Product Management in the New Age of SSL – Re-Engaging the True Voice of the Customer for Fun and Profit

Posted: July 2, 2017 in General Commentary

Product development and management has evolved from the days of taking a shot on a hunch. In the days of fabricating products with minimal tooling, the risk of failure was low, and profit reward for success quite good. Who needed product management? Design it, build it, catalog it and get it to the reps and wait for the orders to roll in.

The lighting industry also has a long history of operating with lean management structures, particularly in small organizations. Ownership, Marketing, Engineering, Finance, Design, Engineering, and Sales all have a role in product development, planning and line maintenance. How well product management tasks are accomplished is highly variable – based on the blend of capabilities, awareness and interest within the “team”, how well they coordinate disparate activities, and the influence of internal departmental opinion and politics. The emergence of the internet, and its exposure of competitive product, coupled with the intrusion of low-cost imports, has transformed the marketplace. The introduction of solid-state technology and increasing costs of product development have further increased stress on every organization attempting to manage their destiny. The term “design by committee” comes to mind, and improves little when rephrased “product management by committee.”

At some point ad hoc product management-by-committee fails. Unfortunately, by the time this is realized, the product portfolio is composed of a mix of successes, obsolescence, near misses, total failures, pet projects of past managers, and profit robbing dogs. Frequently, companies with no long-term planning have wandered down numerous paths, leaving remnants of abandoned directions in the mix. The emergence of solid-state technology has created even more confusion and miss-direction. An example of this is the emergence of retrofit lamps, tape light, linear products, and medical lighting products showing up in product portfolios in contrast to prior offerings. The lack of product planning leaves the door open to chase rabbits down any number of dark holes.

Couple all of this with the ever-changing landscape of component availability, changes in regulatory demands, issues of certification and approval, and changing customer demands for verification of performance. Under these rapidly changing circumstances, the work involved in portfolio management snowballs. Too frequently, the focus on technology and internal turmoil shoves the voice of the customer aside.

The current market demands far greater investment in product development. Between tooling costs, compliance/ testing costs, and the cost of market release, there is a greater need to be plan-full than ever. The current state of a sluggish market, coupled with increased competition from low cost importers, and growth of large competitors, makes product development and management exponentially more complex. The convergence of all these factors is transforming the lighting market, rendering informal product management approaches as obsolete as filament lamps.

Manufacturers with highly diverse offerings often come to this realization later than manufacturers with tightly focused functional product lines. The reason is simple – large product portfolios create confusion that conceals individual product impact on performance for the company and its customers. Limited portfolios expose the performance of individual products more readily. However, as the number of customers increases and sales volume grows, even the simplest organizations find themselves adrift. Further, myopia and corporate hubris creates blind spots that competition is more than happy to exploit.

Another common mistake in product management is the open door approach, where an owner, sales executive, or design staff member is allowed free reign to bring products into the company for full consideration, with little or no rationalization beyond personal insight or opinion. This unrestricted approach creates confusion at every level of an organization, as their is no vision or target to be attained. Further, the more complex a product portfolio becomes, the harder it is to manage and define with customers.

The deployment of formalized product management provides direction that is impossible to realize without someone specifically focusing on the issues in hand. This is a function separate of the burden of attaining daily sales goals, pushing product out the door, or chasing accounts receivable.

Product Management is Not an Engineering Function

Since profit motives are at the forefront of management thinking, when it comes to reigning in product portfolios, it is natural to look at product management as an engineering function. The logic is that engineering understands the physical product and has the capacity to reduce production costs. Therefore, engineering already appears to provide a de facto form of product management. With this in mind, the intuitive approach is to split the product portfolio into bite sized pieces assigned to engineering team members. Done and dusted. This is extended to assign new product development to the engineering team member assigned similar products. I have seen this played out in dozens of organizations and can tell you first hand… it is the wrong approach to the right problem. Engineering is but a small portion of the work of product management, and not the most important component when the entire issue of portfolio management is considered fully.

