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Sometimes it’s okay to prioritize commercial interests over customer features.
Especially when it comes to product delivery.
Two stories to show you what I mean.
Story 1
During the COVID pandemic, our team was racing to launch an innovative product to help physicians and nurses remotely check in on isolated patients.
We had done our homework. Demand was clear. Customers had validated the demo. We knew the features, the budgets, the price sensitivity. And development was running smoothly.
We just couldn’t get our pricing model past the Finance Committee.
To get the margins they wanted, we’d have to price the product way above what customers would pay.
That meant risking pressing STOP in our development work, opening the door to competitors and, worse, leaving hundreds of thousands of patients without the care they desperately needed.
Lives were at stake.
We re-visited our analysis. Scrutinized every assumption. Eventually, we found the problem.
We had baked too much of our shared platform costs — AWS, video tech, security, monitoring, tools — into this one product. Some of it was human error (the pandemic was stressful). Some of it was my faulty assumptions about year-one volumes.
We fixed the model. We needed to allocate only 5% of platform costs, stripping $10,000 in monthly expenses from the P&L.
Voila! Now the numbers worked. We had an affordable price and healthy margin. Finance approved, we launched, and countless patients got care they wouldn’t have otherwise.
Damn, it feels good to be a product manager!
Story 2
Enterprise SaaS platform. Big logo clients. Strong growth. Ambitious goals: increase bookings by 25% and hit 90% retention.
By December, we had a well established strategy and aggressive roadmap to achieve these goals.
Then, in Q1, the CFO began to beat the drum of “faster revenue recognition.” The culprit? Our long client implementation times.
A quick primer on how enterprise SaaS revenue works:
When a customer signs a contract for your enterprise SaaS product, the business is able to report that to the board as a “booking” — i.e., anticipated revenue.
However, accounting principles state that the revenue can be recognized on the income statement only once the product has been delivered — i.e., once your product has been implemented for the customer and the customer has started using it.
So, the longer it takes to implement the product, the bigger the delta between “bookings” and actual revenue recognition.
This is why an enterprise SaaS company can show $10M in annual bookings, but $4M in annual revenue — that $6M gap represents unfinished client implementations.
This is the type of thing that keeps your CFO awake at night.
Professional Services approached me: “We need to cut implementation time by 35%.”
The problem was our Admin Console — critical for client implementation configuration — was underdeveloped. Not uncommon for growth products where customer features are the product development priority.
Fixing the Admin Console properly would 4 months of dev time, jeopardizing our roadmap and company goals. A non-starter.
So, we got creative.
With Pro-Serv and R&D, we mapped the big vision but delivered incrementally, releasing iterative improvements each quarter. Pro-Serv stayed closely involved as primary users.
By year’s end, we had:
Reduced implementation by 20%
Accelerated revenue recognition by millions of dollars
Set ourselves up for another 15% reduction the following year
While also achieving our top-line company goals
The Overlooked Side of Product Management: Delivery Economics
In both stories, there was a net customer benefit. In the first, the got affordable access to a lifesaving product. In the second, they reaped value faster.
But the primary driver behind pursuing these efforts was business impact.
Most PMs are hyper-focused on customer features. But some of the biggest wins come from improving product delivery and cost levers.
How to identify and prioritize these is what I’m going to teach you today.
Remember:
Product Management’s job is to drive the business growth of the product
ROI is driven by net revenue growth and margin velocity
Margin velocity is driven by:
Product development — the investment needed to build the product
Product delivery — the investment needed to deliver the product to the customer
I talked about the product development side in a previous essay. Today, I’ll cover the product delivery side.
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