An Insider’s View on Product Management

July 30, 2009

The importance of being first to market

Or is it? In the wake of the excess of the late ‘90s where in the name of market shares acquisition colossal amount of money were spent, one can seriously doubt it. What happened to the like of, and the infamous Webvan?

As always the truth is not as simple. Being first usually confer a serious advantage to companies but also brings its share of problems. The whole intent to be the first mover in a new market segment is to capitalize on the lack of competition to capture mind shares and market shares.

Position your brand in customers’ minds

From a marketing point of view, this is a unique opportunity to establish your brand as the dominating player in a new field. Who has the best cola? Coca-cola. Who has the best car rental services? Hertz. And so on. By building customer loyalty early on with great customer service and establishing a superb reputation, a savvy product manager has the opportunity to strengthen his brand and create a formidable barrier to entry for potential competition.

However there are risks as well in being a pioneer. The market may not be established yet, and prospects may reject your value proposition because it does not match conventional assumptions. Therefore a lot of the marketing budget will go into educating the prospects and having a few –not too formidable- competitors can help you create the market place. Other typical issues include having miscalculated the target audience or the pricing might be incorrect. Finally distribution channels might be inexistent and will need to be created from the ground up.

Establish product leadership

From a product point of view you get a chance to set the standard and be seen as the market reference and thoughts leader. By setting the bar high enough and emphasizing your unique approach and technology, product manager can slow down competition and force them to play catch up with you.

Similarly, being first market mover and first to come with a product induce risks. Competition can capitalize on your customers’ feedback and mistake to improve your product. By the time they start developing their solution they typically have a much better understanding of the problems and needs in the market . Furthermore developing new technologies is expensive and a lot of trial and errors go in the process. By observing your attempts, mistakes and success, competition can innovate in a must cheaper and most effective way. They might even hire some of your experienced staff away or reverse engineer your solution to benefit from your inventions.

Apple’s Newton, a market failure

Apple with the Newton is a perfect example of a first market mover that was not able to capitalize on their ground breaking device. Apple was able to capture public imagination with the first version of “PDA” and basically invented a new market segment. However the product was not technically fit, too bulky, and was targeted to the wrong audience with a price tag too high. Apple had a chance to fix all this, but they were too slow in the process and the quality issues start catching up with them. A few years later, PALM that benefited from Apple mistakes and experience – and their own experience building the Zoomer with Casio- revolutionized the PDA with a cheaper, smaller and simpler solution appealing to a broader set of users.

Weigh pros and cons

Thus, product managers should carefully weigh the pros and cons in being the first mover in new markets. This is a strategy that with proper management and marketing can result into long terms advantages but that also involves a fair amount of risks.

July 6, 2009

Short term success is not a strategy

Filed under: Business Strategy,Product Management — Gregory @ 11:11 am
Tags: , , ,

In today business environment, executives are nervous. Sales are plummeting, prospects are uncertain and deals get delayed. Regardless of the unpredictable nature of the business cycle, shareholders, investors and owners make the management team accountable for any slowdown in business. The executives are under enormous pressure to deliver quarter after quarter and some of the pressure is often relayed to the product team.

Don’t succumb to external pressure

However despite external pressures, short term focus is not a business strategy. Good product managers know that valuable and successful products don’t get built in one day; it takes time. A few setbacks or bad quarters along the way are immaterial as long as the product is getting closer to the final vision.

Microsoft is the archetype for long term strategy and planning. When entering new markets they willingly accept to be simple contenders and recognize that short term opportunities are poor. However as long as their strategy is solid and the opportunity real, they will keep investing. They have been very successful with this approach during their corporate history. It all started with Windows.

A short history of Windows
Originally, Microsoft announced Windows in 1983 but the development was delayed multiple times. When Windows 1.0 was finally released in 1985, the industry was laughing. The product was poorly designed as a pure extension of MS-DOS and particularly. Even if some of the underlying concepts had a lot of merits nobody seemed to notice – running multiple applications concurrently and use a mouse device to control the interface.

