Products vs. Yo-Yos

This article is not a list of companies that have great products or product management, enlightening as it might be. It also is not a list of companies with terrible product management, although I could compose a very long such list, and the stories would be very entertaining!

Instead, this is a discussion of why product management matters, and how you get great product managers.

The genesis of this article is a number of conversations and interactions I have had with companies over the last year or so, several of which have had great product management, while others have been sorely lacking in the field.

Why Product Management

Most people grow up in a particular function in companies, and thus get what most jobs do. The sales team sells; engineers build; administrators run the servers; marketing figures out who to sell to and creates collateral; finance keeps track of funds and budgets; etc.

What about product management? What do they do? They don’t:

  • Build
  • Operate
  • Sell
  • Finance
  • Market

After all, there are departments for each of those. So what do they do?

This lack of understanding is the reason why, at least in the first tech wave, many companies simply had no product management. This was particularly bad in Israel, where the “Field of Dreams” philosophy reigned: “we have the coolest technology, so everyone will come buy it”. It led to the destruction of innumerable firms. But it existed in New York and Silicon Valley and many other startup locations. Fortunately, the second wave has been much healthier.

So what is the purpose of product management?

The job of product management is to manage the product.

While that sounds trite, it actually is quite deep. To quote Peter Drucker, “the purpose a business is to create and keep a customer.” If the company can do so, keeping the customer happy at a profitable price, then the company will exist and grow; if not, the company will fail.

But what does it mean to service a customer, and at a profitable price? There is an almost infinite number of questions that needs to be answered. Some crucial ones include:

  1. What features must be included in the product today? How about in 1 month, 6 months, 1 year, 5 years?
  2. What service levels do customers expect? How much are they willing to pay for it?
  3. Do we need certifications? What kind? How much are they worth to us?
  4. What time to deliver / time to deploy do we need? What is that worth?
  5. What type of sales structure and sales process do we need? Do those match with the kind of product we are selling and the customer type we expect?
  6. How do all of the above tie into our pricing? Are we a premium pricing company (larger profits for a smaller market) or more mass market (smaller profits for a larger market) or somewhere in between?
  7. Etc.

Some of these questions are strategic and should be resolved at the level of the Board or, at the very least, the executive team together. But the decisions to be taken and their impact and implementation in a complete product-wide and consistent manner is something that has to be owned by someone. That someone is your product owner.

What happens when product management is weak or non-existent?

  • Engineers build a fantastic product or service… that no one wants
    • Or, they build a product that lots of people want… with all of the wrong features
  • Service levels are so high that customers are unwilling to pay a premium for them… leading to losses
    • Or, they are too low, and management cannot understand why customers are so unhappy
  • The product itself is priced too high, leading to low market share
    • Or it is priced too low, leaving lots of money on the table
  • The sales team lacks confidence going into each deal, leading either to a “race for the bottom”, a competition on price, instead of value, or a constant focus on value and higher price when all the customer wants is the lowest price
  • The company spends too much getting every certification it can dream of, at a higher expense but for no additional sales
    • Or it doesn’t get the certifications it needs and misses on crucial sales

But perhaps worse than all of the above is the “yo-yo” syndrome. Since the company does not have a consistent plan or picture for “creating and keeping the customer”, it bounces back and forth like a yo-yo with each subsequent development.

Does the following scenario sound familiar?

VP Sales: “Hello Mr. Operations Head. I just got off the call from a great deal, it could be worth millions to the company. All we need to do is get certification X by the end of the month and the deal is ours!”

VP Technology: “That certification takes 6 months at minimum, plus $1MM in fees. In addition, it will cost us $500k upfront in our own manpower, delay 20 critical new features, and $200k per year in maintenance. Is it really worth it? Where is the budget”

VP Sales: “Budget? That is your issue, you own it. We just have to have this now or this deal is D-E-A-D, dead, and on your head!”

VP Technology: “I would love to help you. Just get the CEO to sign off on the additional spend, delay of priorities, timeline, and we will do it. But I don’t hear about it being crucial for any other deals, while these features are, and cash flow is tight. Are you sure we should do this?”

Six months later:

CEO: “Mr. Tech, why are we over budget?”

VP Tech: “That was the additional spend you authorized for all of those great new deals worth millions.”

CEO: “Mr. Sales, where are all of those deals?”

VP Sales: “They are on their way, but I never promised them, just that they looked good. And we would hit our numbers anyways, if only we weren’t late on those 20 features you promised 2 quarters ago.”

Should you get certification X? Can you get it by the end of the month? Will you really get that deal? Is it even worth it for that deal? Sure, it may be a $1MMk 3-yr enterprise deal, but if it costs $1.5MM upfront and another $200k per year to get that certification, the costs will exceed the deal’s revenues, let alone its profits.

The critical question no one in the above conversation asked, “is this certification something that is good for our product in our market, independent of this deal?” If the answer is yes, then you should get the certification with or without the deal; if the answer is no, you should not get it… with or without the deal. Sure, the deal may impact the timing of acquiring it, but the yes/no decision should only be impact by what you expect the product to be in its market. Period.

That is the question the head of product should have been there asking. If s/he were there:

  1. The conversation upfront would have been more focused.
  2. The conversation six months down the line would not have been antagonistic and leading to blame
  3. The numbers likely would have been met on revenue and profit
  4. The head of sales never would have asked for those requirements, because s/he would know they were not part of the plan, or were already baked into the plan

Product management ensures the company delivers a viable, valuable and profitable product in its entirety to the market.

In the next article, we will look at what key characteristics make for a great product manager.

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
This entry was posted in business, product, technology. Bookmark the permalink.