Mapping Business Outcomes to Product Outcomes
Product Strategy in Harmony with Business Goals
As a Product Manager (PM), you exist at the intersection of two crucial spaces: problem space and solution space. In the problem space, you identify user needs through user research and collaborate with analysts to pinpoint the right problems to solve. This focus ensures your product solves genuine user pain points.
On the flip side, the solution space involves collaborating with designers, engineers, and other teams to craft the best solution. However, simply finding great solutions isn't enough. PMs play a vital role in ensuring those solutions align with the broader company strategy.
The Company Strategy: The Guiding Light
The company strategy is the overarching roadmap that defines where the company wants to go. It's not a feature-specific document, but rather a compass that guides fundamental shifts, like entering new markets or pursuing different business models.
This strategy stems from the company's goals, and successful PMs understand how their work contributes to the bigger picture.
Product Strategy: Bundling Features for Value Creation
Product strategy takes the company strategy and translates it into actionable steps. It represents a collection of features that create value for a specific user need or business problem. Essentially, it outlines the winning solutions chosen to execute the strategic direction.
Feature Strategy: Building Blocks of Value Creation
Features are the discrete building blocks that solve individual problems within the product strategy. PMs leverage user research and feature usage data to inform the development of these features.
Focusing on Outcomes Before Features: The Key to Growth
Great PMs prioritize desired outcomes before diving into product development. This means clearly defining what success looks like. Growth comes from solving not just customer problems, but also business problems.
Business Outcomes: The Metrics That Matter
Here are some key business outcomes that matter:
Profits: Revenue minus Costs (Revenue - Costs)
Revenue: The total amount of money generated from customers (# of Customers x Average Order Value/Customer)
Costs: The sum of the costs associated with producing and selling goods (Cost of Goods Sold) and the cost of running the business (Operating Costs)
Market Share: A company's portion of the total market, calculated as Total Sales divided by Total Available Market Size
Customer Churn Rate: The percentage of customers who stop using a product or service over a specific period (Number of Customers Lost / Total Customers)
It's important to remember that these business outcomes are lagging indicators. They provide valuable insights, but only after the events they measure have already happened.
The Business Model Canvas: Understanding How Businesses Make Money
There are six main business models that define how companies generate revenue:
Selling a Product/Service: This is the most traditional model, where a company sells a product or service for a one-time fee.
Renting a Product: Companies offer temporary access to products for a set fee.
Commission-Based Sales: Revenue is generated through commissions earned on sales made.
Subscription Fee: Customers pay a recurring fee for ongoing access to a product or service.
Charge Based on Usage: Customers are billed based on their usage of a product or service.
Advertising-Based: Revenue is generated by displaying advertising to users.
By understanding these models and how they impact business outcomes, PMs can make informed decisions about the features they build and ultimately contribute to the company's success.
Conclusion: The Balancing Act - A Rewarding Journey
The role of a PM requires a delicate balance between understanding user needs, crafting effective solutions, and ensuring those solutions align with the company's overall strategy and business goals. By focusing on desired outcomes and understanding the business model, PMs can create products that drive growth for both users and the company.