Companies across industries increasingly view software not just as an enabler of business but also a source of distinction. As they increase their investments in software development, the need for ever-stronger product management capabilities grows. And yet our research shows that roughly three-quarters of companies’ product management functions are not yet where they need to be to unlock the full value of their software investments. We surveyed more than 5,000 product managers from around the world who work on both internal and external software products in a range of industries, and some 75 percent responded that product management best practices aren’t being adopted at their companies, that product management is a nascent function within their organization, or that it doesn’t exist at all (exhibit).
This is quite notable, given that product management capabilities are among the top two drivers of business performance for organizations across industries, according to our previous research on how software excellence fuels business performance, measured as “developer velocity.” Improving developer velocity involves empowering developers and creating the right environment for them to innovate, which depends on product managers who are customer and outcome oriented.
The broader business implications of having a strong product management function, across tech and nontech companies alike, make clear how important building up best-in-class product management capabilities really is—regardless of whether software is core to one’s business or considered just an enabler.
Best practices of top-performing product managers
We set out to understand the best practices of top-performing product management organizations, how top product managers operate day to day, and how they help companies grow. Based on our extensive research, work with more than 50 product management organizations, and conversations with world-class product experts, we have identified seven key practices that can help organizations elevate their product management capabilities to maximize their software investment.
Test a feature’s full value proposition before writing a single line of code
Developing hypotheses about customer behavior and then fully testing their validity is a critical precursor to feature development. Testing is core to iterative development practices, as it enables product managers to iteratively refine product and feature ideas without requiring additional development resources. Testing can take many forms, such as customer interviews, targeted emails, low-fidelity mock-ups, or even no-code prototypes, but the key is to validate the hypothesis before committing significant resources to development. Product managers with deep domain knowledge can fall into the trap of assuming the value of a product or feature and may skip the critical testing step.
For example, when the food-delivery service Caviar looked to increase orders from repeat users who tended to order the same things every time, the company hypothesized that smoothing the path to reordering would encourage users to order more overall. Caviar could have just built that feature, but as Gokul Rajaram, who led the product team at the time, explained, the company didn’t want to commit resources to doing so until they knew whether such a new feature would contribute to growth. To test the hypothesis, Rajaram said, Caviar sent regular emails to repeat users showing them their past purchases with links to order the items again. Users not only were more likely to click on these emails than any others Caviar sent them but also clicked through to reorder, ordered more often, and placed larger orders than in the past. With their investment justified, Caviar went ahead and developed a one-click reorder feature.
Don’t ask customers what they want—observe what they need
Identifying true customer patterns and behavior can be done only by observing customers in their “natural habitat.” Although interviews can be a good source of insight, top product managers don’t rely on just customer perception and self-reporting. Product telemetry, like time spent by the user on a certain page, can be a key source for understanding how customers interact with a product. Failing to observe customers’ actual behavior can lead product managers to pursue incorrect hypotheses and ultimately build products that don’t truly solve customers’ problems.
Kurt Walecki, senior vice president for design at Intuit, said the company relies on a “follow me home” program to observe users in this manner. The practice was started decades ago by Intuit cofounder Scott Cook, who would go to retail stores where the company’s Quicken personal-finance software was sold and ask customers if he could follow them home to observe their experience installing and starting to use his company’s product. As a result, he drew a better understanding of customers’ behaviors and experiences with the product. Walecki said visiting customers is worth ten times the effort it takes, because it yields insights that might never be discovered otherwise.
Don’t stop at product–market fit to ensure success
Understanding the business case is as important for product managers as identifying product–market fit: top product managers invest time in developing their product’s business model and understanding competition in the market. Although product–market fit is critical to early adoption and growth, a comprehensive understanding of the business, such as market dynamics, the product’s business model, and potential partners and competition, is as important in ensuring the long-term success of a product.
Although product–market fit is critical to early adoption and growth, a comprehensive understanding of the business is as important in ensuring the long-term success of a product.
