The Insanely Great Product Manager – Part 2: Create Value

In Part 1, we looked at the first step of the value journey, Understand Value. In part 2, we will look at the next step, Create Value, and the product manager’s role in this step. As we did in part 1, we will look at this in the context of one insanely great product manager, Steve Jobs, as well as some other examples.

Different organizations inside a company take the lead role in different steps of the value journey. In creating value, engineering and product development organizations do the heavy lifting, simply because they create the product. What role does the product manager play?

Certainly, product managers define requirements, work closely with engineering as the product is built, enroll early adopter customers, partner with engineering to create roadmaps, etc. While these are important, they are all tactical tasks and activities. Keeping a strategic outlook is a higher order bit responsibility of a product manager. There are three critical questions to understand even before the first line of code is written:

1) What are our core competencies?
2) What is our product strategy? and
3) What is happening in the technology landscape?

Let’s take a look at each one in detail.

What are our Core Competencies?

Core competencies have three key attributes:

1) Not easy for competitors to imitate
2) Leveraged for multiple products and markets, and
3) Directly contribute to the end user’s experience of value.

Out of the three attributes, the third one is most critical. It leads us directly to know what our core competencies truly are. The first two attributes are a follow-up litmus test. Since they directly relate to value, core competencies create sustainable differentiation from the competition in the eyes of the customer. It’s almost as if the customers have granted us permission to stake our claim to fame.

Let’s relate this to Apple. Recall that the two elements of perceived value were: 1) Easy to use, and 2) Works right out of the box.

If we ask what directly contributed to fulfilling these values, we might define Apple’s core competencies to be:

1) Simplicity and beauty in design, and
2) Hardware and software that work seamlessly together.

Let’s apply the litmus test. Both these core competencies have not been easy for competitors to imitate, and Apple has leveraged them both in multiple products starting with the Macintosh, and extending to the iMac, iPod, iPhone and iPad.

As customer perception of value evolves over time, so must the core competencies. We will cover this in more detail in the “Delivering Value” aspect of value management, however, it is worth a mention here. Customers perceive a value of “coolness” about Apple products. This is a subjective measure of value derived from mere ownership of the product, as against an objective measure derived from the utility function of the product. And in delivering this value, Apple has built a core competency around distribution and retail, with its hugely successful Apple stores that showcase and make it easy to purchase Apple products. But here we will focus on the two competencies associated with objective value.

Simplicity & Beauty in Design

Chapter 12 in Walter Isaacson’s biography of Jobs is chockfull of incidents in which Jobs digs his heels in the ground making the case for simplicity and beauty in product design, including the printed circuit boards that held the chips and other components inside the Macintosh, which no consumer would ever see. Here is an excerpt:

Jobs felt that design simplicity should be linked to making products easy to use. Those goals do not always go together. Sometimes a design can be so sleek and simple that a user finds it intimidating or unfriendly to navigate. “The main thing in our design is that we have to make things intuitively obvious”, Jobs told the crowd of design mavens.

Time and again, the engineers pushed back, with statements like “I don’t think we really need it…[and here’s why] it would be impossible to do”, or questioning why it mattered how the printed circuit board looked when all that was important was how well it worked.

I doubt there is a product manager out there who has not encountered statements like these from engineers. And these are valid statements by the way. Sometimes they are meant to push back to prod for a better context. How a product manager answers these questions sets up his or her relationship with engineers, and in turn, the product’s success.

Here is an interesting anecdote from Isaacson’s book (Chapter 11: The Reality Distortion Field):

One day Jobs came into the cubicle of Larry Kenyon, an engineer who was working on the Macintosh operating system, and complained that it was taking too long to boot up. Kenyon started to explain, but Jobs cut him off. “If it could save a person’s life, would you find a way to shave ten seconds off the boot time?” he asked. Kenyon allowed that he probably could. Jobs went to a whiteboard and showed that if there were five million people using the Mac, and it took ten seconds extra to turn it on every day, that added up to three hundred million or so hours per year that people would save, which was the equivalent of at least one hundred lifetimes saved per year. “Larry was suitably impressed, and a few weeks later he came back and it booted up twenty-eight seconds faster,” Atkinson recalled. “Steve had a way of motivating by looking at the bigger picture.”

