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!


20
Aug 13

The Importance of Tools To Product Managers and Other Humans

In a seminal 1962 paper Doug Engelbart outlined a research program that came to be called “Augment,” short for “augmenting human intellect.” He illustrated the importance of tools to human progress with the following story about the pencil and how society might have evolved without it:

For one thing, the record keeping that enables the organization of commerce and government would probably have taken a form so different from what we know that our social structure would undoubtedly have evolved differently. Also, the effort in doing calculations and writing down extensive and carefully reasoned argument would dampen individual experimentation with sophisticated new concepts, to lower the rate of learning and the rate of useful output, and perhaps to discourage a good many people from even working at extending understanding. The concepts that would evolve within our culture would thus be different, and very likely the symbology to represent them would be different — much more economical of motion in their writing. It thus seems very likely that our thoughts and our language would be rather directly affected by the particular means used by our culture for externally manipulating symbols.

Why do I go on so much about tools? Better tools are key to improved productivity, and productivity is what creates value. All major transitions in human history have been related to new tools.

ABANA style treadle hammer

A treadle hammer, which multiplied the productivity of blacksmiths. When you attach it to a water wheel or to steam power, it helps usher in the Industrial Revolution (image by tmib_seattle, CC 2.0 license)

And product managers are the last group without tools of our own. Everyone else has tools that help them do a better, faster, higher quality job, and that are specific for their needs. Developers? Interactive development environments (IDEs) like Eclipse or Microsoft Visual Studio, plus source code control (SVN or Git), build tools (Jenkins), libraries (JQuery), bug trackers. Engineers? 3D cad systems, finite element modelers. Accountants and finance people? Any number of ERP and backoffice tools. Salespeople? CRM systems like Salesforce.com. I could go on.

But product managers don’t have tools. Or rather, we have a book-writing tool – Microsoft Word – and a finance tool – Microsoft Excel.

That’s why I spent seven years at Accept, working on a tool for product managers. That’s why I blog so much about tools and why we don’t have good tools (yet). And why I’m so excited to see a number of tools coming to market now and recently.

I’ll be posting soon on another batch of product management tools, all new, that I’ve heard about in the past few weeks, as a follow on to last week’s post about Aha, ProdThink, and The Skore