It is a marketing fallacy that superior product is the secret to market success. This is even more the case when focus in placed on lowering the cost to make a product more profitable. There is far more involved in product management than making existing products easier and cheaper to make. With no market direction, engineering has little information on which to base decisions – so will inevitably invest a great deal of effort on the most problematic products. This ignores other options, such as discontinuance to make room for more viable new products, re-pricing to increase profitability, or re-positioning to eliminate difficult to manufacture features. These are not generally within the reach of engineering team members that have little or no interaction with customers.

The old days of the 80/20 rule, where it is assumed that 80% of sales come from 20% of a product line offering, is an obsolete and over-simplified view of product management. While it might appear intuitive that saving money on 20% of products making up 80% of the company’s sales will result in the greatest return on investment – this is rarely successful, nor is this ratio real. Every product portfolio will include a mix of high demand and low demand products. Many products are low volume from lack of marketing and sales attention, often due to a missing feature, or lack of meeting a critical performance metric. Further, there are many instances of engineering resources being invested in cost improvement to products near the end of life, resulting in wasted time and money. Sorting which products demand attention and which need to be redressed or removed, is the work of product management beyond engineering task assignment, based on information and consideration that is beyond engineering team functionality.

Product Management is Not a Sub-Set of Sales or Marketing

A highly significant indicator of an organizations need for a Product Management entity, is when Sales takes control of the company’s product portfolio. Sales, through their representing themselves as the connection to the customer, may appear to be in a perfect position to own the product portfolio and its planning. Anxious to give customers whatever they want, the organization is led through a continuous series of product “demands” based on day-to-day sales activities and observations that are not necessarily consistent with the company’s long-term best interests. It further fails to include disciplined product road-mapping that establishes a company trajectory for use of facilities, market positioning, capital planning, forward thinking, and trend identification – over reacting to the latest sales opportunities.

While it appears that Sales and Customer interests are synonymous, they are not. In B to B organizations, Sales is the work of presenting and delivering an organization’s product to the sales channel partners, with the specific goal of closing deals that bring capital into the organization. While this includes some level of anticipating customer demand, it is far more immediate and short-term. Further, sales organizations in Lighting often confuse sales channel partners (Reps, Distributors, Contractors, et al) as customers, which places the needs of surrogates between the organization and the actual customers. This is a common argument within the lighting market, as the case can easily be made that the ultimate customer advocates decision-making to others, so are essentially irrelevant. This is true for those involved in the work of sales management for B to B organizations. However, it is an inaccurate perception of the ultimate customer, the one who has commissioned and will pay for the project itself. Regardless of how product is delivered to them, their needs, desires, priorities, tastes, and interests remain the core of all decisions made by those they hire.

Other organizations assign Marketing as a form of Product Manager – in addition to their daily assigned task of managing marketing resources. This can work for smaller organizations, but falls short as organizations grow and expand their portfolios. For lighting organizations, Marketing is a concentration that focuses on communicating to customers, but rarely receives direct communications from them. Further, Marketing and Design managers have an assumed authority and compartmentalization, not to mention full task load for completing assigned project work, that interferes with proper product management work.

While there are exceptions to these, the assignment of the responsibility of portfolio management as a sub-set of another activity fails to recognize what product management actually is. This does not mean Sales and Marketing have no role in Product Management, as they do. They are a critical players in product management processes, so must be included and considered fully – just not assigned the responsibility for it overall.

The Discipline of Product Management as a Separate Functional Entity

Product Management is a discipline, not a composite lump of tasks to be assigned. Product Management includes participation of Ownership, Marketing, Engineering, Finance, Design, Engineering, Sales, and most critically – Customers.

The customer is the source of 100% of the company’s income. The product is the connection between the organization and the customer. Therefore, product management is a Voice of Customer responsibility. Finding the most efficient conduit connecting the company to its customers, by managing and continually adjusting the product portfolio is the definition of product management.

