The Origins of Product Management (part 2)

NOTE: Part 1 can be found here.

The high technology industry, and in particular, the software industry is much younger than the Consumer Packaged Goods industry. And the role of brand or product management in high-tech and software is even younger still.

Certainly one of the earliest software companies to apply “brand management” principles to software products was Intuit. Intuit was founded in 1981 by Scott Cook, who was a former P&G “brand man” himself.

In developing Quicken, Intuit’s first product, Cook wanted to create finance software that home users who were NOT financial experts could use.  Cook knew he had to differentiate himself in the market. There were already a number of home finance/checkbook balancing software products available, but most of them were difficult to use for the average person.

Cook wanted someone like his wife, an intelligent woman but not necessarily a finance or computer expert, to be able to easily perform the calculations she needed. To do this, Intuit went so far as to emulate the look and layout of the traditional physical checkbook, within the limitations of the monochrome 80×25 character text screens of the time.

This type of innovation, and focus on customer needs, led Scott and his team to create one of the most successful and enduring consumer software packages of all time.

The book Inside Intuit, gives some great insights into the early days of the software company and describes many of the challenges they faced, but also many of the innovations they made. One unique innovation, at the time, was their “Follow me home” program.

In the 1980s, ease of use was not something you would associate with personal computers, particularly those running DOS or Windows. The technology was still relatively new and a lot of software vendors were simply focused on getting software out the door, let alone focusing on usability. But Intuit was not one of those companies.

They realized that the only way they could truly understand how their customers used their software, was to observe those customers in their actual usage environment. i.e. the home. So Intuit created the “Follow me home” program where they would get permission from Intuit customers to send a company representative to the customer’s home and watch the customer install and use the product on their home PC.

Note task 3.1 (field studies) in McElroy’s memo.

These field studies, called ethnography in the social sciences, are only now becoming common in technology companies. Intuit gleaned many insights from the Follow me Home  program which led them to continue to enhance their product and create what can only be described as an incredibly loyal customer base.

In fact, Intuit’s customer base was so loyal that when Microsoft tried to lure them away by offering free copies of its rival Money product, very few customers took that offer.

Today, aside from their successful products, Intuit is well known in the software industry for a very strong Product Management discipline. I’ve previously blogged about Bill Campbell’s (Intuit’s Chairman of the Board) views on Product Management. Certainly, Intuit had a pivotal role in the development of technology product management but others helped shape the profession as well. I’ll get into one other very influential person in part 3.

Saeed

Related Articles:

• The Origins of Product Management (part 1)
• The Origins of Product Management (part 3)

The Origins of Product Management (part 1)

One of the common problems when discussing the subject of technology Product Management is that there is no common definition of Product Management that all people agree on.

To better understand what Product Management is, it’s important to understand where it came from.

The origins of Product Management go back to the 1930s at Procter and Gamble. Back then, a manager at P&G named Neil McElroy wrote what is now referred to as the “McElroy Memo”.  P&G was famous for their culture of writing memos on important topics.

McElroy was the manager responsible for Camay soap — a lesser brand to the company’s leading Ivory soap brand. Camay was not selling well and he decided that a dedicated “brand man” (and supporting team) was needed to ensure that sales of the brand were being maximized.  Here’s an excerpt from that memo describing some of the issues that the “brand man” would need to address.

1. Study carefully shipments of his brands by units.
2. Where brand development is heavy and where it is progressive, examine carefully the combination of effort that seems to be clicking and try to apply this same treatment to other territories that are comparable.
3. Where brand development is light:
   1. Keep whatever records are necessary, and make whatever field studies are necessary to determine whether the plan has produced the expected results.
   2. Study past advertising and promotional history of the brand: study the territory personality at first hand–both dealers and consumers–in order to find out the trouble.
   3. After uncovering our weakness, develop a plan that can be applied to this local sore spot. It is necessary, of course not simply to work out the plan but also to be sure that the amount of money proposed can be expected to produce results at a reasonable cost per case.
   4. Outline this plan in detail to the Division Manager under whose jurisdiction the weak territory is, Obtain his authority and support for the corrective action.
   5. Prepare sales help and all other necessary material for carrying out the plan. Pass it on to the districts. Work with salesmen while they are getting started. Follow through to the very finish to be sure that there is no letdown in sales operation of the plan.
4. Take full responsibility, not simply for criticizing individual pieces of printed word copy, but also for the general printed word plans for his brands.
5. Take full responsibility for all other advertising expenditures on his brands (author’s note – in-store displays and promotions).
6. Experiment with and recommend wrapper (author’s note – packaging) revisions.
7. See each District Manager a number of times a year to discuss with him any possible faults in our promotion plans for that territory.”

Putting aside the lack of gender neutral language (i.e. Study carefully shipments of his brands by units), here’s a summary of the 7 points:

1. Understand the regions and volumes of product being shipped.
2. For regions where sales are good or growing, understand why and try to apply those principles to other similar regions
3. Where sales are light, investigate the situation to understand the problems. Devise a plan to address the problems and work with internal parties to ensure the plan is successful.
4. Take charge for all messaging and advertising copy for the brands
5. Oversee advertising and marketing expenditures for the brands
6. Try new things, particularly with packaging of the brands
7. Work with local sales managers to understand their perspective on what is and isn’t working in their region

It’s an interesting list. In essence, the “brand man” is responsible for the business success of the brand (product or product family).

