Product Management Metrics (part 2)

In Part 1, I defined the mandate of Product Management as:

Product Management’s mandate is to optimize the business at a product, product line or product portfolio level over the product lifecycle.

I’ve emphasized 3 words: optimize, business and lifecycle.

Optimization is the process of changing a system to make it work efficiently within a set of given constraints.

Fundamentally, this is what Product Management is all about: how to invest limited resources to deliver competitive products to market, that are in line with market demands and expectations and then working with other teams to better enable them to reach their targets that make up overall business goals. 🙂

Product Management must always keep business goals in mind and work to achieve or help achieve those goals within the context of the products or product lines.  Business goals are typically related to revenue, expense, customer acquisition, market share, geographic expansion or organizational improvement. This is a sample list of goals and doesn’t imply that Product Management must focus on these areas.

It’s important to keep in mind that business goals differ across the product lifecycle.  A product lifecycle can be defined as having the following stages:

  • Development
  • Introduction/Launch
  • Growth
  • Maturity
  • Decline
  • End of Life

There may be variations on these stages, but this represents the major phases that a product will pass through. And the goals and objectives for the product will vary at each of these stages. For example, the Development phase usually is pre-revenue. In this phase, Product Management is focused on understanding market needs and working with various parties (internal and external) to create a product or solution that addresses those needs.

With Launch, the goals for the product can include initial customer acquisition, validation of the product in the market, educating influencers, generating awareness etc. Revenue obviously becomes a major factor after Launch, as do goals such as customer retention and ongoing competitive differentiation. The other phases — Growth, Maturity, Decline and End of Life (EOL) — all bring their own challenges, constraints  and objectives.

Given the changing objectives over the product lifecycle, the goals of Product Management will change, activities to achieve those goals will change and the metrics that are used to measure them will change.

In part 3, I’ll get more specific, and lay out a model that people can apply to their products or product lines. It is important to note that there is no “one size fits all” solution here. Only at the highest level of business reporting– customer acquisition, revenue, customer retention etc. — can there be a single set of metrics for most products.

Because of the breadth of potential technology products — e.g. SaaS vs. Licensed software, a consumer product vs. a B2B product, infrastructure vs applications, a retail product vs. an OEM product  etc. — specific metrics across the lifecycle will vary.

Department vs. Role

I do want to make take a few moments to address a question related to role metrics vs. department metrics. That is, the metrics used for measuring a Product Manager, vs. the metrics used for measuring Product Management as a whole.

In small  companies, there may only be a single Product Manager for a given product or product line.  I’ve been in that situation myself a couple of times. In those cases, metrics for the Product Manager are pretty much the same as that for the Department.

But in larger companies, where there truly is a Product Management team, most likely with differentiated roles for PMs (e.g. Technical Product Manager (TPM) , Sr. Product Manager, Director Product Management etc.) the metrics that would be used to measure individuals likely would be different that those for the entire team.

For example, a TPM would likely spend much of their time working with Engineering during a development cycle or researching technical issues for upcoming releases, whereas a Director would be more focused on overall product strategy, business alignment, strategic partnerships etc.

The Product Management team may be measured on product revenue, delivering a new release successfully etc., but individuals in that team would have other role specific metrics tied to their individual activities and responsibilities as well.

As mentioned earlier,  in part3, I’ll get more specific and present a model that could be applied or adapted by Product Management teams.


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11 responses to “Product Management Metrics (part 2)

  1. On a product management team, the various PMs would be focused on different phases of the lifecycle, or different segments. The team metrics would cover how the various PMs work together to achieve the overally product(s) strategy.

    • David,

      Yes, this is one way that members of the PM team could be measured.

      One question to you: what metrics would you define that could be used to measure how well product strategy was achieved?

      The timeframe (IMHO) for these metrics would be quarterly or semi-annually.

  2. I see the need for metrics that you manage towards every day. I also see the need for controlled consumption of the market, but this only in a non-promo spend-based market leader.

    Cooking up a metric for how well the product strategy was achieved would have to measure validation of strategy against performance. You cannot assume that the strategy is correct. Forecasts are just as likely to be off as the product management team’s performance.

    I see a software company as collections of market-phase specific capabilities. Each product manager engages those capabilities as processes. Observing the limits of those phases in the Voice of the Customer is a critical measure of both the product manager and the product management team. Handoffs across market transitions are likewise.

    The best way to find metrics is to collect data on everything, and retrospectively look for correlations. If you propose a theory, you have designed a game.

    I would measure the product manager’s communications in terms of frequency and content. The product management team would be measured on leadership vs. management.

    The product management team could be measured across the entire strategy as a roll up of product manager metrics. P&L would work this way.

    The current market phase would drive the interpretation of the numbers. In the tornado, seats are king. In the late market, the absence of discounts, customer retention, and dollars matter more than seats.

    How to turn all of that into one number is the trick. Look at something like new customers today, and customers retained today. Then, you can ask, what actions did this person or this organization take to increase those numbers today and further into the future. And, no, this doesn’t mean bending over backwards to get a customer. There would have to be some measure of distance from strategy.

    Agile is particularly helpful as a measure of distance to strategy, because you project your cash flows for each iteration or release. You do not have to wait for the quarterly close.

    Being on a profit pool-basis will also help the operational reality of any accounting data consumed by product management.

  3. When measuring product management, the manager of product management has a job description. Turn that job description into metrics. Most of those metrics would be team metrics.

  4. Great post and comments!
    Very much thought provoking!

  5. Pingback: Product Management Metrics part 1 « On Product Management

  6. Pingback: Guest Post: Measuring Product Management (part 1) « On Product Management

  7. Willie Hernandez

    It has been my experience that the main metric is the success of the product/products we bring to market. As a Sr. Product Manager we are responsible for the creating or a “Marketing Requirements Document” or MRD. When properly done the MRD is the business plan of an Intraprenuer, the Product Manager. Hence, the MRD should provide not only a high level set of product requirements but also a product revenue plan or forecast, market positioning, product introduction plan, operations and support plan, promotion plan, and finally a detailed sales plan.

    The best metric, like all business metrics are basically derived from the same tools that are used to measure business success in attaining the strategic plan. The main tool is then the accounting reports that reflects the budget plan that, when met, indicates and clearly shows, the MRD’s contribution to the bottom line.

    Any other metrics outside of the accounting systems that guides the success and longevity of the company are just irrelevant. We have to remember that as a Product Manager, we are “managers” and the main definition of what a manager is clearly states that all our efforts are geared toward one main objective, “maximizing the owner’s wealth.”

    Hence, the Best metric that I have always used is the net result of the products I managed as outlined in the MRD. When we look at the end, the MRD is translated into a Budget and resource allocation plan and from this, product revenue are tracked and I have to ensure that the ROI and Payback that was stated in the MRD is either met or exceed at the end. That is the measure of success that I have always used in my 30 years of experience as a successful PLM.

    If there is anything else that we need to focus on then please let me know, I am all ears.

    Willie Hernandez.

  8. Where is part 3? The actual model?

  9. Luke,

    It’s funny you mention that. I just realized myself earlier this week that I hadn’t gotten to part 3. Not sure how I forgot. I’ll get to it in the near future though.

  10. Pingback: Product Management Metrics (part 2a) « On Product Management