In the movie The Matrix, our hero Neo is advised to “follow the white rabbit.”

It’s an invitation to stop accepting the world at face value and start looking for the forces that are actually shaping reality.

Product Management is at a similar moment.

Let me ask you:

Do you believe Product Management is changing faster than at any point in your career?

If so, why? What’s the primary driver?

If you said AI, congratulations. The Matrix has you.

Because that’s not the whole story.

Most people are misdiagnosing what’s truly changing product management.

If you want to understand where product management is actually headed, you need to follow a different trail.

You need to follow the white rabbit.

That’s where the real story begins.

Here’s what product management has traditionally looked like. Some version of this.

The key question we were answering was:

What should we build?

So, it was all about orchestrating product delivery.

Here’s what most people think it will look like thanks to AI. Some version of this.

To some extent, this is true. The key question being answered is:

How can we build it faster?

So, it’s really all about optimizing software creation.

Here’s what it will actually look like:

The key question will be:

Where should we invest?

Product Management is quickly becoming all about optimizing capital deployment.

This is the key question more and more CPOs are grappling with. Our profession is evolving from build better to build faster to build the business.

Let’s talk about what’s actually happening in the market.

The market feels like this:

It feels like this because the headlines, podcasts, and social media makes it feel like it’s all about AI, big tech, and whatever is happening or being said in Silicon Valley.

But this is what the market actually is:

90% of it is in established, enterprise software, vertical industries, corporate tech. And, most of it, is backed by or owned by private equity — NOT venture capital.

This is where capital is actually deployed.

When you remove the paper-valuation markups of AI startups, PE holds a massive, absolute advantage in total assets under control.

VCs, who typically fund early-stage companies, are heavily funding — and subsidizing — the AI startups. That dominates the narrative.

But the reality is that $2 trillion in assets are owned or backed by private equity. 15,000 — 20,000 software companies globally are owned or backed by private equity. And, if you isolate to larger, more established platforms and enterprise software providers, that’s still almost 2,000 large, premier, software platforms under PE control.

When you account for the thousands of smaller “add-on” software companies that PE firms quietly buy up and roll into those primary platforms every year, that’s a massive ecosystem.

Private equity now controls the operational playbook for over a third of the mature B2B software market.

Overlap that with the fact that 90% of product people work outside of Silicon Valley, and you start to see the reality that the market you think you see isn’t the market that’s actually shaping your career.

Look around. You may actually be working in a company that’s owned or backed by private equity right now.

Investors aren’t deploying capital the way they did five years ago.

VCs, who historically have been more concerned with growth and relatively less so with profitability (at least compared with PE), are increasingly focused on profitability. A big reason is because the IPO market has dried up. And there isn’t much dry powder left.

So, they’ve started looking for M&A events, or even to sell to private equity, as an exit strategy.

In contrast, PE has always operated expecting measurable business outcomes — growth, retention, margins, EBITDA.

On top of that, private equity is sitting on $2 trillion of unallocated capital. And they’re under considerable pressure from their LPs to invest it. PE managers typically operate under the pump to deliver returns on a promised target, on a deadline.

THIS is the broader context behind why executive expectations are changing.

So, both VCs and PEs care about value creation, of course. They just ask different questions.

For VCs, the focus traditionally has been on the future. Most of their bets fail. We never hear about them. We only hear about the 1-2% that actually explode, like Uber, AirBnb, and OpenAI.

They’re happy to keep fueling growth even with no operating profit. They want category leadership and market dominance.

Private equity, on the other hand, is comparatively less interested in those things as a goal. They are interested in cash flow. They want ROI via predictable profitable growth.

So, they do not make losing bets. They’re not ok with 1 unicorn out of every 10 investments. In fact, they typically don’t care about unicorns. For PE, they don’t invest unless they’re sure of the bet.

The capital strategy shapes the company strategy. This puts a different pressure on a CEO.

A VC-backed CEO is typically pushed to win the market and grow fast, even if it means no profit in the short-term. The questions a VC-backed CEO is asked to answer are:

Raising capital is usually about extending the runway.

