Understand How A Business Works and Makes Money
Ryan Frederick | November 30th, 2023 | Dublin, OH
I hosted an event recently where a panel of experienced product management professionals discussed the state of product management. One of the topics that surfaced as part of the discussion is that the best product managers are business managers.
Product managers can only be great by understanding how a business works and makes money.
A significant part of a product manager’s job is translating business economics into the product and the associated unit economics. Still, many product managers don’t do this and get wrapped up in the mechanics of product production.
The mechanics of product management can feel like a vortex of time and energy without the business understanding and context. For many product managers who don’t appreciate the business aspects and who have gotten into product management through product production, the time and effort of understanding and working toward the business ends can feel like another layer of complexity and responsibility.
The product production work is at least familiar and brings comfort to product managers because they know what to do. The business economics and finance piece is unfamiliar to many product managers, therefore causing discomfort and then getting deprioritized or ignored altogether.
The best product leaders and product organizations align their product work and teams with the economic understanding and levers of the company. Product leaders who let product managers, or worse, let product managers operate disconnected from the business are setting the wrong tone and encouraging product managers to be less effectual.
Product leadership’s primary role should be to connect product management to the business and vice versa.
Product management has become too associated with the mechanics of building and evolving products.
Roadmaps, sprints, points, and demos all matter, of course, but what matters more is whether the product work is pointed to the correct end, which is to drive the actions and outcomes that produce the needed monetary outcomes of the business. A product and product manager disconnected from the underlying financial levers of how a company makes money isn’t a successful product or product manager.
I would like to see more product managers getting into the profession through the business side and with a business mindset rather than through a production role like project management, design, engineering, etc.
The tools, tactics, and techniques of product production and delivery can be learned and should always take a backseat to the business drivers and outcomes.
Understand the financial levers of the business and how a product impacts the levers.
In being business managers, first, product managers should spend as much as they can and need to understand the financial levers of the business and how a product impacts the levers. For some product managers, this might mean spending time with the finance team and in finance meetings.
The title and role of a business manager or unit-level business lead used to be more common than it seems to be now, and this shift has negatively impacted companies and products. Business managers typically have P&L (profit and loss) responsibility, meaning they know what moves the needle financially for their operation and where challenges and opportunities exist. These insights give business managers the knowledge and confidence to invest and improve products, systems, processes, and more.
The focus of product managers should not be the mechanics of product work. The focus should always be on the business drivers and metrics facilitating the work.
If the role’s primary contribution was managing product work, project management could handle these aspects and we wouldn’t need the product discipline. Product management is the hub that connects customers, the business, and the product. Sadly, business acumen and understanding are too often missing in our current state of product management.
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Special thanks to Tremis Skeete, Executive Editor at Product Coalition for the valuable input which contributed to the editing of this article.