The Entrepreneurial Product Manager

An entrepreneurial approach to identifying an opportunity

As Product Managers we need to become experts in understanding the market our products are used and sold into,  and smart about finding new customer problems to solve. An opportunity to solve a problem is often the first step in delivering a great product, but to deliver it we need resources, a team of people with varying domain knowledge, and a roadmap (or business plan)  to manage uncertainty. We also need to deal with our own role/responsibility struggles as well as other external forces. It all sounds like building a new company!

An entrepreneur is often thought of as a person who left the corporate environment and into the risky world of “business on my own”. These individuals pursue a vision and transform it into action guided by their passion. They have to convince people to buy into their ideas, and often struggle with finding resources since the task at hand is usually bigger than initially expected.

Entrepreneurs are risk managers, and to cover their backs, they need to learn about the market they are in; the problems they are solving for their customers, and plan for adverse scenarios.

Similarities with Product Management are obvious! Product Managers ought to be entrepreneurial individuals just like business owners. We are both responsible for:

• Identifying the opportunity/problem
• Evaluating the opportunity/problem
• Finding solutions to the problem
• Finding the resources to develop the solution
• Managing a development process to deliver the solution
• Getting buy-in from people across the organization
• Measuring success and learning from the process

In today’s economic/social environment, it is critical that organizations develop and encourage an entrepreneurial and innovative culture so they adapt and learn to be resilient over time. If we think about our role, not only as employees but as corporate entrepreneurs, we may also rely on entrepreneurial theory to better understand the challenges we face.

The Timmons Model is an example of an easy-to-understand tool that might shed light into our daily struggle. Let’s look at its elements and relate them to our PM role.

In the Timmons model, the size of the opportunity will shape and determine the amount of resources and the team. In our case, the product manager acts as the founder and is the responsible for identifying the elements that will allow the model to be balanced. Moreover, in this dynamic context we need to ask ourselves: What can go wrong with this opportunity? What favourable events can happen? What risks can be eliminated? What are the minimum resources needed? … In essence we need to sort out the risk-reward equation to make the product sustainable.

At the heart of the model, there is the opportunity. As product managers who need to debate and present a business case, we need to become smart about calculating it. Quick questions for doing this are:

Is the customer reachable and how many are of them?

• What is customer payback?
• Is the market growing and at what rate?
• Is the market emerging or fragmented?
• What are the barriers to enter?
• What are we providing better than the competition?
• What are our margins?
• What are customer’s behaviours?

In entrepreneurship, resources follow a great opportunity and is a common misconception that they have to be in place in order to succeed. On the contrary, scarcity promotes innovation and just like in product management, what we are often short of is of great opportunities. We can learn from entrepreneurs to do more with less and practice focusing creativity.

The team is a key element in every new venture and is located at the bottom of the model. Whether a new company or product development communication and interpersonal skills will foster a better environment where creativity and support leads to a better working team.

An entrepreneurial product manager learns and teaches, deals with adversity and is resilient. She shows integrity and is dependable and honest and builds an entrepreneurial culture in the organization. The passion that drives the team will show as they are motivated, committed, are adaptable and are aware their locus of control is on the team and is not external. Empowered individuals are key to product management and product development.

Examples of how the Timmons Model works are abundant. Let’s say we work at a company whose core business is in retail and we are back in 1995 when the Internet was not as ubiquitous as today. As Product Managers we envision the day when our products are not only available to those who come to our store but to everyone who has a computer and internet access.

First question we have to ask is: how big is this opportunity? Then, do we have the resources and the team to open to online shopping? And of course is it the right time to develop this new business? In this scenario the Timmons model would look like this:

See how the opportunity is bigger than the resources as it would probably cost a lot of money to implement a new online channel back in 1995. Same happens with the team because it would have been hard to find people with the required experience to properly manage a new virtual store.

See also how uncertainty is bigger that the perceived value of the channel in the market posing a greater deal of risk and the need for a strong business plan to pursue this new project.

How would the model look if the same opportunity arose today? It would look balanced and straight forward (as shown in the first figure) because the context and culture have changed, Internet access is ubiquitous and the fears and discomfort of online shopping have diminished. Today very few products  are not available online.

