One of the biggest lies in product management is Agile.
When done well, Agile can be 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, Agile does not 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.
Product Managers feel stuck
So many Product Managers feel like they’re struggling to make a meaningful impact.
They’re dealing with organizational chaos, shifting priorities, prickly stakeholders, and juggling too many demands.
Agile didn’t prepare them for any of this.
What Agile did do is leave them scrambling in the trenches writing stories, managing backlogs, and worrying about sprints, story points, and sprint velocity.
Sure, these can be valuable activities. But they’re not the things that truly create impact producing results.
So what are the things that create impact?
Let’s start with what Product Management is really about.
What really is Product Management?
Most definitions of Product Management out there are terrible.
Long-winded, wordy, vague, nebulous.
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.
Customers have a problem. They want it to go away. The problem may be pain, an obstacle, a job they need to complete, or some outcome they desire that they can’t easily get to. Our product needs to solve for that.
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.
Everything from how the customer gets access to our product to how they use it and how they get ongoing support.
The first condition that must be met for a product to succeed 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 and we won’t have a business.
This value is represented by revenue. It may be direct – the customer pays us for our solution – or indirect. Here are just 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 condition that must be met for a product to succeed is called the Viability Equation. This means our ability to deliver that customer 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 is 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.
Here’s the really important part:
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 product. We don’t have a business.
If customers won’t pay us enough to cover our costs to build and deliver our product, we don’t have a product. 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 Product Management is focused on maximizing BOTH equations — the Value Equation and the Viability Equation.
This gives us a succinct and accurate description of Product Management:
Product Management is responsible for driving the sustained business growth of a product.
The way Product Management drives the business growth of a product is by continuously delivering monetizable customer value.
Customer value not just measured in terms of making customers happy. Rather, in terms of delivering ROI to the business.
This gives us a succinct and accurate definition of the job of a Product Manager:
A Product Manager is responsible for driving the sustained business growth of a product by continuously delivering monetizable customer value.
Think about this. This goes well beyond tactical activities like grooming backlogs, writing requirements, running sprints, user testing, A/B testing, sweating points and velocity, etc.
Those are all means to the end. But they are not the end.
When we understand this fundamental principle, when we understand what the job really is, what the true purpose and value of Product Management is, we transform ourselves from feature factory delivery managers to strategic business partners who can make a real impact on customers and the business.
How To Make This Transformation
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.
Our product exists to solve a problem for our customers.
We need to understand that. But we also need to understand our product’s business reason for existing.
Think about what you’re working on right now. Trust me, it exists to fulfill a specific business purpose. You need to understand what that is.
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 them 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, we need to understand the business reason for why our product exists.
2. Understand your product’s go-to-market.
A product is not just the features, functions, UI, design, and tech. It is the entire experience in the eyes of customers — from how they buy it to the support they expect when something goes wrong.
So, as PMs, we need to go beyond the bits and bytes of our product to understand the buying journey — how our 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 your company’s business objectives.
These are the top-level business outcomes, OKRs, KPIs, or metrics 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.
Our product — and our work as PMs — must directly or indirectly support these top-level goals.
4. Understand your product’s 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? 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?
Something else?
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 customer 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 formulas out there. Prioritization isn’t about blindly applying some formula. Prioritization always begins with strategy.
Once we’re armed with the knowledge from steps 1-4 above, we can be more strategic in how we prioritize product work.
For example, let's say we’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 we’re responsible for managing the personal music library feature of a $1B+ music streaming app.
The strategy for our “product” — the personal music library feature — may be to optimize the user's ability to manage their playlists. Why? 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 we go about our daily activities, think about how they impact the business outcomes above.
This way, we’re not mindlessly going from meeting to meeting, user story to user story, sprint to sprint, release to release.
We can be more purposeful in prioritizing our work, managing our time, and then being able to speak to the impact of our work at our next performance review cycle.
Key Takeaways
Our job as Product Managers is to drive the business growth of our products.
We do this by continuously delivering 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 be worth doing by providing 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.
Have a joyful week, and, if you can, make it joyful for someone else too.
cheers,
shardul
Shardul Mehta
I ❤️ product managers
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