From my experience, brilliant engineers have a great sense of the capabilities and constraints of technologies and how those enable or hinder value. However, a product manager that constantly brings the customer’s perspective of values and core competencies into focus and can justifiably defend them gains the respect of his or her engineering colleagues.

Hardware and Software that Work Seamlessly Together

Apple’s focus was on building the best computers, which meant that they had to completely control every aspect of the development of the product, including hardware. Jobs loved to cite a quote from Alan Kay:

People who are serious about software should build their own hardware.

Let’s leave aside for the time being the fact that Microsoft licensed Windows to multiple hardware manufacturers and was the decisive winner in the PC market. We will address that later. It does not alter the fact that the philosophy of hardware and software married seamlessly make Apple’s products work right out of the box much better than competitor products. In the heydays of the PC, Dell selling computers online, changed the customers’ perception of value. Computers became a commodity and buying an inexpensive computer became more important to customers than a computer that was easy to use and worked right out of the box. As Windows became a platform, more applications were available for it, and that became important for customers as well. So the segment of customers that valued what Apple distinctly provided paled in numbers by comparison, and in turn Apple’s core competencies were rendered ineffective.

But fast forward, and now, Microsoft coming out with Zune, XBOX, and now Surface is, in some sense, validation of the philosophy. Does this mean that Microsoft will be able to imitate and achieve the same perception of value that Apple enjoys in the eyes of the customer? We have to wait and watch. But Jobs took the notion of core competency to the organizational level when he reflected upon the following at the time of unveiling the iPad, implying that there was something core in the DNA of the company that was inimitable.

Technology alone is not enough. It’s technology married with the liberal arts, married with the humanities, that yields the results that makes our hearts sing. Nowhere is that more true than in these post-PC devices…that need to be even easier to use than a PC, that need to be even more intuitive than a PC; and where the software and the hardware and the applications need to intertwine in an even more seamless way than they do on a PC. We think we are on the right track with this. We think we have the right architecture not just in silicon but in the organization to build these kinds of products.

On the mobile front, even though Android is the market share leader in terms of devices it is deployed on, the fragmentation of the Android platform is a significant problem for both customers and app developers.

What is our Product Strategy?

Simply put, the goal of any product strategy is to drive exponential scale in the business. It is very much possible to have a product strategy based on selling more units of an individual product and introducing variations to drive volume. That was certainly true with the first translucent blue iMac introduced in 1998 and which was followed up with an assortment of candy colors. The iPod nano follows this strategy. However, there are two critical aspects to product strategy:

1) Product Platform, and
2) Product Portfolio.

Product Platform

A platform is a collection of common set of components, modules, processes, which can be reused in a number of compelling products which then become successful because of what they share. While a platform achieves cost reductions due to reuse, the biggest advantage comes from being able to leverage commonality across software, hardware and interfaces. A product platform materializes when the product capabilities themselves become an important and reusable component in the value journey for other products.

When Apple released the first iPhone in 2007, Steve proclaimed to thundering applause that iPhone ran Mac OS X. The only apps on it were what Apple had built. However, that was when Apple was able to leverage iTunes as a product platform to be used for the iPhone in addition to iPods. Apple gave the iPhone it’s own OS in iOS, leveraged from Mac OS X, and created SDKs for third party app developers to write apps for the iPhone. The AppStore was launched in 2008, and within a month, Apple had sole 60 million applications. The iTunes Store became the product platform for the AppStore and the iBooks Store.

Similarly on the hardware side, the laptop including the aluminium unibody enclosure can be treated as a product platform which has enabled products like the MacBook, MacBook Pro and the MacBook Air. The iPhone is a product platform for the iPhone and the iPod Touch.

Apple has been able to successfully create product platforms of its software, hardware and cloud services. One cannot say whether the product platform strategy of Apple was a deliberate strategy or one that was the natural result of Apple just building, in Steve’s words, “great products we know how to build“.

