What is a Product?

I recently read the book “Why we sleep” by Matthew Walker. It really scared me, and I decided that better sleep should be a priority in my life. Being an analytical guy, I first wondered how good my sleep is currently, and how I could monitor the quality and quantity of my sleep. After considering and trying several approaches, I eventually adopted the Oura ring and its associated app to address this challenge. In fact I’m wearing it right now.

The Oura ring is a product. More generally, products are solutions for doing a job, delivered by a producer to multiple customers.

Probably some of you are involved with producing physical goods like the Oura ring. The term product is sometimes used narrowly to refer to physical artifacts, but I will use the term to refer not just to tangible goods, but also to software, and to services.

Here are some more examples that fall within my definition of product, all related to health and wellness, just to bring a bit of focus to the examples. Each of these products contains a solution for doing a different job. In fact, as is common in practice, I’ll even sometimes refer to products as “solutions.”

The Strava app supports fitness by measuring and analyzing running, cycling, and other activities.

SoulCycle Studios provide fun and engaging exercise while delivering a community experience.

The pharmaceutical Zocor lowers blood cholesterol levels, thus reducing the risk of heart disease.

The patient medical record system EPIC captures health information for individuals in a way that is secure, durable, and accessible across providers.

The food product Flavanaturals provides a tasty chocolate beverage that delivers flavonoids shown to improve cognitive function.

The Hamilton Medical ventilator is used by hospitals to support breathing in patients suffering from acute respiratory illness.

Many if not most products combine some tangible goods with services or software. The Oura Ring is both an app and a physical device, and physical goods like exercise equipment and medical devices typically contain a huge amount of embedded software, and likely some ancillary services.

For completeness, let’s get some pesky technicalities out of the way. 

Frankly, I could use a burnt stick and a flat rock to record a time series of subjective judgments of my sleep quality. But, that would not be a product. Products are solutions created by producers and delivered to customers.

An artifact that will be created only once, say a war memorial, is probably not best considered a product in and of itself, but the service of designing and constructing monuments could be a product, because the supplier, say an architecture firm or a sculptor, will likely do it repeatedly.

In most settings, a producer delivers a solution to a consumer in a commercial transaction. Most of the time I’ll use the words customer or user to refer to the consumer, but sometimes there are multiple stakeholders and the definition of the consumer is a bit murky.

In the simple case, consumers are individuals who both purchase products and use those products. I decide what shampoo to buy and I use it. But in other cases one party makes the purchasing decision and someone else uses the product. A hotel chain may buy shampoo for its rooms, but the hotel guest uses it. And, in this case, the customer is a business not an individual, and the customer is not identical with the user.

I like the term “doing a job” to indicate what products do, but I’m going to use several words pretty much synonymously: Job to be done, problem, gap, pain point, and even the more clinical term demand, which you probably remember from an economics course. Demand is just jobs to be done that we as consumers can’t do, or don’t want to do for ourselves.

Dozens of other categorizations of products are possible — consumables, durables, consumer packaged goods, fast moving consumer goods, and an alphabet soup of associated acronyms – CPG, FMCG, B2B, B2C. All of these are just further specification of types of solutions used in different settings to do different jobs.

Finally, there’s a special kind of product, called a platform or a two-sided market, in which the job to be done is to bring together buyers and sellers. For example, the web-based product ZocDoc matches individuals with physicians for acute medical needs. In these settings, the platform provider has two very different types of customers, the two sides of the market, the buyers (in this case patients) and the sellers (in this case physicians). 

What is Product Management

Here is the LinkedIn profile of a former student, Effie Wang. Effie served as the head of product for the dating app, Bumble, and she’s been a product manager at Amazon, ZocDoc, and GrubHub. What exactly is product management and what do Effie and those like her actually do?

Put very simply, companies deliver solutions to customers who have a job to do. Product managers stand at the interface between the customer and the resources that create and deliver products.

Product management in the broadest sense is the planning, creation, and improvement of products. These functions exist in all companies that deliver products to customers, so product management must also exist, whether or not the functions are assigned to someone with the job title Product Manager.

Some descriptions of product managers that I like include:

• Creator or guardian of the product vision.
• Interpreter and protector of the customer experience.
• Guide for the technical resources to create or improve the product.
• Prioritizer of the feature and improvement road map.

