Product Managers need to be technically competent, have great soft skills and be business-savvy. But what does that really mean? In this post, I list some of the key characteristics present in all business-savvy Product Managers. Do you have them all?
When I think of business acumen, the show Shark Tank comes to mind. If you are not familiar with it, I really recommend you check it out. The premise is that hopeful entrepreneurs pitch their company to a panel of 5 successful business people (a.k.a Sharks) in hopes of getting investment for their company. It’s very interesting to see the pitch, the negotiation and the Shark’s rationale for investing or staying away from a particular opportunity.
You might be asking, what does that have to do with Product Management? Well, the answer is business acumen. On the show, the contestants that do well are often the ones that understand financials, have identified a market and have a product that people want. Non-business-savvy contestants are usually eaten alive by the Sharks.
Business acumen is one of the 4 pillars of Product Leadership, but a question I often get is: what does it mean to know about business and how can I learn? This is a very valid question, and there is no simple answer. A common approach is through an MBA (Masters in Business Administration), but not everybody has the funds or time to go through one. Plus, as valuable as they are, they only tell half of the story. The other half is experience, mentorship and making mistakes in the real world.
A good mentor once told me: “If you want to get ahead in an organization, you have to be in a position to impact the bottom line”. Very wise words. But the trick is to understand enough about business to know how to impact the bottom line. Here are some of the key characteristics you should have (or develop) to be a business-savvy Product Manager:
Understand the Definition of Business
The Merriam-Webster dictionary defines business as: “The activity of making, buying, or selling goods or providing services in exchange for money”.
Therefore, to understand business means to understand how your particular company makes money and what is your contribution, as Product Manager, in that whole process.
To set the ground rules, here’s a summary of key concepts every Product Manager must become familiar with. If you are not familiar with some of them, you can use Investopedia to look up these concepts. To “speak business”, it’s important to know these terms, and it’s even more important to understand how they apply to your product.
-Cost of goods
-Net & Gross profit
Recommended article: 7 IoT Business Models That Are Transforming Industries
Learn to Read Financial Statements
Once you understand some basic concepts, it’s time to put them together in the context of a business. You’ve heard of “top line” and “bottom line”, right? But what do they really mean? Understanding financial statements, such as an income statement or a balance sheet, helps you answer that question. Financial statements give you a snapshot into the financial/business health of a company. The good news is that financial statements for all public companies are available for free at sites like Google Finance. Want to know how Apple is doing or how they spend their money? Just look at their latest income statement and get the full scoop. If you are new to this, here’s a good set of articles to get you started.
If you work at a private company you might not get access to financial information. The solution? Just ask. Ask your manager or ask somebody from Sales. They’ll probably be happy to share.
Have Clarity on Your Company’s Strategy, Mission, and Vision
In a nutshell, strategy defines how your company goes about achieving its objectives. It defines the type of market to pursue or what type of product to launch next.
It’s also important to learn the mission and vision of the company. Mission is the reason the company exists. Vision is what the company longs to achieve. By understanding mission, vision, and strategy, you’ll be able to align yourself and your team with the company’s goals and be much more effective when making trade-offs on your product roadmap. Remember that a “cool product” means nothing if it doesn’t help the company achieve their financial and strategic goals.
Know your Industry
Having vertical knowledge is key to making great product decisions. If you are in eCommerce, then work on understanding the challenges of companies involved in the trade. What are their pains? What is their business model, their operational flow, main pain points? Same applies to any industry, from banking to automotive, manufacturing, food, etc.
Once you understand your industry, you’ll be able to correlate their needs with the latest tech trends to make sure you solve their needs. For example, we are undergoing a “mobile revolution”, and knowing about the technology is great. But it’s more important to understand how your product can leverage mobile to meet the needs of your industry and therefore your users.
Recommended article: 7 Ways to Get a Product Management Job When You Lack Industry Experience
Understand and Contribute to Sales
The Sales department is responsible for generating revenue. And as the saying goes: the cure to most company’s troubles is more revenue. Product Managers should be intimately familiar with how the company sells their product. In general, the Salesperson is your best ally and building a strong relationship with him or her is very important. Take the time to understand the sales funnel, the overall sales cycle, the time it takes to close a deal, the stages of an opportunity, how your product is demoed, etc.
Some of the most valuable people in the organization are those who can help close a deal. As Product Managers, we need to articulate not only the technical value but the market and business value as well. In many software organizations, the Sales folks build relationships and open doors, but they need a product expert that can close the deal by selling benefits, not features. That’s where you come in. Once you are known as the expert, the evangelizer and the closer, then your opportunities within the companies will expand to a whole new level. Bigger companies, usually have Solution Engineers (or similar) to fill this role. In this case, it’s your job to train that person to ensure the correct message, value, and benefits of your product are properly communicated to the end customer.
I also recommend getting involved in RFIs (Request for Information) and RFPs (Request for Proposals), not to mention getting intimately familiar with contract negotiations. If you are new to contracts, I suggest you check out my contracts primer series.