Also finding talented individuals to run a virtual channel is not a challenge anymore and implementing it is certainly cheaper than it was 15 years ago. This model also shows that opportunities are about timing and that if we want to go “over the fence” we need to keep our eyes and minds open to new ventures.

Understanding how the elements in the Timmons model interact and being aware of our role at balancing them will prevent our organizations from throwing too many resources at weak and poorly defined opportunities. So next time you feel like an acrobat at the circus trying to convey all variables to successfully manage a product, think of yourself as an entrepreneur and own your product as if you were its CEO. After all we all face the same challenges.

Veronica

Know thy Customer – Segmenting your Market

A proper segmentation ensures that a product roadmap and its respective marketing efforts are focused on a specific segment, aligning customers’ needs and marketplace offerings closer together.

But segmenting a market usually poses a challenge for Marketers and Product Managers alike since collecting the relevant data and understanding the critical segmentation variables are pivotal to gain reliable insight to identify the ‘market opportunity’.  Jumping into quantitative segmentation can be overwhelming especially for products of mass consumption where millions of units are sold through multiple channels and in different consumption occasions (i.e. how do we segment the market of Diet Cola drinkers?). Thus, selecting relevant variables and proper segmentation methods is the first step to define a strategic segmentation that could drive refined quantitative research.

Deductive Logic Segmentation

A simple yet powerful segmentation method to identify relevant market segments is through “Deductive Logic” method. Deductive logic is powerful as it results in a valid argument as long as the premises are true.

To apply deductive segmentation one can rely on segmentation trees. They work the as a classification tree but instead of using statistical criteria, it uses deductive logic . Conclusions will follow a set of premises that are neither wrong nor right, as they are based on our own hypothesis and Its quality depends on the validity of such premises. It could be compared to a mental map that will allow Product Managers to see all possible segments to better calculate the real market opportunity.

An Example

Let’s look into the case of finding segments for a Diet Cola.

Before drawing the tree we have to choose appropriate segmentation variable. It is recommended to start with variables that are relevant to the product supplier (Uncles and Bock 2002*) i.e customer profitability: frequency of consumption (number of units/time) or volume of consumption (size of product/time), and suppliers’ bargaining power (how many similar products can the customer obtain at a similar price and in a similar place). These variables will help identify segments based on frequency and place of purchase and also consider the consumers’ choices against competitors. Remember that choosing other variables will also be valid but as deductive logic explains, the validity of the outcome will depend on the quality of variables.

Followed by supplier variables, we must choose consumer segmentation variables that are strictly related to the product we are analysing. This is if we want to segment using age as a variable then we must ask ourselves ¿is it age a determinant variable in Diet Cola consumption?... It is probably not as relevant as knowing the product benefits, availability and the point of sale or awareness of the brand.

Building the Segmentation Tree

After choosing the relevant segmentation variables:  frequency of consumption, volume of consumption (size of product/time), knowing the product benefits, availability and the point of sale or awareness of the brand, we rank them logically from more important to least important. For example, frequency and volume of consumption should be placed high in the tree because it will show profitable segment of consumers directly related to the market opportunity. Brand awareness although important, has less direct influence on the product’s consumption and is more difficult to quantify (although in the case of Diet Colas brand awareness and product availability are key for sales).

First, we have to ask the obvious question: Does the customer drink colas at all? And does the customer drink sugar-free colas? These logic basic questions raise at least 6 macro segments.  At this stage, a Product Manager can start discarding or reconsidering segments not relevant to the opportunity she is trying to evaluate.

Continuing with the logical variable ranking; the following order is suggested:

·         Frequency of purchase

·         Volume of purchase

·         Brand awareness

·         Product availability

A good and free tool to build segmentation trees (and mind maps) is www.mind42.com

Discovering Segments

Once all segmentation variables are displayed in a segmentation tree (or classification tree), relevant segments are consequently ‘discovered’.

The point of this exercise is to find the segment or segments that will deliver business return.

As shown in the tree above, consumer segments are identified by following the arrows and multiplying the number of options per segmentation variable. For example, Diet Cola drinkers that consume the product 3 times a week form 27 segments (3 options of product presentation (X) 3 options of brand awareness (X) 3 options of product availability). The same process is applied for all three frequency of purchase options, resulting in 27 additional segments (18 for one time a week diet cola drinkers and 9 for non cola drinkers).