My favorite less formal description of product management, coined by my former student and co-founder of Gridium, Adam Stein is, “making sure that not even one hour of an engineer’s time is wasted.”

The role of product management varies quite a bit over the lifecycle of a product. Let me explain. I like to think of the product lifecycle as having four phases: Sense, Solve, Scale, and Sustain – The Four S’s.

Sensing is recognizing an opportunity for a new product, usually the result of some kind of disequilibrium in the market or in the technological landscape.

Solving is creating a product to respond to the opportunity, and typically launching the first version.

Scaling is the improvement of the initial product to deliver an excellent solution tailored to the bulk of the market.

Sustaining is the refinement of the product over its life, advancing both cost and product performance. While the first two phases, sense and solve, typically play out over months or a year or two, and the scaling phase another few years, the sustaining phase can last decades.

I find it useful to think of three types of product managers: innovators, builders, and tuners, which we can map onto the product life cycle. Innovators recognize and develop new opportunities. Builders start with a target and lead developers to create a great product. Tuners optimize the success of the product over its lifecycle. The scaling phase is a less clearly demarcated zone, and product managers in this phase can be thought of as builders or tuners, or a hybrid of the two.

Sensing new product opportunities, the role of innovator, may be performed by someone with the job title of product manager, or by a chief product officer, but that role could also be played by a founder of a start-up, by a business unit manager, or by an advanced development, or strategic planning group.

During the solving and early scaling phases, a dedicated product manager almost always leads the development effort. This is sometimes called “zero to one” product management, creating a new product from a clean slate. In technology-intensive hardware companies, this role may not be called product manager, but rather “heavyweight project manager” or “development team leader” or “program manager” but the role is that of the builder product manager.

In the sustaining phase of the product life cycle, dedicated product managers are typically only found in highly dynamic product environments. Dynamic environments are those for which the product changes a lot, say at least quarterly.

For instance, the fitness app Strava has dedicated product managers, but the Irwin hammer does not.

My Strava app is now version 232.0.1 updated two days ago, and Strava releases a new version (230, 231, 232, etc.) every week. The Strava app is a highly dynamic product – it changes a lot. Why is that? There are two reasons. First, it’s a software product which exhibits a high degree of modularity, so features can be updated easily and even pushed to the user on a regular basis. Second, the app operates in a highly dynamic competitive environment, and in a domain in which the enabling technologies are changing rapidly. 

The Irwin hammer on the other hand has not been updated very recently at all. It’s pretty much the same as the Stanley hammer I worked on as a product designer in 1990 (Stanley and Irwin are brands owned by the same company), and really it’s not that different from this Craftsman hammer my father gave me when I was 15. It’s not that hammers never change. They do, and when they do, the function of product management must be performed. 

For example, If there’s an emerging trend for tools to be produced in bright fluorescent colors to make them easy to find, then a project will likely be kicked off to do a redesign of the hammer. But, that decision and the planning and coordination of the effort, will likely be the result of a cross-functional discussion among the business unit manager, the marketing manager, and the engineering manager. There is not a dedicated product manager for the hammer the way there is for the Strava app.

Some people define the job of product manager as the CEO of the product. Well, that’s not quite right. Rarely does the product manager or PM have responsibility for the profit and loss of the product — that falls to the business unit manager or CEO of the business. Furthermore, while the PM may be responsible for prioritizing features, he or she rarely has direct authority over technical resources, that’s usually the responsibility of an engineering manager.

In describing the role of the PM, it’s probably better to consider specific decisions. I’ll use the RACI (“RACY”) framework to do so. Most of you have probably seen the RACI framework, but to remind you, each stakeholder in a key decision can be thought of having one of four roles:

R is for RESPONSIBLE — The responsible person actually does the work supporting a decision and delivers the outcome. More than one person can be responsible.

A is for ACCOUNTABLE — Only one person can be accountable and that person owns the results. He or she approves decisions, signs off on actions, has veto power, and can make go/no-go decisions.

C is for CONSULTED — Some stakeholders are consulted. They provide information, perspectives, resources, and support as needed.

I is for INFORMED — Finally, some stakeholders are merely informed of decisions. They are kept up to date on progress and results, but not necessarily consulted prior to decisions being made.

