The simplest way to explain Product management
Product management 101
Product management 101
In the years that I have been active as product manager I’ve had the question many times:”What is product management? What does a product manager do?”
Let me try to explain product management as simply as possible.
What is a company?
A company is an organisation that delivers products or services in exchange for money. It’s as simple as that. People work to make something (a product), or do something for someone (a service). In return they earn money.
An example: Kate’s bakery
Meet Kate. She owns a bakery. (Why a bakery? Because everyone can relate to this type of business). She bakes fresh bread every day and sells it to people in her neighbourhood. Kate is every role in her organisation.
Her product — bread — fullfills a direct need for her customers: they need to eat.
Kate’s bakery is successful. The demand for her bread is growing and she can’t bake enough on her own. She hires a person to sell the bread, so she can continue to bake. She now has sales in her company. As her company grows she hires people to bake the bread for her (development), and people that make sure the correct ingredients are purchased and in stock (supply chain).
As the company is growing, Kate doesn’t have the time anymore to actually bake bread. Kate takes care of the rest, basically doing general management.
An opportunity arises and she opens a secondary store. This means she has to hire more people and has to do the accounting for the various locations. She creates a human resources department to deal with all personnel related matters and a finance department to do the accounting for her.
Kate’s customers tell her that they love her bread. However, they would also (1) like to have something on their bread, they would (2) like some sweets and pastries, and they would (3) like some milk to go with the bread. Three very concrete examples of customer needs that she receives from the market.
She decides to launch a new product line to fit the needs of her customers: pastries and cakes. After all, she has the ingredients, she has bakers in her workforce and can sell it in her store; it’s a natural fit to the existing product she sells.
Since the requirements for the two products are completely different she now hires a person to look after the product bread and another person for her pastries and cakes.
Welcome product managers!
These product managers are responsible to make sure the customer needs are met with products and the company can deliver those products. For example this means they check that the products are tasty and fresh (quality control), they fit the needs of their customers (e.g., should they have carrot or apple cake), have the right price so customers are willing to pay that price, etc.
So...what is product management
There are many opinions on what product management is. There are also various definitions. You often read things like 'the product manager owns the product' or 'the product manager represents the customer in the organisation’ or 'the product manager is responsible for delivering value to a customer’. All these statements are true. Partially.
Product managers are responsible to make sure the customer needs are met with products and the company can deliver those products
Through my own experience, and investigations into the role of the product manager, I’m convinced that the product manager doesn’t have a single hat. The product manager is responsible to balance all the interests in getting a product (or service) delivered to a customer. What makes or breaks a good product manager is his ability to balance the interests of the company and the customer without losing the ability to actually deliver that product to a customer.
A product manager balances the interests of the customer, the business and the value delivery funnel for the product or service
What is what?
What does that mean? Customer, Business, Value Delivery Funnel?
A customer is the person that is purchasing your product in exchange for money. Every customer has certain behaviors and motivations to purchase your product. You should understand those.
Business refers to the price that you charge for a product and the costs that you have to make in order to get that product to a customer. Basically you should calculate whether the product(s) are able to make money in the end.
Value delivery funnel is the whole process that is needed to create a product and get it into the hands of a customer. This includes supply chain, manufacturing, research, development, packaging, shipping, etc. You want to understand every hand that (needs to) touch the product before it hits your customer.
Don’t focus on one. Balance.
Product management is like a three-legged table: super stable if the legs are equal. If one of the legs is unbalanced, the table tips over.
Suppose that a product manager only focuses on the business. He would eventually deliver products that bring a lot of revenue, and has its cost fully optimized. But no one wants to buy the product because it is too expensive and the organisation cannot deliver it.
If you focus too much on the user, you risk the creating something that people love, but cannot sustain a business. You have to understand that the selling price of the product has to cover the costs for the complete funnel behind it. Spotify dealt with this issue in their initial years.
They were able to deliver superior value to a customer, but they struggled to become profitable. They clearly understood the user’s needs and had the right infrastructure to deliver it consistently to their market. They failed to deliver it in a profitable way. (They impressively turned that around by the way).
If you focus too much on the value delivery funnel you run the risk of failing to deliver any value to a customer and not sustaining the business. You are optimizing processes, for process’ sake.
Important note: the product manager has to understand and balance the various perspectives. However, that does not mean that he is responsible for those parts of the organisation. For instance: product managers should not resolve issues in the supply chain, nor should they conduct sales.
What activities does a product manager do?
As a product managers you will have a variety of responsibilities. At a high level they are:
- You understand what the problem or need is your customers solve by purchasing your product(s). In Kate’s bakery there are two types of customers: one buys bread, the other buys pastries. Even if this is a single person the product address a different need. For example: the bread is for the buyer himself and should thus match his own taste. The cake is to share with friends or family, and therefore have a more commonly appreciated taste, it should look enjoyable, and should be sufficient for a few people. When a product manager talks about the needs of his customer, this is what he refers to.
- You know the market. In Kate’s bakery it is important to know how many people purchase bread and cakes on a daily basis. With this information you can ensure that you have sufficient bread readily available every day. Understanding the market is also important to ensure that you can create plausible business cases.
- You know the competition. It’s also important to know that the other bakery two blocks down is currently offering carrot cake half off. You’re likely going to sell less carrot cake this week! And if their bread is half your price, you’ll have a hard time to convince your customers to buy your bread.
- You understand how a product is made and how it gets delivered to your customers. If someone asks you what a carrot cake is made of, you can explain it to them. You can even give them the rough process to make it. You know it takes 30 minutes to bake. And so on… You need to understand the complete delivery funnel so you can optimize it and deliver product on quality and in time.
(There is a great article by Chris Miles that can help you to understand the product management role it’s tasks and responsibilities even better)
Every product manager is different
Depending on the organisation that you work in, your tasks and responsibilities will be different. You may have to work a bit harder on one end, to keep things in balance. Overall I see there are two variations on the product manager role.
- Product managers for fast-moving consumer goods
- Product managers for (regular) consumer goods or software-based products
In the fast-moving consumer goods segment, a product manager is typically responsible for a segment or category of products. The weight of the role is typically on setting up the right assortment and sustaining the supply chain. I personally don’t have experience with this type of product management (and also don’t have a strong affinity with this domain).
These product managers are less involved in product creation and development. They typically work for companies that don’t create the products themselves, but sell them to the end-customer.
Product managers for (regular) consumer goods or software-based products are typically responsible for a few products. They have a closer relationship to the product and should be involved in the creation and development of the product.[Further reading ‘Inspired’ by Marty Cagan gives an excellent overview of the product management role for tech companies]
Even in these companies your role may be different. You can often see where the weight of your role will be by getting to know where in the organisation you will reside. Personally I have a strong affinity with product development and will always opt for a role within the development organisation.
However you may also be located within the marketing department, within a business unit or within general management. In development you are closer linked to the product creation. In marketing departments you are more leaning towards the customer. In a business unit or general management there may be more focus on business elements.
I hope that this article gives you an easy to understand example of what product management is. A product manager is the person in a company that understand the customer and his needs, the product and it’s business aspects and how this product gets created and delivered to the customer. The product manager is the person that can balance these perspectives within the company.
I’m happy to read your thought and comments.
Father, Huisband and board game enthousiast. Designer by education, product manager by profession. Passionate about innovation, technology and space travel.