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!


10
Mar 15

The Most Important Problem

What is the most important problem that our customers, or the people we want to sell to, are having – that we can solve?

This is the fundamental question we PMs have to keep asking ourselves (and our customers/market).

Ideally what we’d do is prioritize solving that problem. And then, if we have capacity left over, we ask, “what’s the second most important problem that our customers, or the people we want to sell to, are having – that we can solve?”

And then we prioritize solving that second problem. We keep doing this until we run out of resources.

Then we do it all again.

There are of course lots more details – how much of that #1 problem do we solve? Do we get it to MVP state? To V1.0 state? To highly polished state? The answer to this question depends on a few things:

  • How we will use this solution to sell
  • How we will use this solution to differentiate
  • How hard it is to get from MVP to the next level, or the one after that
  • Whether the MVP is actually “marketable”
  • If a competitor has set a bar on how much functionality is needed

It’s hard to live with this approach on a day-to-day basis, but it’s really what we should be doing.

And the roadmap is then just a list of the problems we’ll be solving over time. (Subject to change, of course, as the problems customers face change.)


22
Jan 15

A VALUABLE Rubric For Product Requirements – Podcast Episode #5

In this podcast I talk about a problem that afflicts many product companies – poor communication between product management and developers. And I describe an approach that can help improve the communication, and improve everyone’s motivation – a new rubric for writing good requirements which I call VALUABLE. That’s an acronym for: Valuable, Aligned, Loved, Understood, Acceptance tests, Bounded, Leverages, and Expected Usage. It will all become clear when you listen to the podcast – or download the infographic.

The infographic I mention in the podcast is here – please feel free to download it and print it out and put it up on your wall. Or whatever you want to do with it.

In the podcast I mentioned a number of earlier posts, a book, and some useful posts on other peoples’ blogs.

Links

If you like this podcast, please subscribe via iTunes (search for “responsibility authority” to find the listing) or your favorite subscription method via this feed. And please consider rating and reviewing the podcast on iTunes. The feedback is very helpful for me.