But a PE-backed CEO is held to a higher standard. Different expectations. They’re pushed for consistent returns. This forces them to take a more disciplined approach to investing the company’s cash.

So, the questions become all about:

The goal is about maximizing ROI through efficiency, growth, and focus. Raising capital is a non-starter, because there is no capital. (PE typically uses the leverage buyout to acquire a company — i.e., debt.)

And guess what?

Product leaders are increasingly being asked to answer these questions.

Every CPO and VP of product I’ve spoken with over the last year told me they’re being asked the questions on the right.

Whether they were PE backed OR VC backed!

So, if capital strategy is shaping company strategy, you better believe it’s shaping product strategy.

You just may not see it.

So, the product playbook is changing.

If it hasn’t hit you directly yet, it’s likely because it hasn’t yet trickled down to you.

But unless you’re in a well-funded AI startup whose business model is being subsidized, it’s definitely hitting your top product executive or will very soon.

For years, our product management community was told that our competitive advantage came from building faster and more efficiently. Some of the most popular podcasts have championed this for the last several years, and still do.

It was wrong then and is even more wrong now.

Today, AI is rapidly commoditizing software creation. So, building and shipping is no longer a career differentiator.

The scarce skill isn’t in building products.

The scarce skill is in making better business decisions.

In demonstrating sound business judgment.

In business fluency.

This requires a new set of leadership skills that traditionally has not been taught to product people.

Understanding customers, prioritizing roadmaps, and product execution are now merely table stakes skills.

And AI is commoditizing these even further.

Exec teams are increasingly expecting product leaders to:

This isn’t just affecting product leaders. The PM role is changing.

But not in the way most people think.

There’s this narrative about how the Product Manager role will go away and be replaced by the “AI Product Builder.”

Well, 12 product builders delivering 12 products does not automatically generate
12x in profitable revenue.

Building faster creates zero value if the product doesn’t have a proper monetization plan.

For the real signal, look back to what’s happening in the capital markets, like we talked about earlier.

With AI commoditizing code creation, your differentiation as a product manager isn’t proving you can use AI tools better than the person sitting next to you.

The value shifts both upstream and downstream to commercial planning, GTM execution, and monetization.

The PMs who will stand out will be the ones who can demonstrate sharp commercial thinking.

I suspect for many this will be an uncomfortable identity shift.

It’s not what PM folks have bene trained to do over the last 10-15 years.

But if we’re honest with ourselves, what most PMs have been trained to do is act as glorified roadmap managers.

But that’s now just table stakes.

What we need to do is start thinking and acting like portfolio owners.

When you bring 40 features to a reset conversation, you guarantee a debate about priorities.

When you bring 10 investable bets, you create a portfolio review.

An investable bet has an economic outcome. It has a cost that includes not just the team working on it, but everything else the company is not doing as a result. It has a risk profile and a confidence level based on evidence.

If you can’t express it as a bet, it’s vulnerable.

Product leaders need to be able to connect every product decision to financial outcomes.

I call this Business Fluency.

And it’s increasingly the new way to lead Product.

Business Fluency involves understanding not just your product features and the underlying tech, but the economics of the business that you’re in and being able to speak that language.

It involves treating product work as investments. And making decisions based on business impact.

When you do this, you:

This isn’t a talent gap. It’s an upgraded operating system. One built on the product craft you already know so well.

It’s the operating system that Mike Smart and I teach in our Business Fluency for Product Leaders masterclass. Business Fluency isn’t about becoming a finance expert. Business fluency is about becoming the product leader executives trust with bigger business decisions.

This article only scratches the surface. In a recent ProdPad webinar with Janna Bastow, I went into this in depth, walking through the underlying data, explaining what’s really happening, and showing how those changes are reshaping product leadership and executive expectations.

Watch it here:

For the last fifteen years, product management has been taught to optimize product delivery. We can stop worrying about that. AI is optimizing that faster than we ever could.

The next generation of product leaders will optimize capital deployment.

The leaders who thrive won’t simply build products faster. They’ll become the people executives trust to decide where the company should invest next.

That’s it for today.

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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