Too many companies are still trying to sell products and services that are losing them money because they simply no longer meet their customers’ needs. A better understanding of product management might help, suggests Paul Gurhy.
While Product Management has been a core discipline in most large organisations since the 1930’s, the current trading environment makes it critical for Small & Medium sized businesses – (including startups) to consider how they can embed the core concepts & practices into their own business.
Effective Product management involves oversight and co-ordination of all aspects of a product or service throughout its life cycle, from the original idea concept, through to launch, growth and its eventual retirement. The underlying aim is to create and deliver superior customer satisfaction while providing long-term value for the company.
When an entrepreneur starts a new business, it’s because they have identified an unmet need in the market, which they can fulfill for a viable sized segment of customers at a profit. They are very focused on meeting those customer needs, are close to the customer and have a finger on the pulse of everything that happens in their business to ensure they deliver on their promises. This strong insight into their customers’ needs means they develop more products that their customers want to buy and as a result the business is successful and grows.
As the business gets bigger, the owner decides to employ more staff, initially in sales, then operations and eventually someone to do their marketing and advertising. Over time the owner starts to lose the vital connection they had with the customer.
The risk at this stage is that manufacturing or software developers start to develop new products based on their capability rather than identifying, quantifying and meeting unmet customer needs at a profit for the business. This is analogous to a restaurant that solely provides meals based on the contents of their fridge on a given day, rather than what their customers are looking for and expect.
Over time, the business develops more products, incurs more costs but finds it difficult to replicate the success of their early products. This leads to cost cutting and downsizing, however, there is only so much cost that can be taken out of any business and many companies have now reached that point.
The time has come to look at how a business can more effectively manage its products to drive growth. Instead of talking solely about internal capabilities and your products, the successful product manager talks about your customers and their problems.
Product Management identifies a market problem, quantifies the opportunity to make sure it’s big enough to generate a profit and then articulates the problem to the rest of the company. An effective Product Manager communicates the market opportunity to the senior team with the business rationale for pursuing the opportunity including the investment business case, financial projections and an assessment of the risks. They communicate the problem to the people responsible for the development in the form of market requirements; they communicate with marketing using positioning documents, one for each type of buyer; they support the sales effort by defining a sales process supported by the requisite sales tools to make it easier for the customer to buy and for the sales team to sell.
Effective product managers understand the impact of their decisions on asset utilisation – which products warrant investment & which don’t; cash flow – where do we get the best return in terms of margin; inventory and supply chain relationships – is the business as effective as it could be in these areas or is there waste. In short, they fully assess the effect each decision they make about their products will have on the profit and loss account.