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.


18
Sep 14

What Is The Business Value Of A Product Manager?

I have not been able to find an answer to the question “what is the business value of a product manager?”

So, I did some arithmetic, and here’s what I came up with:

A product manager is worth between $5 and $10 million of annual product revenue.

That’s an educated guess, a stake in the ground, a challenge to you.

Simple Ratios

I arrived at that value working bottom up using familiar financial ratios from software product companies:

  • The normal ratio of development resources to revenue is roughly one developer per $1 million in revenue.
  • The normal ratio of product management to development resources is one product manager per 5-10 developers.

Combining those ratios results in one product manager for every $5-10 million in revenue.

I’ve taken a leap and assigned this as the business value of the PM – if you hire a product manager, then you are looking toward increasing your revenue by $5-$10 million annually.

Raises Questions

Once you put a stake in the ground about the business value of a product manager, you can ask interesting questions.

If you are a product manager, you can ask:

  • How well am I doing? Is what I’m doing going to result in $5-10 million a year in new revenue?
  • How much would it be worth to the company if I got 10% better at my job (answer: maybe as much as $1 million).

If you manage product managers, you might ask:

  • What’s the return on investment if I help my product managers become 10% more effective, and it costs $10,000 per product manager? (Answer: pretty high!)

And here are two questions for you:

  • Does this analysis make sense to you and is it valuable?
  • Do you have a top-down analysis – to go with my bottom up calculation – for the value of a product manager?

I’m curious to see how this conversation ends up. I believe that putting software product management on a concrete business value foundation could be transformative for the profession.

What is your take on the business value of a product manager? Does this concept make sense to you? Do you think my figure is correct? Way off? Unmeasurable? Let me know.


11
Sep 14

Revenue Up-And-To-The-Right – That’s The Goal

The Business of Software blog just posted my latest essay! Here are some excerpts, and you can read the rest there:

Most of you have the ambition to get big. How do you do that? The only way to get big as a product company is for people to buy your product. Preferably a lot of people, for significant amounts of money at a time. Duh!

But why would people buy your product? We know there are products that people don’t buy. We don’t want those – because you can’t get big, or even grow at all. If you look at the revenue line for a product that no one buys – it’s nasty! We don’t like that line!

Solves-a-Market-Problem-vs-Doesn’t

Revenue Lines For Products That Do – and Don’t – Solve A Market Problem

 

 Why Do We Get Revenue?

Compare it to our desired revenue line – up and to the right – and accelerating as it goes up. If our product sells like that, it means it’s solving an important problem for some people – important enough that people will pay for the solution.

You can have a beautiful product, beautifully engineered and architected, and totally rocking in usability – but if it doesn’t solve a big market problem – flat line.

But a product can have some warts, not quite work as the user expects all the time, have some typos, use a 1998 style UI – but if it solves a big problem better than anything else – up and to the right.

Read the rest, including thoughts about the real definition of product management (it’s not just about finding problems)  at the Business of Software blog.