Now let’s consider some key decisions and which roles key stakeholders assume. I’ll show typical roles for the product manager, product marketing manager, engineering manager, business manager, UI/UX designers, and Sales manager in the context of a digital product. There are of course many other decisions and several other stakeholders, but these are the most commonly associated with product management in information-technology companies. The roles are not identical for every organization, which is one reason you may benefit from discussing these roles explicitly within your own organization, and gaining a shared understanding of who does what.

I won’t drag you through every cell of the table, but if we focus on the first column, the role of the Product Manager, we see that the decisions for which the PM is responsible and accountable are the product vision, product concept, and product roadmap, but that in this context the PM is consulted on branding, go to market strategy, pricing, growth, and partnerships.

Can Product or Product Management be a Source of Sustained Competitive Advantage?

First, I need to be clear that not all things that are important can be sources of sustained competitive advantage, resources I call alpha assets. For example, an excellent sales process is very important for enterprise software companies. That doesn’t imply that an enterprise software company can rely on its sales process as a significant source of sustained competitive advantage. It’s more that if you fail to do sales well, you are unlikely to be successful in enterprise software. We could say the same thing about operational competence for a restaurant, or accurate and timely finance and accounting processes in a bank. None of these things are likely to be sources of sustained advantage, yet they all need to be done competently to ensure success. In the same way, good products and effective product management are critically important for all companies, even if not alpha assets for all companies.

But, product can be an alpha asset in some settings. These two settings are (a) zero-to-one new products and (b) domains with very strong intellectual property barriers.

Let’s consider the zero-to-one setting. Peter Thiel famously wrote in his book Zero to One “as a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.” I don’t fully agree with the statement, but I do agree that when there is some disequilibrium in technology or in the market, then an organization has an opportunity to move with speed and agility to take advantage of that disequilibrium and to create a product that is dramatically better than the pre-existing alternatives. At the dawn of the covid pandemic of 2020, the videoconferencing company Zoom was in the market with a product that just worked. It didn’t require registration. It didn’t require a download. It didn’t require any special gear. It just worked. Despite the fact that there were dozens of other solutions in the market at the time, including BlueJeans, Skype for Business, Google Hangouts, and WebEx, Zoom was able to seize the market and gain significant share. This was almost entirely because Zoom had a better product. Better product can be an alpha asset for a finite time period after some type of disequilibrium. This finite period of product superiority is a way of kick starting the other flywheels in an organization. But, the organization must use this precious window wisely in order to oversee the acceleration of the other flywheels for sustained advantage. Indeed, Zoom took advantage of its initial product superiority and prospered. But, predictably Microsoft was quick to follow with an enterprise product, Teams, that was at parity on many features and superior in others. Zoom remains a key player, but its product per se is no longer its primary alpha asset.

Now let’s consider intellectual property barriers. Some domains have very strong legal intellectual property barriers, which allow product itself to be an alpha asset. For example, during the same pandemic period, the companies BioNTech, Pfizer, and Moderna all created mRNA vaccines that enjoy almost impenetrable intellectual property protection. For these companies, the product itself is an alpha asset. It enhances performance and is almost impossible for a rival to acquire. 

Not all intellectual property needs to be protected by laws to be a barrier. For instance, the product of semiconductor company TSMC is a fabrication service it offers to designers of proprietary chips like NVIDIA. While TSMC has a lot of patents, its primary source of intellectual property barriers is the accumulated know-how and trade secrets embedded within its semiconductor fabrication process. Some people believe that what TSMC does is the hardest single task in the world. No one else comes close to being able to do it. In this case, the intellectual property associated with the product itself is an alpha asset.

In some settings, the product itself is only incidentally the alpha asset. In very dynamic markets – those for which some combination of enabling technologies, competitive actions, or customer behavior are changing very quickly – the organizational capability of product management can itself be an alpha asset. For example, consider the fitness app Strava. Strava does weekly product releases, which include incremental improvements and less frequently substantial product changes. Any particular version of the Strava app could likely be easily replicated by a team of developers and so the product per se is not much of an alpha asset. However, the system that Strava employs to engage its users, understand opportunities for improvement, and prioritize the changes in its product roadmap, benefits from data and experience with millions of users and a refined organizational process of product management. This organizational capability is an example of the fifth flywheel and a compelling alpha asset.

Notes

Ulrich, Eppinger, Wang. Product Design and Development. Chapter “Opportunity Identification.” 2020. McGraw-Hill.