Windows 1.02 years later, Windows 2.0 was launched and added some innovations that are now common in modern OS: windows overlay and resizing, keyboard shortcuts for navigation, etc… But adoption was still poor. Finally in 1990, 7 years after the first announcement for Windows, Microsoft revealed Windows 3.0 … and the industry stopped laughing. The product was a complete overhaul of the previous versions, with advanced graphics and better usability. The product proved a huge commercial success with 10 millions licenses sold and established one of the most dominant franchises in the computers history.

Obviously Microsoft did not pick the easiest road and most companies could not have afforded to throw money for so long to unsuccessful projects. However you have to admire the conviction and discipline of Bill Gates who kept investing for 7 years in his long term vision despite so many setbacks.

Long term strategy is not a luxury

Some will argue that short-term results have become a matter of survival for many companies and long term planning is a luxury they can’t afford. However this reasoning is flawed. If a company is so ill, this is typically because a lot of bad decisions were made. Why bad decisions were made? Because management was only focused on short term prospects and gains not on long term strategy. If you are already in a hole, you need to stop digging. For example the big box electronics retailer Circuit City filed for bankruptcy protection in November 2008. One year before the company was already in a lot of trouble and a long term strategy to compete against Best Buy and Walmart was badly needed. Despite those obvious problems, management decided instead to focus on short term issues and laid off 3400 of its most highly paid and experienced employees. This certainly offered a short term relieve to their finance but eventually backfired and only accelerated their demise.

Keep your end goal in mind

The same than when running a marathon, you don’t plan your race as a succession of sprints, a product strategy should be focusing on long term vision and commitment. This is the duty of product managers to maintain a steady direction for the product and avoid getting distracted by short term opportunities and issues.

June 20, 2009

Measure this, measure that

Filed under: Product Management — Gregory @ 11:02 pm
Tags: , ,

Making decisions is arguably the most important responsibility for managers and executives. Their decisions are expected to be rational, methodical and are often backed up by a flurry of statistics and other numbers.

After all, statistics and numbers are an important part of the decision making process. They are hard facts that help to quickly identify issues, spot opportunities and measure progress. They are quantifiable value that can be acted on. In contrast, abstract ideas and strategy are much more difficult to assess and to debate: they are less tangible.  Thus, managers tend to put a lot emphasis on numbers and metrics. But they often forget that it’s only a small part of the story and that those numbers cannot always be trusted.

Statistics can be manufactured

The first problem with statistics, is that they are easy to manipulate. In the matter the US government is a master con artist. Their favorite statistics: unemployment and inflation – also called CPI (core price index). It seems they always come up in the “acceptable range” or as expected month after month, no matter if reality seems different. In fact, Uncle Sam has a clear vested interest in understating those numbers. But curiously media and experts typically accept government readings at face value and rarely challenge the methodologies applied.

Indeed many government payments like social security, and bonds interests are directly indexed to the CPI – lower CPI translated into lower payments. Furthermore CPI is also used to calculate GDP, so lower CPI also means higher GDP, which makes the economy look better than it is.

How do they do that? There are plenty of websites explaining the mechanics behind CPI and all the changes over the years. But suffice it to say that CPI exclude energy costs and food costs because those are judged too volatile – no matter how high gas and milk prices can go. It also exclude housing price because housing is considered an investment. But most pernicious is the concept of hedonic adjustments: if the “quality of goods” changes, their price is accordingly adjusted. For example, let say you bought a standard computer for $1000 last year, and you buy a new standard computer for the same price this year. You would think the price has stayed the same. No so fast… Since the computer you got this year is faster, has more memory, etc… than last year, the CPI price will reflect this increase in quality. In that case it actually means the inflation price for the computer went down… (I wonder if they take into account that last year computer had Windows XP and this year it comes up with Vista. How would that compute for a change in quality? ).

Joke aside, the point is numbers can and are tweaked to support somebody point – sometime it’s not even conscious. The governments is doing it all the time, but they are not the only one – ask Jeffrey Skilling, CEO of now defunct Enron or check how the banks got us into the current recession.