This NYT article, titled “The Power of the Platform at Apple”, is a good read of Apple’s product platform strategy. It also argues that the Barbie doll is a product platform, because it has enabled different versions of the doll, and enabled third party suppliers to create accessories, toys, etc. Amazon is another company that extended its ecommerce infrastructure from selling books to pretty much everything, even enabling third party retailers like Toys’RUs at one point.

Product Portfolio

One of the most important decisions a product manager helps to drive has to do with ensuring that the company’s resources are allocated to the highest and best use. In startups, this is not that much of an issue, because the entire company is typically focused on one or two products. This becomes more important when a company has a portfolio of products for different customer segments. There are a number of models for portfolio analysis, most notably, the Boston Consulting Group model, and the GE/McKinsey model. They provide a good framework for evaluating products across a normalized set of metrics.

When Steve came back to Apple, he sat through product reviews to understand what had been going on. Apple had been producing a dozen versions of the Macintosh, and not just computers but printers and peripherals as well.

After a few weeks Jobs finally had enough. “Stop!” he shouted at one big product strategy session. “This is crazy.” He grabbed a magic marker, padded to a whiteboard, and drew a horizontal and vertical line to make a four-squared chart. “Here’s what we need,” he continued. Atop the two columns he wrote “Consumer” and “Pro”; he labeled the two rows “Desktop” and “Portable.” Their job, he said, was to make four great products, one for each quadrant. “The room was in dumb silence,” Schiller recalled.

Take a look at Apple’s product portfolio in this great infographic:

History of Apple’s Product Portfolio

It is clear and simple in the early days, until about 1990. Then it bloats during the period that Steve is out of Apple. Interestingly, notice how it gets streamlined and simple again after 1998, after Steve returns. This clarity affords many benefits for engineering, marketing and sales.

The key challenge is how do you identify products to kill? Or as Steve put it across to the CEO of Nike, “Get rid of the crappy stuff“. So how do we go about identifying what is crappy? And how do we avoid doing things that might end up being crappy? This is not easy, of course. Some projects have vested management interests, some have dependencies in terms of sales commitments, or potential bookings, and some just have dependencies towards other products.

At the end of the day, we can use any quantitative model, and crunch numbers, but it is worth asking, does this product align with the customer perception of value and is it economical to keep for our core competencies?

What is Happening in the Technology Landscape?

Mark Zuckerberg stated recently that Facebook’s biggest mistake with mobile was betting on HTML5 rather than developing natively to the platform. It is critical for a product manager to really understand the technology behind the product and understand the shifts happening in the landscape. In this sense, the architect is the product manager’s best friend, in developing this understanding. Most job descriptions for a product manager will have some variation of the words “knowledgeable about technology and technology trends”. Why is this important?

The ability of a product to fulfill or constrain the value it delivers comes down to the availability, capability and readiness of technology. This is what is most important to understand. This not only helps to drive architecture and platform decisions, but it can also help to drive product and product strategy decisions.

Steve’s Thoughts on Flash is perhaps a great example of a business person demonstrating how Apple makes decisions on what technologies to include and exclude from a product. Watch from 3:30 to about 7:00.

[youtube http://www.youtube.com/watch?v=ZLEzEL35Iyc&t=3m30s]

As I am writing this, one thought does come to mind. Product management is one of the most challenging roles in an organization as it requires one to have a deep understanding of the market, customers, technology, business, etc., and product managers have to lead by influence up and down the organization, and not by authority.

Steve, while being very talented, also had the advantage of being an executive founder who had sufficient muscle to push things forward, and one doesn’t know if he was autocratic about it, but perhaps not (“People tell me I am wrong more often than you think….you have to let good people do that otherwise they leave”). In general for product management, though, it is very important to have a seat at the executive table where critical discussions about core competencies, value propositions and strategy take place. A product manager or a product management leader does not come up with this in vacuum, but has to along with a team, and having executive buy-in is very important.

In the next part, we will look at the third aspect in the value journey, “Capturing Value”.

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