 Product Management Establishes Order from Chaos for Maximum Result

Product Management is best accomplished by a dedicated individual (or team) responsible for the entire portfolio. Generally, product managers are not assigned authority to effect change directly, or assign work independently of department leaders or executives. Product managers work on the principle of influencing through presentation of accurate, objective information, insight and customer input. To this end, the ideal Product Manager will be very familiar with the products and customers involved, with the ability to communicate with others in the organization. Organizations committed to product management will simultaneously create processes that support the needs of the Product Manager for accurate operational information, input from Sales and Marketing, interaction with Engineering, Finance, and Executive Team members. Further, inclusion of processes that utilize Product Manager input, guidance and recommendations, to achieve company goals is necessary.

The responsibilities of Product Managers includes:

  • Continually research the activities of the market, its customers, and product producers satisfying customer demands. This includes employing sales and marketing to collect information and insight, as much as it does a direct investigation with target customers.
  • Creates and maintains the company product road map with participation with all other levels of the organization.
  • Identify and document all regulatory, outside influences, approvals, testing standards, etc.. the company may be subjected to from customer activities.
  • Identify and define target customers to create a meaningful and clear focus for the organization as a whole, including characteristics to define what is not a customer of the company’s products.
  • Collect, interpret, and assimilate market data from external sources to create a realistic image of market activity and behavior.
  • Collect, interpret and assimilate competitive market activity directly related to the company, and surrounding organizations that define the company’s position in the market space, including portfolio content as well as market presence, image, price positioning, etc.
  • Observe and assimilate customer uses of the company’s product portfolio to create an image of how they perceive the products and company overall, and why.
  • Evaluate the company’s actual performance in extracting maximum value from the market, including assessing missed opportunities due to product shortcomings, pricing, or delivery methodology.
  • Evaluate existing product performance on all levels. This includes deliverable value to customers as well as profit extraction internally.
  • Identify products due for obsolescence, updating, or re-marketing, in order to enhance overall portfolio performance for the company and its customers.
  • Create, manage, maintain, and continually adjust the company’s product road-map, identifying un-met market demand, competitor intrusion, emerging trends, emerging technologies, and potential for extending customer reach.
  • Oversee company visibility and image with the customer and intermediaries, in order to guide marketing and sales to attain greater success from invested effort. Includes literature, PR releases, sales presentations, trade conference participation, web site presence, etc..
  • Collect customer feedback from product experiences and define improvements as necessary.
  • Evaluate products for fit to customer expectation, including adding or eliminating features to tune products to customer need.
  • Evaluate product pricing, sales volume, financial, and profit performance, impact on manufacturing, demands made on sales and marketing, capital resource commitments, and other factors impacting profitability. Recommend updates, revisions, or obsolescence to improve performance for the company and/or customer.
  • Weigh the needs of the company to turn a profit from product portfolio, with the needs of customers, company image, sales channel influences, competitive intrusion, supplier capabilities, internal organizational appetites and capabilities, with the intent of identifying products that are unnecessary to the company’s objectives, products missing that are hindering success, and products within the portfolio requiring further improvement.
  • Based on input from the Owner, Sales, Marketing, Engineering, market research, customer observation, competitive activity, technology evolution, identified market trends, identified un-met market demands, and company sales data, crate new product proposals and business cases for consideration.
  • Keep the entire management team up to date and unformed of all findings, with honest, complete, and objectively rational information for use in decision-making at all levels.

This sounds like a lot, and it is. Product management is an integrative function founded on cooperation and contribution of many levels within an organization to realize product profitability and product performance for the company’s customers.

By remaining an objective observer of customers and market activity, the Product Manager also serves as a voice of customer resource in developing marketing literature, web site content and appearance, trade show displays, training sessions, etc. Further, the Product Manager also becomes an expert on assigned products and the portfolio as a whole, so may serve as a point of reference when questions of suitability to a specific application is raised by customers. This two-way involvement also serves to provide the Product Manager insight into how customers are using products within the portfolio.

While the Product Manager will make recommendations for product additions, obsolescence, continuous improvement, redesign, re-engineering, re-sourcing, etc… the final decisions to take action, and what specific actions are taken, are made by those responsible for the departments and activities involved. Therefore, commitment to product management is more than hiring an individual with a title. Anyone holding the position of Product Manager can be made value-less, if the organization is not structured to utilize their input or respond to recommendations. Further, anyone holding the position of Product Manager must commit to remaining open, honest, objective, and thorough in their work, and earn the respect of the organization, since there is no assignment of direct authority to force any action to be taken, or request for participation to be filled.

