(DETROIT) Today at the North American International Auto Show, Audi announced immediate availability of the PRUGO5. The PRUGO5 beats the comparably equipped BMW M5 in 0-60 and quarter mile performance, improves on the industry-leading fuel economy of the Toyota Prius, and comes fully loaded for about half the price of an old Yugo. The car won't work for everyone - towing capacity is limited and it only seats 5 adults comfortably - but nearly all customers polled are excited about the feature set. Audi expects to sell 6M units in the first year, breaking every previous sales record, and quintupling their market share. ...
The PRUGO5 would be highly differentiated in the marketplace. It's tough to imagine a salesperson struggling to sell it to anyone. It's also equally tough to build, and even tougher to build cheaply enough that it sells for a profit. Unfortunately, many product specs, guided by salespeople who want to make their jobs easier and their commissions larger, end up looking a lot like the PRUGO5. Rather than make tough decisions, product management just asks for the product to do everything. This leads quickly to a major breakdown between product and engineering, with product (and sales) blaming engineering for being unable to build stuff and engineering blaming product (and sales) for pie-in-the-sky requirements.
Product management is the central nervous system of a (product-driven) company. Product managers need to understand not just the market requirements but also the tradeoffs in those requirements, the willingness to pay of customers in each segment, and the complexities inherent in building solutions for each segment. Getting those answers is tough - even impossible in many cases of brand new products where there is no market data - and even when answered, salespeople will constantly push for feature creep anyway. But the difficulty of getting those answers is also why product management can be so rewarding and can have so much influence over the direction of the company.
There are plenty of tools to understand market tradeoffs and willingness to pay across segments - conjoint analysis, regressions, observations of changed usage across small variations of the product, etc. Even trial and error work fine - start with a hypothesis, figure out a fast way to test it (e.g. put screenshots and sample prices in front of customers), and then keep going.
In finding these tradeoffs, I've seen product management struggle in two major ways: (1) Asking customers "do you want this?", and (2) Asking customers "what do you want"? The problem with (1) is that there's no cost for the customer to say yes - who doesn't want the PRUGO5? Much better to ask a bunch of "would you prefer (a) or (b)?" questions (a conjoint) with lots of followup about how they'd use each potential product. The problem with (2) is that it allows the customer to stay bounded by their current experience - so you can make gradual, incremental product improvements but can't ever have a discontinuous innovation. If you can suggest something discontinuous, maybe even show how the customer would interact with it, and then ask followup questions, the data you get back on new products is much more useful.
Understanding the market requirement tradeoffs is just the first step for product people - reducing all of that to a profitable line of business, also a responsibility of a good product manager, involves several more steps (and more blog posts). Without having the tradeoffs understood, though, the rest of product management is mostly irrelevant.
(Thanks to Shawn Gradek, one of the nicest guys and best salespeople I know, for the name of the car.)
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