March 5th, 2003
Integrated Product Management
Speaker: Darlene Mann, CEO, Siperian

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Darlene Mann, CEO of Siperian, presented to a crowded room at the March 5th meeting of the SVPMA. Darlene spoke about Integrated Product Management and how product management links to the executive business plan. She enriched her presentation with many stories from her own experience that includes twelve years in sales and marketing and six years in venture capital.

The executive team sets corporate direction in a business plan that is then approved by the Board of Directors. Product management is key to delivering on this plan, but the product manager must understand the assumptions driving it. Otherwise the plan will not be achieved.

The board of directors cares about two questions:

• Is the company doing well today, which is defined by revenue, cost structure, and profitability?
• Will the company continue to do well in the future, which is guided by its ability to find new market opportunities to drive growth and retain a competitive advantage?

The first problem that attracts the board's attention is when the company misses its revenue or profit target. This indicates an execution problem. This can occur when the revenue model cannot support the necessary cost structure. For example, the customer acquisition cost is too high, the cost to service the customer is greater than expected, operating or cost of goods sold increases substantially, or there is poor expense control. The last of which is inexcusable.

A second cause of missing a revenue or profit figure is a product misalignment with the problem or the market achieving saturation. This may be the result of the market being too small, the product not adequately solving the problem due to poor execution or poor vision, or competitive price pressures undermining the value being delivered.

A third cause is that a market disruption creates a strategic issue for the company. This may be the result of a new technology or an industry consolidation. The consolidation might occur in the sales channel or a company with a broad product portfolio, such as SAP, offers a similar product to ones own best of breed solution. Boards do not generally recognize strategic issues, and it is management's responsibility to inform them.

When any of the above occurs, Product Management needs to take action. It should immediately inspect the channel, reviewing goals for direct and indirect sales, and also the contribution of each channel. Then re-examine the market opportunity, perform a feature, function, and fit analysis and evaluate the cost structure for delivering the product. Product Management should analyze customer adoption trends and determine if the company is being outsold, such as Oracle did to Sybase, if the competition actually has a better product, or if the company is being undercut. In the case of price pressure, does the competing company have a true cost advantage, maybe due to offshore development, is the company buying share, or is there a lousy competitor implementing an impractical pricing strategy? If the market has been disrupted, is there a newer, cheaper, better, and faster technology or substitute? Did the industry structure change? Or are you just too early? In particular, what is the life cycle of the product you are replacing, what is the cost of switching, and does the user recognize their pain? Darlene commented that is "bad to be late, but really painful to be early."

Because the job of Product Management is one of managing complexity, it is often difficult to address the board. Darlene offers a few recommendations. Frame all issues in terms of financial impact, quantifying issues whenever possible. Explain what you know and how you know it (i.e. sources of that information). Using language such as "I know" or :I can tell you" is preferable to "I feel" or "I think". Keep the discussion at a high level and relevant to big issues. Lastly, focus on place, process, and progress. Thus, where did you start, where to want to go, and how are you going to get there.

In summary, everything for Board of Directors nets to financial performance and decisions must be tied back to these metrics. In tough times, understanding the expected business model is essential for financial success. If your product line does not conform to the model, work to understand why and how to fix it.