Saturday, August 15, 2009

How Soon Do You Need a Product Manager?

I recently had lunch with a colleague who is leading a very early stage start up. His company is building a product targeting product managers, so our lunch was a fact finding mission for him. During the course of the lunch, he asked me how big does a company need to be before it needs a product manager.

This, in my opinion, is a fascinating question that is worth taking some time to answer. Companies succeed or fail based on how they answer this question; even a company with three people like my friend's. In fact, I think small companies are more at risk when they answer this question wrong. As such, let's focus on the small start up.

Early in a company's and product's life, development velocity is very high. It is both fast and easy to add new features. This velocity is one of a start up's greatest advantages in the marketplace. Over time, this velocity slows as development complexity and support burdens increase, reducing the start up's advantage. It is, therefore, critical to make the most of that early velocity.

Development at a start up is usually guided by two things: the founder's vision and feature creep. The founder has a notion of what the product will be and who the market is. Development usually proceeds based on those notions, using the velocity advantage to throw as many features as possible into the product. It often feels like we are throwing spaghetti at the wall, hoping more sticks than falls.

The danger with this approach is that every piece of spaghetti that falls on the floor has a cost, not just the cost of developing that feature, but also the opportunity cost of what wasn't developed and the future reduced velocity to develop features the customer will pay for. To maximize success, we need to minimize that loss, and that is what a product manager is there to do.

I can imagine the immediate response to this will be, "Isn't that the founder's job?" In an ideal world, I'd say yes; however, more often than not, they are not able to do it. Let's look at why that is:

  • Founders are busy being pulled in multiple directions by everything inside and outside the company. They rarely have time to do the legwork necessary to understand the specifics of the market. Instead, they paint with broad brushes. depending on velocity to make up for precision.

  • Founders are biased. The passion that draws them to found a company biases them to the idea the way they see it. This is good to get the company moving, but, again, it depends on velocity to succeed, which may not be enough if the original idea isn't close enough to the actual market need.

  • Founders may not have the knowledge to understand the market. Founders are often extremely talented individuals with strong knowledge of their subject area, whether it is technology, sales, marketing or some other aspect of the company. Building a successful product requires understanding the trade-offs and needs of each organization in the company, even if those organizations are just a hat a person puts on for a couple of hours a week. Start ups will frequently overcome this only by scrambling and learning on-the-job.

Coming back to the original question: How soon do you need a product manager? The answer is it is never too early. Small companies so often succeed by depending on their velocity advantage, an advantage that diminishes over time. How much better off would those companies be if they succeeded by understanding their customers and their market, and used that velocity advantage to generate a significant margin between them and their competitors.

"But, but, but, we are a start up. We can't possibly understand customers, market, and products until we release something. Then the market will tell us where we are wrong." I'll talk about that in my next post.