Bloomreach, an e-commerce personalization company that was an early mover in the search engine optimization (SEO) business, learned the value of this practice the hard way. Cofounded in 2009 by Raj De Datta, who is still CEO today, Bloomreach used in-depth customer research to establish clear product–market fit for one of its first predictive SEO software offerings. Initially, it enjoyed success catering to businesses eager to create SEO-friendly content more easily. However, De Datta said, Bloomreach had not considered the significant platform risk of the product, given its dependence on other companies’ search engines and algorithms. If a search engine changed its methods, Bloomreach’s product could be left flat-footed. Bloomreach learned a valuable lesson that initial product–market fit alone is not enough to ensure sustained, long-term success and went on to find success with other products. A singular focus on product–market fit is flawed, De Datta said, because the business itself and its structural underpinnings also matter significantly in the long term as well.
Focus on holistic impact, not just product adoption
Balancing value created for both internal and external stakeholders (end users and functional partners, for example) is critical to creating great products. Top product managers, especially at nontech companies, go beyond adoption metrics, such as daily active users, and collaborate with stakeholders across a product’s value chain to develop a more comprehensive definition of success. Defining holistic impact is a decision unique to each organization, but ensuring a balance between all affected stakeholders across the value chain—for example, consumers who view content, creators who make content, and engineers who leverage available content through APIs—is critical to creating great products.
At The New York Times Company, for example, journalists are embedded in product management teams to help build the various formats available for publishing digital news, which extend well beyond the constraints of a traditional article web page. The teams work together even in real time on breaking stories to choose the right combination of digital modules to use—video, text feeds, and graphics, for example—that best conveys a particular story, said Alex Hardiman, the Times’s chief product officer. By working together to continually refine display formats, the Times is able to consider the impact not just for readers but also for reporters seeking to report quickly in whatever format the story requires, as well as for editors looking to package the elements cohesively while maintaining editorial standards. Ultimately, Hardiman explained, this approach allows the publisher to give readers greater reason to return to the company’s website and app more often, deepening the value it gets and further bolstering the company’s direct-subscription business model. To make it work, she said, the Times’s product managers have to be flexible and need to understand what’s editorially important to encourage real engagement.
Shorten time to value for customers to less than an hour
Making core use cases simple and focusing on quick time to value for the customer is critical to enabling growth. Top product managers have the technical acumen and deep enough understanding of their product’s technology stack to design easy and simple onboarding processes for critical customer use cases. Creating these short onboarding processes allows customers to quickly realize the value of
the product, which propels organic adoption and use. Failing to make core use cases simple can hinder organic adoption and require more investment in sales and marketing.
The business communications platform Twilio aims to make its onboarding and integration process ultrasimple, targeting time to value for the user to just a few minutes. Twilio’s chief product officer, Eyal Manor, said one of the tests the company used to measure ease of onboarding was to see how long it would take his 13-year-old daughter to onboard onto Twilio’s API platform. The company knew it had perfected the process when it took her only a few minutes. This approach is central to Twilio’s strategy of having products themselves spur adoption; some of its most successful products don’t even require dedicated sales resources. Manor acknowledged that achieving ultrasimple onboarding to a complex platform can be very difficult but said ease of use almost always wins, to the point that he keeps an eye on adoption metrics at all times.
Look beyond the expected to identify unintended outcomes
Identifying unforeseen product outcomes is as important as validating intended behaviors for creating value. Top product managers proactively look for unexpected outcomes or feedback of the products they develop to better understand how they can meet their customers’ needs. These unintended outcomes can extend beyond the tenets of responsible product management—privacy, sustainability, and inclusion, for example—to include operational or business impacts, such as physical-operations bottlenecks. All of these potential unintended outcomes can be opportunities as well as challenges, so failing to consider them can leave value on the table, limiting realization of a product’s full potential.