The role of “brand man” or “brand team” was very successful at P&G and was emulated throughout the consumer packaged good industry.  And, after almost 80 years, Brand Management is well defined and is a pure marketing and business function within Consumer Packaged Goods (CPG) companies.

The story doesn’t end here, but it’s clear that the principles of brand management had a significant role to play in the formation of technology product management.

Saeed

Related articles:

• The Origins of Product Management (part 2)
• The Origins of Product Management (part 3)

Product success is not easy….part 2

Scott Sehlhorst wrote a good post entitled Successful Products:Lucky or Intentional? about my comment on Phil Myers post entitled Chasing Outcomes. Did you get that? 🙂

Phil had summed up his Chasing Outcomes post with the following line:

At the end of the day, its simple. Create a product or service that your buyers want to buy and the rest takes care of itself.

I argued that things don’t take care of themselves and asked for other people’s comments.

Scott took my comment, that product success is not easy, and analysed Phil’s post and then provided guidance on how to increase the likelihood of product success. He states 7 steps should be followed. These are:

Identify your market (and therefore your customers and competition). Identify their problems, and select the ones you will solve. Create a product roadmap (aka a “plan”) to solve those problems. Design and implement solutions to the most valuable problems. Get feedback on your solutions. Incorporate your feedback into your plan (step 3) and repeat. Revisit your market (step 1) and the problems you choose to solve (step 2) and repeat. Note: Step 7 should occasionally replace step 6, so that you stay focused on your market, and not just an out-of-date snapshot of what used to be important to your customers.

This is a good list that describes a good standard process for developing products. It basically says one should do their homework before implementing solutions to problems, and then iterate on the solution based on feedback from the market.

And while this should reduce chances of failure, and help develop something the people want, it doesn’t mean that there will be product success or that anything will take care of itself.

There are several reasons for this.

First, even if you follow the steps above, none will be done perfectly, and there will be aspects of the market, the problem, your solution etc. that are not fully taken into account or addressed. It could simply be because there are things you cannot know for certain, or because your resources or budget don’t permit more accurate research or for other reasons. Regardless, it goes without saying that your research and your efforts will not be perfect at each step. Think of these imperfections as “error bars” associated with decisions made at each step.

And remember, decisions are what we make when we have imperfect information. When we have ALL the information needed, we no longer are making a decision, but a calculation. Now, when do we have ALL the data? Well, almost never, or almost certainly when the market or opportunity has passed us by. And keep in mind that the error bars from these decisions can compound over the product development process.

In addition, the marketplace is not static. Customer needs or preferences may change. New competitors may appear. Economic conditions may change. The market may not develop as expected. Thus the solution you provide may no longer address the market need the way you thought. Now step 7 wisely says you should revisit step 1 and step 2.

While this is going to help reduce some of the error in the solution, it will not eliminate it. Thus no matter how hard you try, there will always be a delta between what you offer and what the market needs. That delta could be small or it could be large, but it will always be there.

Remember McPizza? McDonald’s can be accused of a lot of things but not for rushing to market with this product. They did a lot of research and test marketing. They had a well defined target audience. They advertised and promoted heavily. It was hard not to know about their pizza.

Yet it failed miserably. Why? In short, people didn’t associate McDonald’s with pizza and they could get better pizza elsewhere. Now why didn’t any of the market research turn up this insight before McDonald’s invested untold millions on pizza ovens and marketing on the nationwide launch?

And this wasn’t the only failed product from McDonald’s. Remember McRib? Yum!!! And how about the Arch Deluxe? And McDonald’s isn’t the only such company with these kinds of failures.

Here’s a great recent article from the LA Times about Proctor and Gamble — the company where modern Brand Management was developed. While part of the article refers to a new book by P&G Chairman and CEO A.G. Lafley, there is a great line in the article that is relevant to this topic.

The book’s strongest message comes not from successes such as Olay, Febreze and Swiffer but from failures, such as Fit, a fruit and vegetable sterilizing wash launched in 2000 and sold three years later at a loss of $50 million. After all the changes, the company still has a success rate of 60% on innovations. But that “is as high as P&G wants to go. Any higher would be playing it too safe,” the authors say.

Even at P&G, they view a failure rate of 40% as acceptable. Later in the article:

He also insists on disciplined control of innovation that weeds out failures before they become painfully big. Each innovation team must, from the start, identify the issue that represents the biggest threat to its success and explain how to deal with it. … There will be plenty of failure to go round — and also, probably, innumerable new versions of Whitestrips.

So, what can be concluded from this? Bringing new successful products to market, even for large well established companies, take a real disciplined process. There is no guarantee for success with a disciplined approach. In fact innovation has to be measured and carefully managed. And for those products that make it to the market, but don’t succeed, there needs to be enough discipline in the company to know when to kill them or sell them off and focus efforts and resources on more lucrative or potentially rewarding ventures.

Saeed

P.S. There is a good article called “Why Startups Fail” that covers some of the things I’ve talked about here.