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.”)
Generate more revenue, faster
What levers do you have to increase PM effectiveness? At a very high level:
- You can do a better job of discovering important market problems.
- You can do a better job of creating solutions to those problems.
- You can do a better job of taking those solutions to market.
For example, let’s say you want to do a better job of discovering important market problems. This is often the highest leverage I have. No one will buy your solution, no matter how good it is, if it doesn’t solve an important problem!
Therefore, step 1 is to focus more of your time on market discovery. If you’re not spending much time finding problems today, you must reprioritize your work to spend more time on that activity.
This means you won’t be able to do some other things – they’ll fall off your plate. You might not be able to babysit customer enhancement requests. You 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.
Create better quality products and get them to market sooner
When you understand the market problem well, you 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.
Eliminating wasted work results in higher revenues
Finally, better problem discovery gets you to market faster! You don’t get more efficient or code faster. You 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 ’70s, their great efficiencies were not the result of working faster. 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.
Put these ideas into action today!
- 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.
- Plan how you’ll start spending more time on market discovery.
- 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!
Give me your feedback
Let me know how you are planning to improve your effectiveness – and your revenue and profits. Please leave a comment below with your reaction and feedback on these ideas.