Prod Mgmt for Newbies #5 -Understand your business holistically

In one of my early days as a PM, when I talked to people about making more money, I always used to say build new products. Sell them to existing or new customers and make more revenue.

I was so wrong and limited in my understanding of a business.

Understanding one’s business in-depth is extremely important for a Product Manager for him to take the right decisions given a business objective.

Understand your business

Here is a basic list of questions I would suggest you to ask yourself and your peers/ leaders:-

  1. What do we sell ?  ( do we sell experiences ? physical products ? Phone numbers ? )
  2. Who are the customers and how do we acquire them ?  (understand the acquisition strategies we use)
  3. Who are our suppliers and how do we acquire them ? 
  4. How do we grow our user / customer base ? (On all sides of the business)
  5. What generates the most revenue ? Or rather whats the revenue split by user / product segments ? ( iPhone generates the most revenue for Apple, did you know that? when there is a conflicting priority between Mac and iPhone, you know which way Apple is going to go.
  6. What incurs the most cost ? Or better if you can get a high level split of the costs.(Many companies have Marketing as their biggest cost, for some its RnD, for others it might be operations – you need to understand the split)
  7. Who are our competitors ? And how are they different ? 

When I started to develop an understanding of the above, I stopped saying build cool new products, my thought process on making more money started to bend around expanding the customer base, or increasing pricing by offering a premium feature on an existing product, or monetize an existing asset which we are not monetizing today..or automate some aspects of the business to increase profitability, or may be just optimize a particular flow in the product to increase revenues.

Why are certain new products built/ sold ?

Next, lets try to understand why do companies build the products they build, or features they add.

  • Why do you think Google built Google Chrome ? To provide a better browsing experience to the world ? To make websites faster ? Think again.
  • Why do you think Amazon built Kindle ? To provide next generation book reading experience ? No. e-Book readers already existed in the market. Think again.
  • Why do you think Google is building project Google Loon and Facebook is trying to provide free access to Facebook ? To help people get access to internet and improve their lives ? Not exactly.

All these products are built to help the company

1) Acquire new customers 

  • Google chrome search bar leads to more google searches. Hence more people see/  click ads. ( and hence more money)
  • Kindle leads to more people buying books from Amazon. And seal the existing ones  to amazon forever.
  • Google loon / FB free access – would provide internet access to people. What would those people do ? Search for stuff on google or browse content on FB. Hence more ads and hence yet more money.

2) Strengthen their current position/ assets.

  • If one gets used to using google chrome and searching from the search bar on top. Google’s position as a search leader is further strengthened.
  • Amazon’s position as the biggest online book seller gets further strengthened.

 

Why are companies built ? Why do companies exist ?

Two reasons

  1. Solve a user problem / fix an inefficiency in the system.
  2. Make Money. For most companies, #2 is all that matters.

So don’t just think that a new cool product is going to solve a real problem and stop at that. Think money too. Make it a part of your habit.

Useful Resources & Parting thoughts

Advertisements

2 thoughts on “Prod Mgmt for Newbies #5 -Understand your business holistically

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s