13
Apr 15

The Astonishing Financial Benefits of Improving PM Effectiveness

Image of man holding hand-lettered cardboard sign saying "Give Me One Million Dollars"

Give Me One Million Dollars (by Klaus M, CC licensed)

What if you could increase your company’s revenues by $1 million simply by changing what you do? Not by adding any new employees, or buying a business software package. Just by doing things a little differently. What would $1 million more on your top line mean for your bottom line?

That’s the kind of return you can get by improving your product management operation – per product manager!

A Massive ROI

The business value of a product manager is about $10 million in revenue, based on standard industry ratios. A 10% improvement in product management effectiveness is therefore worth about $1 million more revenue. (10% of $10 million.) And if you gain that improvement simply by changing behavior, by doing things differently, that new revenue is going to flow all the way to the bottom line.

That sounds pretty good, doesn’t it? So, how do you do it? How do you increase product management effectiveness by 10%? Do you just increase the hours a PM works? Or can you get them to put in 10% more effort? Unlikely.

Instead, a 10% improvement is going to come from doing things differently. (And everywhere I say “PM” in this discussion, I also mean “the PM organization” or “the PM function within your company.”)

How To Be A More Effective Product Manager

What are the levers we have to increase PM effectiveness? At a very high level:

  1. We can do a better job of discovering important market problems.
  2. We can do a better job of creating solutions to those problems.
  3. We can do a better job of taking those solutions to market.

For example, let’s say I want to do a better job of discovering important market problems. This is often the highest leverage I have. No one will buy my solution, no matter how good it is, if it doesn’t solve an important problem! Therefore, step 1 is to focus more of my time on market discovery. If I’m not spending much time finding problems, I’ll have to reprioritize my work to spend more time on that activity.

This means I won’t be able to do some other things – they’ll fall off my plate. I might not be able to babysit customer enhancement requests. I might not have as much time to write detailed user stories for developers. Spending time discovering market problems to solve is almost always a higher payoff activity than spending time decomposing requirements.

More Effective Means More Successful, Higher Quality Products, Faster

This is because when I understand the market problem well, I can do a better job of prioritizing the work of the product team. Whether it’s choosing between different features, or choosing between different products to invest in. Prioritization is a complex subject in itself, but having good market intelligence is the most critical part.

If you have more market intelligence you can write better features. You can tie the feature more explicitly to specific market needs. The feature will be worth more (versus “this seems like a good idea”). And the developers will be more motivated – they’re solving a real validated market problem! So you get a higher quality solution.

Finally, better problem discovery gets us to market faster! We don’t get more efficient or code faster. We simply make better decisions and create less waste. A feature that doesn’t really solve a problem, or that’s incomplete, or is implemented in a less valuable way is waste. And waste is always a drag on revenue and profits. By being a more effective product manager you’re eliminating waste from the product development process.

When Japan innovated their manufacturing systems in the ’70’s, their great efficiencies were not the result of working faster. (Although they also developed techniques for working faster, analogous to unit testing and code templates.) They focused on eliminating the waste of doing work that was bad or incorrect or unnecessary. Not only did their efficiency skyrocket, but so did their quality. Now we in product management have the same opportunity.

Three things you can do today to start being a more effective product manager:

  1. Calculate how much time you’re spending today finding market problems. This means talking to customers, prospects, the customers of competitors, and lost prospects – outside the context of sales – to understand their most important problems.
  2. Plan how you’ll start spending more time on market discovery.
  3. Practice your market discovery skills such as asking open-ended questions, putting yourself in your customers’ shoes, and “asking Why? five times.”

By the way, Justin Wilcox has a great resource on how to do a market discovery interview. If you start doing a few of these every month, you’ll learn a lot about how to offer more value to your market, and thereby start creating more revenue for your company!


29
Sep 14

Is Your Lack of A System Of Record Leaving You In the Stone Age?

I have done a bit of guest posting lately, and this week’s entry is about a new essay on Mike Smart’s Product Management 2.0 site. As long-time readers know, I’m a proponent of getting product management into the “big leagues” with better tools, and particularly, with a good system of record for the full lifecycle of product management. “System of Record: Why You’re in the PM Stone Age Without One” puts a stake in the ground about what product management needs to insist on to become a modern business process.

Almost no company has a legitimate system for product ideas and input, or front-end customer interactions (i.e., interviews, ethnology, market discovery and research). Likewise, typically there is no system of record for product marketing (i.e., value proposition, benefit statement, go-to-market plan). Instead, all of these are stored in various spreadsheets and documents, but not tracked or managed.

The benefits of tracking all the information related to product management – from customer interviews, to market analysis, to competitive positioning, to roadmaps, to the value proposition, to the go-to-market plan – are immense. They range from the obvious, like transparency and collaboration, to the subtle, like the fact that product managers have more time and attention to spend innovating and learning about market problems to solve.

I’ll be following this essay up with a post on this site about how to build a real system of record, even if you don’t have all the tools you’d like.

In the meantime, take a look at System of Record: Why You’re in the PM Stone Age Without One.