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Why is product management important? 6 reasons to hire a product manager.

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The hiring dilemma

Let’s say you are responsible for a product. And, at the same time, you have other business responsibilities. Your business is successful and grows. But, you start feeling overwhelmed with tasks. So, you wonder if it makes sense to delegate product decisions to someone else. After all, other companies like yours have product managers. Would hiring a product manager be the solution for your case too? In other words, why is product management important?

In this post we look at what are the reasons to hire a product manager. So, you can assess if you really need a product manager rather than any other role. We are going to do it by analyzing 3 necessary conditions and 3 most frequent cases for hiring a product manager. This is not the first post about why product management is important. The Product School, for example, has published a great post on the 10 things you may miss without a product manager. However, when asked this question, I like to give a short list of reasons based on recurrent situations that I have experienced myself.

Of course, every company is different and hiring decisions require more analysis and judgment than just a checklist. So, you should not take any decision just because of what is written on this post. Nevertheless, with this post you should get a rather quick insight that will increase the confidence of your decision.

3 necessary conditions to hire a product manager

Before jumping straight to the conditions, let’s first agree on what a product manager does. There are many definitions of “product manager”, depending on industry, product characteristics and company size. Nevertheless, I like to refer to Martin Eriksson’s post definition, where product managers are defined on the basis of their responsibilities. Specifically, a product manager focuses on 3 aspects: customer needs, the company’s business, and the technical implementation of the product. For more details about product management activities, I invite you to check Martin’s post.

Enough about who a product manager is. Let’s now look at what conditions companies with product managers share. These are my top ones. They are:

  1. The business is middle-sized
  2. There is a product
  3. There is room for a strategist

If all 3 conditions apply to your case, you should check if any of the cases described next also apply to your situation. But let’s look at each condition first.

1. The business is middle-sized

Size matters when it comes to assign product management decisions. An essential condition for a company to need a product manager is to be somewhere from an established start-up to a mid-sized company.

Why a product manager does not fit with a young start-up? Usually a young startup is still looking for a viable business model or even the right value proposition for their customers. The founders should know inside-out about the product and the customers. Product decisions are simply company’s decisions and, as such, are mostly taken by the CEO with the founding team. Outsourcing product management responsibilities to a different person, like a product manager, would be like swapping the pilot for a flight assistant during takeoff. It simply would not work.

Why a product manager does not fit with a large company either? This is not a strict rule here, but generally the kind of product management activities in a large company require more than just one person. All the considerations in this post would not apply. As described in this article by the Carnegie Mellon University, in large companies (think for example about Google, Facebook, Amazon) there are often many product managers for the same product. This means that not everyone deals with both customers, technology and business.

If you are in a medium-sized company, or in a product-focused middle-sized business unit of a large company, a product manager can cover the three facets of product management: customers, technology and business.

2. There is a product

As obvious as it sound, a product manager is useless without a product to manage. So, what is a product actually?

A product is generally an object or a system that delivers (or is supposed to deliver) value to customers by satisfying some of their needs or desires. For example, a product can be an output that offers customer value directly, such a bike or a piece of furniture. Moreover, a product can be an asset that provides customer value as a building block of a service. For example, a software used to complete a job, like filing a tax return, finding a taxi, or booking a doctor appointment, is also a product, although it does not create value by itself but just as part of a service. On the other hand, a taxi drive, a doctor’s visit, or the distribution of electricity are services rather than products. Indeed, they are no objects or systems, although they obviously deliver value.

In a nutshell, if your business output is not a product, you do not need a product manager.

3. There is room for a strategist

There is often a myth about where the most of a product manager’s focus goes to. It is true that a product manager conducts customer interviews, analyzes product performance, writes requirements and coordinates efforts. On the other hand, product management mainly involves strategic activities.

Product managers assess things like customers, competitors, technology and trends to derive actionable product strategies. Finally they execute, monitor and adapt these strategies. So, why product management is more strategy than tactics? Because, otherwise, a product would just be part of someone else’s agenda. And product managers would just be executors with little responsibility for product success.

For those looking for more tactical product roles, other options exist. For example, a project manager can plan and control product development efforts, a business analyst can evaluate customer needs and transform them into product requirements, and in agile development a product owner ensures product releases follow the roadmap. I have to say, though, that there are no strict boundaries, as I have seen the same person acting with two, even three, different product roles.

