Dear CEO, Innovation Starts with a Good Product Manager
I’ve worked for more than a decade in product management with Fortune 500 companies and startups, and I realize I’m seeing a scary pattern. Product managers are only hired after the innovation or startup teams get concepts or funding approved. This means that product managers are thrust into developing a product or service concept they had no part in creating.
Why is this a problem?
First, we should break down the role of the product manager since this job title has different meanings across different industries and companies.
A product manager is the leader and glue for the development team, from concept to launch. Depending on the cross-functional team available (think engineer, designer, marketing, and so on), the product manager must translate, influence and prioritize each team member’s mission to achieve one common goal. This is important because all specialists tend to put their own interests into the product and this can negatively affect either the timing, quality, cost, or market need. The product manager keeps the team on task while advocating the equal importance of all team members.
You would think that someone holding this position would be leading innovation teams or startups, but the problem lies in companies justifying the investment for the role. I’ve lost count of how many times I’ve heard C-suite leaders say: “I would hire an engineer or designer 100% before hiring a product manager. They can at least deliver something tangible while the product manager role can be filled in later.”
I believe this is short-term thinking and I think it’s time to challenge CEOs and leaders to think differently. How many companies have failed because they never validated a market need for their product? According to CB Insights, this is 42% of startups. While the statistics for Fortune 500 companies are less public, consultant and author Tendayi Viki hits the nail on the head when he says that coming up with a great idea is easy, the hard part is building the development process, business model, value proposition, and execution. All aspects of development that product managers are held responsible for delivering.
When quantifying the ROI for innovation, tech entrepreneur Tomer Dean explains that only 5% of startups return more than three times their investment and a whopping 85% consistently miss their projections set by VC firms. However, these VC firms can still make money because “they can rely on fees to pay themselves even when their investments are mediocre”. In larger companies, PA Consulting found innovation failures cost companies about £65 billion each year in the UK alone.
Speed to Market
If the financial costs were not jarring enough, the speed to market for innovation or startups is worse. Shareholders care about time to market. OakStone Partners research found “…that a product delay can cost a company upwards of 15-35% of the Net Present Value.” With numbers like these, customers lose interest and share prices drop. In addition, the Center for New Product Development found the main reasons companies fail to launch products on time are due to:
Poor management of the development process
Frequent design changes
Lack of coordination among different functional areas
Shortage of resources
All of these failure reasons can be mitigated by including a product manager upfront.
If we take a step back to understand the numbers, it’s funny to hear C-suite leaders say – even though they may be losing billions – they cannot justify investing in product managers who have an average salary of about $100,000 each year.
As product leaders, we should challenge CEOs to build better products, upfront. How? Invest in an expert product manager early in the development process.