Wepow, the cloud-based HR recruitment technology platform provider, was concerned that its asynchronously recorded videos of job candidates answering interview questions might disadvantage job seekers facing unconscious or other bias, the company’s cofounder and former CEO, Imo Udom, explained. The company prioritized this concern when it achieved a level of scale and revisited the product it had initially gone to market with. But when the company spoke with customers—recruiters and hiring managers—it was surprised to find that the videos could actually serve as a tool to counter the bias Udom’s team was concerned about. Further, the team learned that the videos also provided a source of value to recruiters that Wepow hadn’t foreseen: both benefits hinged on the videos giving recruiters a tool to move their conversations with hiring managers past each party’s impressions of separately conducted interviews—now they could refer to the common assessment the videos offered to discuss a candidate’s strengths and weaknesses. This helped recruiters see hiring managers’ needs and preferences more clearly; for instance, they could better understand why a hiring manager might seem uninterested in a candidate who appeared strong to a recruiter. By identifying unintended outcomes early, Wepow was able to address this newfound source of value and adjust future product strategy accordingly, including by adding an auto-share feature that sends a recording directly to hiring committees.
In another example, a large North American airline implemented a new cargo revenue management application to maximize its bookings and pricing in light of last-minute customer no-shows, variable passenger loading on each route, and overall economic volatility. The AI-based model drove
a ten-percentage-point increase in cargo utilization across all 1,200 routes—a game changer. However, poor palletization procedures at key airport hubs prevented the new revenue management application from yielding the anticipated benefits. In essence, the bottleneck had moved downstream, a classic pattern
when optimizing end-to-end processes. Great product managers anticipate these problems by ensuring that potential bottlenecks upstream and downstream of their digital product are well understood and managed.
Create ten times the value for customers than what is derived from them
Product managers have the onus and responsibility to lead the conduct of their product organization. They adopt responsible product management approaches to ensure that they are taking only what they need to provide value for the customer (limiting collection of customers’ personal information, for example). Consistently reassessing how information collected from customers is used to create value for them is critical to being a top product manager.
Mozilla uses responsible product management principles, along with the organization’s unique guiding mission as a subsidiary of the not-for-profit Mozilla Foundation, to make key product decisions, said Udom, who is now Mozilla’s senior vice president for innovation. Mozilla’s mission prioritizes privacy for its free Firefox web browser (and other products), limiting the amount of information it collects from customers and forgoing the extent of personalization features available in competing offerings. However, when the company determines that a personalization feature truly brings value to customers, it identifies the minimum data required and explains to users exactly how their data will be collected and used to bring value. This ultimately helps Mozilla stay true to its core mission and attract users, Udom said. Having a set of guiding principles makes it easier to maintain transparency about the sources of monetization, he explained, by raising critical questions such as: Are we being honest about the data we’re collecting? What is the value to the customer? Are we being generative or extractive?
Getting started: Redefining the product management aspiration
While individual product managers can weave these practices into their day-to-day work, to unlock
the function’s full potential, product leaders need to ensure that these mindset shifts are part of the fabric of the organization, enabling a product management function that is more oriented to customers and outcomes.
By assessing product management capabilities across five key dimensions, as well as a set of important enablers, individuals and organizations can establish a baseline for the current state of
their product management function and identify areas of opportunity (see sidebar, “Product management capability framework”).
For product leaders, establishing a baseline of product management capabilities is typically followed by two parallel paths: strengthening key enablers and investing in a broad capability-building program for current talent. For the latter, an immersive training program, where product managers can simulate a real-world customer problem and take a product from idea to execution while receiving regular coaching, can deliver dramatic improvement in product management outcomes.
As the pace of technology development increases and software continues to play an increasing role in every facet of life, developing a best-in-class product management function becomes ever more important. Strengthening product management capabilities allows companies to unlock the full potential of their software development talent, fully maximize the return on their software investment, and ultimately elevate their business outcomes.