3 usual cases to hire a product manager

So far we have looked at the needed conditions to hire a product manager. If all of the conditions apply to your case, you are likely to need a product manager. Not yet though. Before considering to go for product management, you should check if any of the following different cases apply to your situation:

  1. Acquiring customers is too costly
  2. The product does not interest customers
  3. It is time to grow

Let’s go one by one in detail.

1. Acquiring customers is too costly

It is no secret that, at early stages, companies spend lots of money to get customers. However, when the cost of acquiring new customers does not get under control, it may become a startup killer. Customer acquisition cost depends on different factors. First, it has to do with how hard is for new customers to become aware and evaluate your product. Second, it depends on how well your product beats your competitors’ ones in front of your customers’ eyes. Third, it depends on how many intermediate steps there are to sell your product to customers.

So, what would a product manager do to reduce the cost of acquiring customers? The answer is simple: “Understanding customers”. This is because, by knowing customers, it is easier to understand what they value and delight them. For example, a product manager would soon spend time with marketing and sales segmenting customers. What does “segmenting” mean? Segmentation is the process of dividing customers into groups based on demographics, behaviors, needs and desires that are relevant to both the product and customers’ purchasing decisions. For example, segmenting customers of a life insurance policy by age is better than doing it by working hours, since age is a factor for people to buy life insurance or not. On the other hand, segmenting users of a ride sharing app by working hours makes much more sense, because it impacts people’s choices to use public transport.

Realistic and detailed customer segments represent a cornerstone of any product strategy. Once segmented the customers, the product manager analyzes the acquisition cost for each segment, compares it with the revenue for each segment, and find ways to make segments profitable.

2. The product does not interest customers

The figure is different by industry, but research shows that 40% of new products fail. A common reason for failure is that it does not solve a real customer problem. Let’s say you trust your pre-launch market analysis. Then, you launch your product and find out that customers do not like it. A product manager can help you. Customers are, again, the key, but this time with a twist.

Rather than defining needs and wishes of hypothetical customers, the product manager will evaluate actual customers’ behavior with your product. There is no universal recipe to study behavior. First, the product manager works with customer support, product developers and marketing to identify reliable sources of customer feedback on customer experience. Feedback can then be captured, for example, through interviews, focus groups or surveys. A more objective approach is to measure customer experience while the product is used. This mostly requires building behavior analysis in the product.

Once information is collected and analyzed, the product manager discusses with customers and the product team what to improve. Finally, the product manager revises the product roadmap. The worst case may be that there is not much to improve. In other words, the product does not fit the target market. In this case, a product manager evaluates if it makes sense to go after another market.

3. It is time to grow

If customers are happy with your product, you might wonder how to sustain this success. Indeed, over time features that initially delight customers become expected or even outdated. This process is relatively slow and can take from months to years. Customers do not tell when they are about to leave or if their loyalty begins to crack. When you realize they left, it is already too late to react. What’s the impact of customer churn then? Studies show that acquiring a customer costs 5 to 25 times more than keeping one. Thus, making sure a product stays relevant to existing customers should be a priority.

On the other hand, earning market share and finding possibilities to conquer new markets are crucial for growth. So, once a product is at this stage, it should start appealing to mainstream customers whose expectations are usually different from those of early customers. As Geoffrey Moore argues in his book Crossing the Chasm, the first customers of high-tech products are enthusiasts and visionaries. But they cover only a small fraction of the overall market potential. A growth strategy to capture mainstream customers requires doing things differently. This is why a product manager would revisit product features, distribution channels, marketing strategy and pricing to go after these new types of customers.

Product managers define and execute product strategies that both retain existing customers and satisfy new ones. They liaise with other functions, like marketing and technology, to execute the strategy and check progress along the way.

What next on product management?

If you read so far, you probably have a better feeling on whether and when investing on a product manager will return positively. If the first 3 conditions all apply to you, and if you recognize your situation in any of the 3 usual cases, it might be worth to hire a product manager. Your business is, of course, more complex than ticking a few boxes. And there is no list that fits all companies’ situations. If you want to share your experience or ask a question, feel free to leave a comment below or just contact me.


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