Columbia Business School, The Kellogg School of Management and MIT all offer product management programs. There’s even a dedicated Product School and the Product Institute.
Companies from startups to enterprises are formalizing product management divisions – including Google, Mailchimp, Nextlix, Reddit and 1Password.
The role of Chief Product Officer is becoming increasingly prevalent, as evidenced by its adoption by seven out of the Top 10 companies on the Fortune 100 list.
Product management isn’t just a trend. It’s a powerhouse driving success across industries.
In fact, strong product management is critical to the success of software investments – both maximizing revenue potential and saving wasted money on misaligned efforts. Considering the rapid pace of technological advancement and changing consumer behaviors, strong product management is more important than ever to validate assumptions, streamline operations and iterate based on market feedback.
But it’s tough to measure the ROI of product management as a strategic function.
We can look at individual use cases, like when we created a product team at a digital car platform, sales increased by 5x in just 9 months and the speed-to-market improved from 45 days to 15.
In another case, we worked with a children’s magazine to implement data-driven decision making and to enhance product pages – generating up to $1.2 million in incremental revenue annually, as well as saving $186,000 yearly in losses by implementing proper data and testing practices.
Overall, the success of product management is often tied closely to the overall success of the product, as well as enhanced product quality, increased customer satisfaction, and overall business growth.
Below, we’ll examine more deeply the impact of product management and how it helps ensure the success of your software investment.
First, a note: It’s crucial to differentiate between viewing product management merely as a tactical function, focused on tasks like drafting use cases and managing backlogs (akin to the roles of product owners and project managers) versus a strategic function that drivies business outcomes.
As we delve deeper into the discussion on measuring ROI, this distinction becomes pivotal in understanding how to harness the full potential of product management to propel your team forward.
(Have a specific software conundrum? Book a free 30-minute consultation here for personalized business advice.)
9 ways product managers boost your profits
So how exactly does a product manager create business value?
Before we dive in, it’s important to note: Product managers also excel at identifying what not to pursue, preserving valuable time and resources of engineering teams and others in the company. Their ability to prevent costly missteps and guide strategic decision-making is invaluable in today’s fast-paced business landscape. It’s tough to measure what you say “no” to, but the cost savings can be just as important as the revenue generation.
That said, a good product manager can generate value in several ways (any of which are measurable), including:
Maximizing revenue of the product: A skilled product manager is adept at prioritizing features based on value and impact. By focusing on high-value features first, they optimize ROI for the development efforts.
Increased user adoption (or retention): One of the biggest challenges for tech products is not just acquiring users but keeping them engaged over time. Product managers play a crucial role in understanding user behavior and preferences. They analyze data to identify pain points in the user journey, strategize improvements, and implement features that enhance the user experience. By doing so, they increase user satisfaction, leading to higher adoption rates and improved retention.
Increased customer satisfaction: Customer satisfaction is the bedrock of any successful product. However, reaching and maintaining high levels of satisfaction can be challenging amid evolving market dynamics and customer expectations. A skilled product manager listens to customer feedback, identifies areas for improvement, and advocates for user-centric changes within the development process. By prioritizing features that directly address customer needs and pain points, they elevate satisfaction levels, foster loyalty, and drive positive word-of-mouth referrals.
Less bloat and tech debt: Accumulating technical debt over time can hinder product innovation and scalability. Product managers play a crucial role in preventing the buildup of unnecessary features and technical complexities. They advocate for a lean and efficient product roadmap, focusing on essential functionalities that align with business objectives. By making informed decisions about feature prioritization and resource allocation, they minimize bloat and mitigate the long-term risks associated with technical debt, ensuring a more sustainable and adaptable product architecture.
Reducing time-to-market: Efficient product management can significantly accelerate the development cycle. Product managers streamline decision-making, eliminate bottlenecks, and ensure a quicker time-to-market for your software.
Strategic alignment: Product managers ensure that the product aligns with the overall business strategy. They bridge the gap between the technical team and business stakeholders and business goals, keeping everyone on the same page.
Customer-centric approach: As an industry, we have a tendency to build a lot of features that no one really wants or needs. Building products without a deep understanding of customer needs often leads to wasted resources, unnecessary documentation and missed opportunities. Product managers champion a customer-centric approach by conducting thorough market research, interviewing users regularly to refine understanding of user need, and validating product hypotheses through iterative testing.
Better, smaller product bets: In the fast-paced tech industry, adaptability is key. Product managers continually assess market changes, customer feedback, and technological advancements, adjusting the product in the right direction as they learn more about what works and what doesn’t.
Data modernization: Product managers and their teams are the key to successful data modernization efforts – which is key in today’s data-driven landscape. Product managers identify relevant metrics, establish data governance frameworks, and facilitate the integration of modern data technologies into the product ecosystem. By harnessing the power of data analytics, they enable informed decision-making, drive product optimization, and unlock new avenues for innovation and growth.
Famous products that failed: cautionary tales
Remember MySpace, Google Glass, Quibi and Vine?
These once-mighty giants stumbled in the face of shifting consumer preferences and market dynamics. They now serve as poignant illustrations of the consequences of overlooking the strategic significance of product management.
MySpace: MySpace was once hailed as the titan of social networking, with a valuation of $12 billion. Then Facebook and Twitter came along and introduced new features – but MySpace clung to its original strategy and watched as its users dwindled. Within three years, Facebook surpassed MySpace.
Google Glass: Launched in 2013, Google Glass was one of the first large-scale attempts to capitalize on artificial reality. It was announced to so much hype they planned to ramp production to more than 2 million units per year. But Google Glass encountered a barrage of challenges – from mounting privacy concerns and social backlash to a lack of clear use cases. Less than two years after its grand debut, Google Glass was shelved.
Quibi, a short-form video streaming platform, raised nearly $2 billion from investors, sure that the world craved bite-sized entertainment on the go. But they overlooked a critical detail: validating the assumption that consumers would pay for a mobile-only service in a world where content is freely available. Quibi’s meteoric rise was eclipsed by the harsh reality of market indifference – and shut down the same year it launched.
Vine: Vine, a short-form video hosting service, was crowned the fastest growing app on the planet. Twitter acquired Vine pre-launch for $30 million, and four months after the launch it was the No. 1 free app on the App Store. Within seven months, it had reached an incredible 40 million users. Just as quickly, the tides shifted as competitors like Instagram and Snapchat emerged, and Vine failed to keep up with market demand. Vine shut down within four years.
We believe one thing could have saved these companies from failure: leveraging the strength of good product management.
Effective product management involves continuous market research and understanding of consumer preferences and trends. A strong product management team would have recognized the shifting landscape and evolving consumer needs, enabling these companies to adapt their strategies and offerings accordingly.
Quibi could have benefited from more extensive market validation to understand consumer willingness to pay for mobile-only content. Similarly, Google Glass might have identified privacy concerns and social acceptance issues before its widespread release.
By prioritizing user feedback and ensuring that their products meet customer needs, these companies could have built stronger, more engaging offerings that retained users and attracted new ones.
Finally, incorporating continuous iteration and feedback into the product development process ensures that products evolve in alignment with user needs and preferences. This approach could have helped Google Glass pivot towards more acceptable use cases or helped Quibi, MySpace and Vine adapt and innovate based on real market feedback.
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