Becoming involved with Sales not only hones in your business acumen, but it also gives you a priceless opportunity to hear first-hand the needs of real clients. You’ll be able to see what they value and the types of questions they ask in order to buy your product. User testing is great, but believe me, the info you can get from users is very different than the info you’ll get from prospective buyers. Well rounded Product Managers understand the differences and can address concerns from each group.
Understand the Complete Product Lifecycle (From a Business Perspective)
As I’m sure you know, the complete product lifecycle is much bigger than just the engineering cycle. Product Managers that understand the business side of things provide incredible value because they can guarantee all aspects of the product will be accounted for to ensure a smooth launch. It’s not enough to know the product from a technical, user and marketing perspective. Savvy Product Managers understand the complete product lifecycle from a business perspective as well.
A product usually starts out of a business need. From there, it requires market and user research to validate the idea and then funding for the development effort. Once the actual product development starts, there are the typical stages of UX, development, QA, etc, but in parallel, there are other tracks going on. While the product team is ramping up, HR is busy hiring team-members, marketing is busy crafting the positioning and message of the product, and Sales is busy talking to potential clients.
Before your product launches, you’ll need to define how you’ll train the Salesforce, how you’ll work with marketing to ensure all your features are well represented, how you’ll train the support team, etc. You’ll also need a plan on how to engage your first clients (i.e. beta program) and how you’ll circle back their feedback into product development. And by the way, all of this needs to be done within budget and in a particular timeframe so you can be first to market.
Understand the Competition
Business-savvy Product Managers also have a very clear understanding of the competition. This knowledge goes beyond the understanding of the competitor’s features and technical capabilities. It includes understanding their target audience, what are their key differentiators, their message and overall business model. At all times, be prepared to answer how you compare against the competition and why your product is better.
By the way, I highly recommend looking at the competitor’s financial statements. Are they outselling your product? Are they profitable? Are they investing a ton in R&D which means they might be gearing up for a major release? Knowing the financial data of your competitors certainly gives you a better picture and is invaluable when you need to make decisions about your product’s roadmap.
Understand Your Product’s Contribution to the Company’s Bottom Line
As much as we’d like to think that our product has all the company’s attention, the truth is that we are always competing for resources with other products, services or areas of the company. The advice here is to understand what percentage of the company’s revenue is generated directly or indirectly by your product. The more revenue/profit you bring in, the more influence you’ll have. Plain and simple.
Read. A lot
Business, like any other discipline, is always evolving. Remember how much you had to read when you were ramping up on the technology curve? The same is true here. But don’t focus only on the latest trends. Especially if you are new to business, there are some staple books, like Crossing the Chasm, Build to Last and The Art of War, that are a must read for every Product Manager.
Good business people are always in-the-know. It’s important to keep up with the latest news, not only tech news, but also news about your industry, world news, etc. I even recommend keeping up with lighter topics like entertainment and sports. You never know when you’ll need to make light conversation with business folks in an elevator or 5 minutes before that business meeting.
Note: I highly recommend listening to my IoT Product Leadership podcast to hear directly from business-savvy product leaders. Pay attention to how they always tie their points to the business value.
Take a CEO perspective on your product
Product Management is a relatively new discipline. In many companies, this role is often played by founders or CEOs since they are usually the ones with the holistic vision of the product. But as companies grow, this role is commonly taken over by the Product Management team. My recommendation is for every Product Manager to take a CEO perspective of their product.
There are a lot of articles going back and forth about the Product Manager acting as the “CEO of the product”. I don’t mean that at all. Calling yourself the “CEO of the Product” can backfire. Product Managers have a much more narrow focus and usually aren’t able to make all the calls. It’s not about “ownership”. It’s about perspective. Roger Cauvin, from Smart Product Decisions, summarizes it well in this post.
What I mean is that you should step back from the technical role and look at your product from a holistic business perspective. For example, instead of just focusing on features and customer value, ask yourself these types of questions:
- How should the product be rolled out?
- How will the product be sold?
- What is the value proposition and how am I better than the competition?
- What’s my sales strategy and how will I train the Salesforce?
- What should the support team look like?
- Who are my top 10 accounts today and what are 10 accounts I’d like to penetrate this year?
- What is my revenue goal for this year?
- What is my growth target for this year? And why?
The Bottom Line
Business is a huge topic and some people dedicate their whole career to it. The takeaway from this post is that as Product Managers we have the responsibility to guide our teams towards creating the best product possible. Technical and business leadership are equally important to achieve our goal. Driving towards a balanced skill set takes time and dedication. Every step you take in this direction is a step toward becoming a more robust Product Manager.
Next time you watch Shark Tank, put yourself in the entrepreneurs’ shoes and try to answer the same questions from your product’s perspective. That way, next time you go into that quarterly meeting with the executive team, you’ll be ready to swim with the Sharks.