Product Management – Alignment is Job One
By Walter Knitl – CEO at Praxiem
All product providers “manage” the products they deliver whether they realize it or not. Irrespective of the provider’s size or maturity or the type of product, delivering viable and successful products to customers always demands the following of product management:
- Discovery, prescription, and tracking of product objectives, attributes, positioning, and metrics – i.e., Product Scope
- Set of progressive innovations, investments, activities, and checkpoints to bring the product to, and off the market – i.e., Product Lifecycle
- Participation of a variety of stakeholders both within the provider organization and outside – all focused on both the customer interests and the provider owners’ interests – i.e., Product Stakeholders
- Simultaneous attentionto all the above areas, or dimensions of product management, aiming for a viable and successful product.
With that said, however, the definition of product success is not universal and depends on individual provider’s and customer’s objectives at different points in time. For example, provider success might be defined as maximizing product margins or return on investment. In other instances, success may be termed as achieving certain revenues or market share, de-emphasizing margin. Despite this variation, there is a common thread or condition for product success – both the provider and the customer must achieve their-defined net benefit from the product. In other words, there must be a Net Benefits Alignment.
Benefit vs. Net Benefit vs. Net Benefit Alignment
The common mantra says that a product will succeed if it provides a benefit to the customer. While this is a necessary condition, it’s not enough. A benefit occurs when a need is satisfied, or a pain alleviated. Unfortunately, benefits are never unaccompanied by opposing costs, objections or detriments to various degrees.
For example, consider a SaaS product which is a supply chain app/service for procuring least-cost components from the market. The SaaS product is delivered by a SaaS provider and used by a SaaS customer. The SaaS customer may, in fact, derive the Benefit of locating least-cost component suppliers from the SaaS product. However, the subscription Cost and the cost of integrating the app/service into existing enterprise tools, for example, must be weighed against the benefit of reduced part pricing. In the end, it is the Net Benefit or the benefit less the cost or detriments that matters. The SaaS customer will buy the SaaS product only when it achieves its specified Net Benefit from the product – the Customer Net Benefit.
If we, as a provider, achieve the Customer Net Benefit we can sell the product, and we’re done – right? No – not so fast. There remains the matter of care and feeding of the provider owners – investors, shareholders, C-suite. Revenue, for example, is one provider benefit from a product. But this benefit has costs associated with it such as material costs, selling costs, investment costs, and opportunities lost – among others. These must be subtracted from or weighted against the benefits to ensure that a Net Benefit accrues to the provider. It’s the net benefit, in terms of profit or other metrics that matters. No rational product provider will deliver products without deriving its own Provider Net Benefit from it.
So, if a customer doesn’t buy a product without getting its Customer Net Benefit, or a provider won’t sell without getting its own Provider Net Benefit, there’s no viable product. It’s not enough for just the customer to get a benefit (e.g., lowest component pricing from a supply chain app) while the provider loses money providing the product. It’s not enough for the provider to get a benefit (e.g., revenue from selling a supply chain app/service) if the customer incurs excessive costs using the product. The overarching condition for a viable product is the alignment of Customer Net Benefit and the Provider Net Benefit – i.e., Net Benefits Alignment.
A product manager has accountability to deliver viable products, which means ensuring Net Benefits Alignment at inception and throughout the product lifecycle. This involves straddling the provider and customer realms to define the right product function and pricing that will sell, but within the capability and cost structure of the provider to deliver it. This may also mean redirecting to different markets or dropping some customers if needed, influencing capability development and cost reductions at the provider, and if Net Benefits Alignment can’t be found or sustained be brave enough to stop the product or pivot.
Net Benefits Alignment is job one for product managers.