Imaginary correlations

Even if we could work with reliable and accurate numbers, the trouble is they are often meaningless. People like to point out to imaginary correlation and justify why those number matters with… you guess what, other numbers. There is no better example than the stock market that is highly subjected to random fluctuations. Traders, desperate to find some explanations to the chaos, dutifully analyze stock data, chart prices and other metrics in the hope of finding the magic formula behind stock moves. However their feverish researches sometimes get misplaced and correlations are found in unexpected places. A famous example, is the Super Bowl indicator that according to investopedia is: “An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in the stock market for the coming year, and that a win for a team from the old NFL (NFC division) means the stock market will be up for the year.” They go on by adding “Chalk it up to coincidence, but this indicator has been surprisingly accurate (around 85% correct) over the past years. Even so, you probably shouldn’t bet the farm on it.“

Well at least they invite to caution. Is the number accurate? Probably. Is that relevant? Be your own judge.

It’s not about what you know, it’s about what you don’t know

So you gathered some good statistics, verified their accuracy and feel comfortable that those numbers are relevant to your situation. Well the dilemma is: it’s not what you know that is going to hurt you, it’s what you don’t know. When presented with numbers, those are often taken out of context and even if accurate they can be the proverbial tree hiding the forest.

In the 2006 excellent film satire “Thank You for Smoking” inspired by the novel of Christopher Buckley, Nick Naylor the main character and spokesman for the Academy of Tobacco Studies, a tobacco lobby, has the following interview during the movie:

Senator Ortolan Finistirre: And what, so far, has the Academy concluded in their investigation into the effects of tobacco?

Nick Naylor: Well, many things actually. Just the other day they uncovered evidence that smoking can offset Parkinson’s disease.”

Of course in this situation everybody knows cigarettes are harmful. Even if the tobacco industry is able to prove smoking has some unexpected health benefits, people are unlikely to get convinced by a few deceptive studies. However in other situations, especially in the business world, the context is not always as clear. As a result naive managers can take decisions based on a few isolated statistics, without understanding the complete picture.

No substitute for experience and intuition

Numbers can be fascinating. They inspire comfort and confidence and contain some mystical value. However when accepted as absolute truth they can also be misleading and even plain dangerous for making decisions. A bit of caution is highly advised. Numbers are just a tool, a good starting point for reflection. They are not substitutes for experience, careful analysis and intuition.

In the famous words of Einstein: “Not everything that can be counted counts, and not everything that counts can be counted.”

May 2, 2009

Should you listen to your customers?

Filed under: Business Strategy,Product Management — Gregory @ 8:18 pm
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Ford Model T There is a trend in today’s business to get closer to customers and let them directly influence product roadmap and features. Indeed, with the democratization of open communication and the internet, customer feedback programs are growing in popularity. Those programs are sometimes referred to as crowdsourcing and are adopted by high profile companies such as Dell IdeaStorm , Starbucks MyStarbucksIdeas and SalesForce IdeasExchange. Consequently, customers’ wishes, hopes and desires are getting added into products roadmaps with less and less scrutiny. After all, users should be the best judges for product enhancements. Without a doubt, incorporating customer suggestions into existing products is a proven approach to bring in incremental improvements and ensure customers retention. In fact, within the software industry, agile development methodologies have became all the rage in recent years and rely on the promise of constant customer feedbacks and iterative enhancements.

However companies should resist the temptation of taking this idea too far. Product managers must be careful not to confuse customer suggestions and feedback with the underlying bigger problem they are trying to solve. As Henry Ford famously put it: “If I had asked people what they wanted, they would have said a faster horse”. Similarly, did anyone asked for the light bulb before Thomas Edison invented it? What about Sony’s Walkman? Keeping ahead of the competition and bringing to market the next relevant product take imagination and creativity. By solely focusing on present customers’ issues and existing solutions, companies unconsciously hinder their capacity to innovate, pay less attention to external industry trends and become more vulnerable to competition.

For companies, the key to a sustainable business strategy is not only to understand what customers want today and enhance existing product lines, but also to realize the limitations of this approach and encourage investments in longer term innovations.

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