Understanding your product’s true value

After a decade of books and thought leaders sharing their experience on good product management, we have reached a point where there is little or no arguing about what good looks like. Yet despite this, many organisations can not express how their costly product development efforts create value.

There is still a widespread lack of good product management being practiced. Many companies fail to empower their teams or run product discovery, the term MVP is incorrectly used to describe “version one”, or there is an ongoing obsession with outputs and features instead of outcomes. Many still build collections of features for clients and fail to create products for markets. The client fit focus continues to be widespread across scaling B2B tech companies.

I guess I should introduce myself. My name is Dave Martin, and I am the founder of Right to Left and run product leadership coaching for MTP Leader members.

Right to Left focuses on helping companies build and scale products that make a difference. The companies I work with are often tech companies at the series A or series B funding stage. These organisations have usually found product-market fit in a niche segment and have started to scale. Unfortunately, this is generally also where product management begins to break with potentially disastrous consequences for the company. In this article, I will share observations and learnings around understanding where the value lies.

When product management breaks

Many tech companies start with the founder as their unofficial Head of Product. When founders run product management in those early days, their perspective often drives decisions to achieve market fit.

As the headcount grows and a product leader gets hired, noise and pressure increase, leading to diluted focus. Despite product investment focusing on tactical initiatives, revenue is often still growing. Unfortunately, it’s usually a Trojan horse. At some stage, leadership will be hit by the ‘Scaling Growth Ambush’. The average growth is not accelerating and will never become high growth without urgent action.

This average growth is not what any VC-backed tech start-up plans. Instead, their funding pitch deck shows a hockey stick graph with exponential growth. A lack of high growth impacts future funding terms, shortens the funding runway and significantly reduces the valuation of the business come to an exit event. But, of course, this assumes a lack of high growth doesn’t kill the company.

As the company scales, the pressure on the product grows, and it is easy for the product roadmap to deliver fixes, tweaks, and features to close one deal (client fit, not market fit). Put another way; the product roadmap becomes tactical and void of strategy. It usually isn’t because the product leader hasn’t thought about strategy. There is typically a well-considered product strategy. However, what gets prioritised is not based on the strategy.

Prioritising strategy vs tactics

We need to break free of the standard prioritisation battleground. One of our key aims as product leaders must ensure that prioritisation is transparent and effective. It must be clear to everyone when deprioritising strategy for tactics. The strategic value must be well understood by the organisation.

Perhaps the most crucial goal for the product leader is to ensure everyone gets aligned on how product development will create value. Aligned teams will be empowered to achieve outstanding outcomes for users, the market and the business.

The role of product leader in a founder-led scaling company is hard work. Unless you have been there, it’s almost impossible to appreciate the volume and velocity of change. The effort required is relentless. As the value ambush hits and average growth gets realised, the product leader needs to act fast to achieve the expected high growth. Or better still, perform before the ambush and avoid it.

These organisations cannot afford to make product investments that only deliver optimisations. They need product initiatives to have multiples of ROI. If they stay on the average growth line for too long, there is a point of no return.

The big obstacle, as mentioned above, is achieving strategic alignment. The gotcha is that everyone has their ideas of what”value” means. People have different perspectives and different experiences, which fuel their concept of value. Getting everyone to nod and agree in a meeting is not enough. We need to ensure a well-understood and strategic value metric gets taken into the prioritisation process. When individuals debate what is essential to build next, they fall into old thinking and accidentally go gooey-eyed over tactical low-value initiatives. As product leaders, we must switch the prioritisation events to balance bold strategic initiatives with the optimisation of business as usual.

Clarifying value

To ensure strategic value drives prioritisation, the product leader has to define value. I know that is a lot easier said than done. In B2B technology companies, it’s almost impossible. There are multiple personas with multiple motivations and demands, and there is no one metric to rule them all! Anyone who has tried to find a single metric that matters to focus on everyone can tell you it is a rare and wonderful thing.

Instead of trying to do the near impossible, a better approach is to capture and agree on the value assumption in your product strategy. For example, in a B2B company, the first step is to define how changing user behaviour (via features) will create value for the client. The second step is to clarify the value assumptions of how that client value will translate into business value for the tech company. In theory, this sounds simple, but in practice, this requires consideration, collaboration and deep market empathy.

We can further measure our progress when we have defined and agreed on value assumptions. Measuring progress involves picking value indicators which you can track. I call this set of value indicators and associated targets the Product Value Creation Plan (PVCP). The PVCP allows our roadmap to prototype the strategy and help the product leader estimate if the desired value really will be created.

Many companies have implemented a Product Value Creation Plan, and its high impact is always a surprise. The power of articulating the product strategy in a single table of value indicators that everyone can focus on will help cement the product strategy into the organisation’s DNA.

Armed with your Product Value Creation Plan, your first win is plumbing the value indicators into your prioritisation framework. Hence, your roadmap is no longer tactical and your teams can be empowered.

I hope you are inspired to start exploring the value assumptions within your business by reading this article.

Want some help with your Product Value Creation Plan (PVCP)? As an MTP Leader member, you’re in luck! I’ve developed  Empower, a 12-week group coaching program, and in the first session, we’ll dive deep into the PVCP and help you start to build yours. Empower is exclusively for MTP Leader members and is included in your membership at no extra cost. Learn more and register – places are limited!