gets access to our product, how they use it, and how they get ongoing support.
The first condition is called the Value Equation. This means we must create more value for our customers than we capture back.
In other words, our customers must feel like they’re getting more value from our solution than they’re paying for it.
If they don’t, they won’t pay us, they won’t keep paying us, and we won’t have a business.
This value is represented by revenue. It may be direct – the customer pays you for your solution – or indirect. Two examples of indirect revenue:
- A digital initiative that improves the hotel guest experience, thus, encouraging more bookings with that hotel brand.
- A mass market consumer app or experience that’s monetized via advertising.
There are others.
The second is what I like to call the Viability Equation. This means our ability to deliver that value must cost less than our ability to capture it.
In other words, it must be viable for the business to deliver that customer value.
Viability may be achieved in two ways:
- Direct margin – the product is available at an acceptable price point that exceeds its cost
- Indirectly – e.g., a health plan offering an app to help its members achieve better health outcomes, thus, reducing its long-term claim costs.
If it’s more expensive for us to create the value for our customers than it is to deliver it, we don’t have a business.
If customers won’t pay us enough to cover our costs, we don’t have a business.
Turn off the lights. Lay off everyone. Go find a new job.
If this sounds familiar, it is.
Revenue - cost = profit.
No revenue, no growth.
No profit, no business.
What this means is that a product manager is focused on maximizing BOTH equations – the value equation and the viability equation.
So, the job of a product manager is to drive sustainable business growth by continuously delivering monetizable customer value.
This goes well beyond tactical activities like grooming backlogs, writing requirements, running sprints, user testing, etc.
But maybe you’re stuck in that tactical rut.
So, how do you get started?
Here are 6 things you can do in the next two weeks:
1. Understand your product's business reason for existing.
Your product obviously exists to solve a problem for customers.
You need to understand its business reason for existing.
Trust me, your product has a specific business purpose.
For some products, it’s straightforward – customers buy the product and pay for it. So, the goal is obvious: get more customers to buy our product, and get those customers to keep buying and/or renewing = more revenue.
For others, it may be to deliver against a strategic business goal that lends itself to capturing revenue or reducing cost.
For example:
- Encourage digital check-ins on booked hotel rooms. More digital check-ins means an improved guest experience, which means more bookings. It may also mean reduced traffic at the front desk, which means our staff’s time is more efficiently spent, which keeps labor costs down.
- Increase usage of a mobile app to reduce call center operational costs.
- Drive enrollment and usage of wellness programs provided by a health plan. More adoption means healthier members, which means fewer claims, which means more profitable health insurance plans.
- Boost consumer usage or eyeballs-on-content. More usage means more advertising revenue.
Whatever it is, you need to understand why your product exists.
2. Understand your product’s go-to-market.
Our product is the entire experience in the eyes of customers – from how they buy it to what they expect when something goes wrong.
Go beyond the bits and bytes, features and functions of your product to understand the buying journey - how your product is marketed and sold to customers, how it’s positioned against competitors, and how it’s supported among paying customers.
Spend time with those cross-functional teams to understand how their models and processes work, and what goals they’re operating against.
3. Understand the company's business goals.
These are the top-level business outcomes or KPIs that the company cares about:
- What is the company's revenue growth goal for the year?
- How much will come from growth (new customers) vs. retention (returning customers) vs. expansion (upsells/cross-sells)?
- What is the company's profitability goal? This may be expressed in terms of an EBITDA number, a margin goal, or cost reduction.
Your product must directly or indirectly support these top-level goals.
4. Understand your product's current strategy and goals.
How does your product contribute to the company's top-level KPIs? What percentage of the company's revenue is contributed by your product?
What's your product's current product strategy? For example, is it:
- Reducing churn?
- Improving lifetime value?
- Boosting monthly or annual recurring revenue?
- Delivering on certain customer commitments?
- Re-platforming?
- Launching a new product?
- Post-merger integration?
You may have more lower-level goals, such as increasing user satisfaction, improving user onboarding, driving usage, or reducing support volume. You need to understand how these goals align up to the broader product goals and strategy, and contribute toward the top-line company KPIs.
5. Evaluate every product opportunity in terms of monetizable value.
You likely have a backlog of ideas, features, enhancements, and fixes.
How are you prioritizing which ones to work on first?
There are countless prioritization techniques out there. Whichever one you use, armed with the knowledge from steps 1-4 above, you can be more strategic in how you prioritize product work.
For example, let's say you're in a post-Series A startup whose goal is to grow from $5M to $10M this year...
Likely, the primary strategy is acquiring new customers. It's common for the product strategy to be focused more on launching features and enhancements that will win new customers.
On the other hand, let's say your "product" is the personal music library of a $1B+ music streaming app...
The product strategy may be to optimize the user's ability to manage their playlists, because a poor playlist experience will cause users to abandon the product, increasing churn and reducing monthly recurring revenue.
So, product opportunities that will meaningfully increase usage of and user satisfaction with playlists will likely be the most important ones.
6. Tie your activities to business results that matter.
As you go about your daily activities, think about how they impact the business outcomes above.
This way, you're not mindlessly going from meeting to meeting, user story to user story, sprint to sprint, release to release.
You can be more purposeful in prioritizing your work, managing your time, and then being able to speak to the impact of your work at your next performance review cycle.
I'll be talking more about connecting daily product work to business impact in coming newsletter articles.
Conclusion
- Our job as product managers is to continuously deliver monetizable customer value.
- Our solution must provide value to the customer = they’re willing to pay for our solution.
- Our solution must be viable = it must provide some form of measurable ROI to the business.
- Evaluate every product opportunity in terms of value to the customer and viability for the business.
- Be purposeful in what you’re doing. Don’t just be an operational drone, going through the motions of prioritizing a backlog and attending standups. Focus your activities on delivering business results that matter.
That’s all for this week.
See you next Saturday.