All 54 segments are not necessarily valid or worthy of further investigation.

For example the ‘3 times a week’ diet cola drinker that has high brand awareness and access to the product is not a segment that the business should spend additional resources on. There is no point increasing the consumption of that particular segment given that their propensity to purchase is already high.

On the other hand, it is worth evaluating segments where diet cola is consumed only once a week and brand awareness and product availability is low.

Validating Segments

It is necessary to validate segments that have been ‘discovered’ through this process.

Here are some ways of validating the segments:

·      Differential strategy development: do the differences between the segments suggest that different strategies should be developed for different segments?

·      Accessibility: can the different strategies be targeted towards the different segments?

·   Communicability: will the people responsible for implementing the segmentation be able to understand it?

·       Technical validity: are the true differences between the segments known?

This simple yet comprehensive taxonomy can help us narrow the number of quantitative analysis needed to identify the true potential of a market.

Once the segments have been identified and validated, narrowing them to the valid ones will help Product Managers quantify the real market opportunity and support their product’s business case. Additionally its helps in prioritizing the number of product improvements needed since it brings deeper understanding of the customer group the product addresses.

*References

Uncles & Bock 2002, Journal of International Research in Marketing, available

http://www.sciencedirect.com/science/article/pii/S0167811602000812

Training Product Managers.

If you are in this business, you better walk the talk buddy!

So you are a Product Manager (PM) and after a few struggles with your daily routine, you think it is reasonable to have some sort of training so you can sort your priorities better or finally understand what is it that you are accountable for.  Maybe having a certificate hanging in your cubicle will help you to find a better job or support your decisions in a more “educated” way... These were the reasons why I decided to enroll in specific Product Management training from a company called Pragmatic Marketing. 

I enrolled myself with plenty of time ahead since I had to travel overseas to be trained.Turns out, on the second day of a 2 day course,  I was asked to leave the training.  They had discovered that I was somehow related to an Australian PM Consultancy firm called brainmates, who also teaches PMs How to perform a better job.

During the first day of training I was happily tweeting about how great the experience was and shared my excitement with PM colleagues from @brainmates and @ProdMgmtTalk.  These colleagues have helped me learn, discuss valuable knowledge, and network with several interesting people from the PM online community around the world.

Seems like following those tweets, and after the training company googled my name, I was accused of trying to smuggle information from inside one training company to another.  Why would I be public about my relationship with @brainmates and @ProdMgmtTalk if I wanted to steal information?

They argued that Intellectual Property is important and to be respected. However, if a company is concerned about attendees at an event getting access to insider information, shouldn’t they check customers’  backgrounds before letting them enrol, and identify and publicly communicate their policy for preventing and/or dismissing participation in your trainings?

I was not given a chance to express my point of view. I was accused guilty of having intentions to copy and share their material (and also brainmates for that matters) and all I got was - “we’ll give you your money back”, although reimbursement for the cost of my trans-continent travel (I flew from Venezuela to Canada) and hospitality expenses was not offered. 

I would have appreciated a simple apology, such as “We are sorry that we made a mistake as we should not have let you enrol and we need to improve our processes”.  This would have shown fundamental customer service, not to mention a demonstration of what basic Product Management boils down to... recognizing, listening and responding to your customers problems.

Here are my suggestions if you want to learn how to be a better Product Manager, whether you have been in the job for a while, or are just starting out:

1. Increase your knowledge with books: There is an endless list of Book for PM, but the ones I've read and learnt from are: Tuned In, The Product Manager's Handbook , Product Portfolio Management and the Blue Ocean Strategy (these last 2 are more into innovation and New Product Development)

2. Get connected to a community of product managers by attending product events: http://bit.ly/ndBYQA

3. Participate at the Global @ProductMgmtTalk on twitter every Monday afternoon (4:00pm PDT) where you can network with a global community of PMs who generously share their insights, resources and continued challenges. http://www.prodmgmttalk.com

4. Check out the Alliance of Product Professionals http://bit.ly/pocIkE

5. Be happy about being a Product Manager, if you are true to your customers you are making a better world already.

Have a good learning and if you want to share some knowledge follow me on twitter @vfigatelix