To this end, Product Managers produce the following deliverables (to name just a few):

  • Objective information for the executive team to base decisions on.
  • Information to be used by Marketing in developing marketing materials.
  • Specifications and pricing targets to be met for the Engineering team to work from.
  • Complete value proposition information for Sales to build and deploy sales strategies.
  • Exposure of existing product profitability and customer service issues needing attention.
  • Exposure of market opportunities for consideration of Design, and Ownership.
  • Definition of a Product Road-map for evaluating and placing new product effort.
  • Characterization of customers for use in Marketing and Sales approach efforts.
Product Manager Positions

Product management may be a single individuals, or a layered structure of members within a team. How many are involved and to what they are assigned depends on portfolio complexity, size of the organization and appetite to realize the highest potential returns on effort. The demands on product line management is not proportional to sales volume as much as it is to line complexity. Many small organizations create complex product offerings from the “everything to everyone” approach that actually begs for a more robust product management organization to bring under control. Conversely, there are very large organizations who make their income from a limited product portfolio that do not require a deep product management team at all.

The following is a quick summary of common Product Management positions as a point of reference:

  • VP Product Management – oversight of any number of product management team members
  • Portfolio Manager – oversight of a portfolio, which may be a sub-set of a company’s whole offering – generally includes many different sub-sections (below), or of an entire company’s line offering
  • Sr. Product Manager – usually overseas a sub-category within a larger portfolio
  • Product Manager – usually assigned a specific product or product line, often under a Sr. Product Manager
  • Assistant Product Manager – works with one or more Product Managers to complete assigned tasks
Success is in the Offing – When the Right People are Found

The Voice of the Customer is critical in today’s market. This is particularly true when technology producers are aggressively marketing hot new products looking for customers. Sorting which of these attractive new shiny bobbles are actually suitable in meeting customer needs and expectations, and which are just over-hyped pipe-dream schemes, is very difficult. Customers frequently mirror a marketing pitch they’ve heard or seen on the web, without knowing whether it actually has any utility to them. Further, customers are frequently reluctant or find it impossible, to communicate a latent need that is under-served in the market. Customers are also notoriously bad at critiquing a company’s products directly, or providing a consistent level of feedback necessary to manage product portfolios. For these reasons, “Voice of Customer” goes well beyond asking customers what they want – it means digging into the market and finding our what they are demanding, and why – then formulating approaches to isolate opportunities for the company in meeting those needs. The best product launches deliver to customers products they recognize and value immediately  – even if it is completely new and they have never seen it before.

The least successful products are those that don’t add new value, or demand a long hard sales pitch to convince the customer you offer them something they need, but just don’t know yet. The even harder sell is to change a customer’s mind, or force a sale of a product when they don’t feel a need for change. It is the work of product management to avoid leading the company into these dead-end alleys. This includes helping owners and company executives in avoiding short circuiting their own company’s product road-maps.

In the end, Product Management is a complex undertaking. This is why so many organizations fail to consider it fully, or choose to avoid it. The trade-off in lost profit is freedom from rationalization of decision-making (read spending) and avoidance of subjective ideas, whims and opinion being dismissed by the presence of objective information. In other words, the presence of Product Management acts as an acid test that uses objective metrics and processes to keep company resources focused on agreed upon road-maps and planning.

The addition of Product Management is the path to building an objectively founded connection between the ultimate customer and the company that leads to optimization of customer satisfaction and profits from operations. In the Lighting market, facing the evolution of new technologies at a rapid and overwhelming pace, the need for product management is the differentiating factor in who ultimately succeeds, and who finds themselves struggling against more sophisticated competitors who are more organized and focused. Anyone can bloat a product portfolio with product, that’s easy. The results are generally modest in objective terms. The process of building a focused, highly successful product portfolio is far more difficult.

 

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