Making the Transition
At many companies, strong-form product management has become critical for the performance of their product lines and the successful execution of product strategy. In general, companies that benefit the most from adopting this model are those with more complex or highly engineered products that require difficult cross-functional trade-offs to optimize and differentiate their value proposition to customers. Some good candidates include companies in the aerospace and automotive industries, for example, that develop a single new product with such a high level of investment that a wrong decision could have devastating financial consequences. Companies with dozens or perhaps hundreds of product lines, or annual product introductions, would also benefit from a strong-form model.
For all these companies, any successful adoption of strong-form product management begins with five steps.
1. Hire or train product managers with the right skills. Investing in talent development is critical. Strong-form product managers need certain intrinsic abilities—namely, the judgment to understand trade-offs, anticipate market changes, and make savvy business decisions. They also need the technical expertise to work with advanced functional leaders. Beyond that, they need influencing skills, because in many cases they won’t have solid-line authority over functional leaders, but will rely on those leaders’ involvement and support. For much the same reason, they need a collaborative leadership style, in order to get the best from people and not miss out on ideas and important input from functional managers and other stakeholders. Finally, and perhaps most importantly, strong-form product managers need an entrepreneurial mind-set. This presupposes a facility for connecting with customers, a general manager–like willingness to take risks (and live with the results), and a desire to be responsible for the P&L and for meeting key metrics.
This is a rare set of traits to find in one individual. It is the sort of package that often positions an up-and-comer for general management or even for a senior leadership role. Product managers at most companies have never been asked to operate at this level, and thus the transition can result in significant personnel challenges.
To build a robust product manager pipeline, companies should put an increased emphasis on learning and development. For instance, they may want to groom future strong-form product managers by rotating them through key functional areas, and create new practices to develop and reward these managers’ performance—their compensation potential should rise, but far more of it should be variable. Companies should also give heightened attention to succession planning, whether it pertains to what a person must do to qualify for a product manager role or the career path a manager can expect afterward. At many product-oriented companies, a decade or so spent managing increasingly important product portfolios can be a stepping-stone to a position in the C-suite.
2. Enable financial transparency down to the product level. Business unit managers can usually count on getting information about their monthly sales, operating margins, and costs, but it’s much less common for this information to be provided on a product level. Many multiline product companies have a surprising lack of insight into how individual products are doing versus their expected performance, the extent to which a given product may be siphoning revenue from more profitable products, and what the biggest drivers of (and potential detractors from) individual product profitability are. This can lead to hidden opportunity costs or to out-and-out profit surprises, often caused by an increase in costs from a supplier that is managed by another function.
A company moving to a strong-form model can alleviate these problems by making much more granular financial information available to its product managers. The idea is to measure actual product revenue and profitability over both the near and long terms. With this information, product managers can immediately address major changes affecting a product’s life cycle. It gives them the insight they need to identify marginal or unprofitable products, as well as products that don’t fit well with the company’s most important capabilities. These can then be pruned from the portfolio.