Some time ago I got a nice invitation to write as a guest for SharePLM, on any topic I felt was important. Delighted with the opportunity, I chose an area close to my heart— Product Management. It’s a broad and deep area, with an overwhelming amount of information and research available.
Even the word “product” is so multifaceted: commercial, industrial, plant, equipment, service, software, immaterial, platform, beverage, apparel, insurance, extended, etc. You can find a lot of discussion about the “technical” side of product management—PLM systems and integrations, model based systems engineering, digital twins, Industrial Internet of Things, to name a few.
So how on earth could I claim writing an ABC about this topic? Well, I have always liked challenges, and at the same want to spice up the discussion a bit and select a slightly different angle to start writing from!
One of my favorite movies is Glengarry Glen Ross written by David Mamet. It is one of those must-see movies for people aspiring to learn how to (or how not to) sell. Set in the real estate business, it has an intense atmosphere, great dialogue (warning: profanity also…), and an awesome cast. It also has a pivotal scene where a new sales “coach” has been sent to boost the performance of a local team. This aggressive and to-the-point person delivers a memorable punch line for the sales guys: A B C — Always Be Closing.
Sure, the business and sales practices depicted in Glengarry Glen Ross are harsh and a bit outdated. But still today, for any commercial enterprise, the reality is the same: you’ll either be closing the deal or hitting the bricks. Today’s customers don’t necessarily have to put their signature on the dotted line to close the deal, but they still need to be convinced of the value of the product for them.
In Glengarry Glen Ross the sales guys were presenting the product (the properties) to customers with interesting tactics and twisted facts. Today, the customer has an amazing amount of information available, and it is also important to provide it. Recent research suggests that customers are over halfway through the decision-making process before contacting the company for the first time about the product! This makes sales and product management more challenging than ever, and at the same time, more exciting than ever!
So I decided to start writing my Product Management ABC from the commercial angle first. Let’s put R&D and technical product management aside for a while and consider the situation where we already have a market, a product and a product manager. If I would describe the job and responsibility of the product manager in one sentence, it would be:
“ABC – Always Be Competitive”
Competitiveness is about providing superior value to customers, winning deals over competition, AND sustaining higher profitability. It’s easy to win deals by dropping product prices, but without doing the same for the product cost, it will lead your company to perish. Establishing and sustaining competitive advantage requires much more — you can dive into the concept for example in the 1985 book by Michael E. Porter.
Diving one level deeper into competitiveness and profitability, we reach Customer Value, Price and Cost. Those three things are by far the most important things to decide about your product. What customer problem you intend to solve, at what price do you plan to sell it, and at which cost must you produce it.
Customer and segment planning are more areas where there are numerous books written, courses and consultation available. So let’s look at a few key questions your product should answer. Number one in my mind is: What customer problems are there, and which should my product be solving?
Starting from the customer problem, empathizing, asking questions, working towards solutions and possible technologies: that’s Design Thinking, a good method if you are developing products. But here we have an existing product for which we are defining customer-related boundaries. Customer needs and requirements are the next-level questions, which bounce nicely to the topic of compliance, which I will address in another article.
Everything is worth what its purchaser will pay for it.”
Publilius Syrus, first century B.C.
No matter what your business is, your product must have a compelling value proposition spelled out in monetary terms. Especially in B2B markets, there is more than one person making the decision, hence the value proposition should be adapted to each decision maker so that it resonates with their interest profile. Crafting a value proposition is a fine art, and something that the product manager must do in collaboration with Sales, Marketing, Engineering, Manufacturing, Customer Services and so on. For industrial products, great resources are articles and books by Jim Anderson and Jim Narus. And I cannot resist mentioning that you should not only think about your physical product or equipment, but think about the customer problem you are trying to solve with your solution. What are the services that I should offer to make my customer’s life easy? Fantastic readings about resonating value propositions, moving from physical products to hybrid offerings with services, are publishings by Dr Wolfgang Ulaga.
Once you have crystallized which customers, problems and needs the product addresses, and what value the product should provide, the natural next question is: How much is the customer willing to pay for the product? Pricing is the fastest way to influence your product margins and company profitability—positively and negatively, unfortunately. Again an area of research and consultation of its own, exemplified for example by Simon-Kucher & Partners.
Then there are product margin and cost. How much margin does your product need to make? Or how much margin is left after you subtract the cost from the price the customer is willing to pay? The way you ask the question sets up two different paths.
First is the path where you do product (portfolio) planning from the profitability targets, setting target prices and designing TO cost. The second is the path where you first design and manufacture a product to find out how much it costs, and then slap on the margin, and hope that the customers still buy it (cost plus). And over time, customers expect to see a reduction in the price as the product matures. Constant, relentless seeking for cost reduction is one of the key responsibilities of the product manager, and so is understanding and managing the Product Lifecycle and Product Portfolio I mentioned earlier in brackets.
Essentially, you must manage product variants and product portfolios in a way that makes business somehow predictable. Your company will have products that are nearing their end of life, facing lower margins and revenues, and therefore will need new product introductions, allowing juicier prices and margins.
Products in declining lifecycle stages may affect your profitability also from the service point of view. How long will you offer support and spare parts for your end-of-life products? Ending support too soon will affect customer loyalty, but stretching it too long will draw valuable resources for only low returns. Some industrial products have a really long use-life after they have been sold and installed—up to 50 years or even more!
If you have a smart modular structure and even better, some capability to influence product features and performance via software, you have an additional possibility to extend your product’s commercial life. Offering upgrades and modernization is a good way to improve your customers’ productivity and a way to extend product earnings. In order to be efficient in this business, you need to manage and well document all product revisions and variants sold over time.
Sami has over 20 years of experience in global mining and metals business, and has held various positions from Engineering, Product Development to Sales and Product Management. Currently he is in charge of Operations and Process Development, with the responsibility of ensuring all operations and business processes deliver targeted performance corporate-wide. Additionally he is the owner of the R&D and PLM process with related concepts and systems.