Have we Entered the Post-Product Management Economy?
BySeth Godin recently made a post about Why Be Good? Godin states that the worst thing for a Marketer is to be given a “good” product to market. He’d much rather have a “bad” product. Godin is a marketer, not a product manager, so his view doesn’t surprise me at all. Ethan at On Product Management reacts strongly to Godin’s thoughts and turns Godin’s examples around, stating that the opposite is actually true – it’s better to have the best product, because that is what customers will buy.
This is a great interaction because it illustrates the rift between marketing and product management. First, I suspect that Godin isn’t really saying that for any given company it is better to have an inferior product. He’s saying that for a marketer it is better. I’ll go a step further – for a great marketer (which Godin is) it is better. The first question I always get from Marketing is “what are this product’s differentiating features?” Lazy marketers love to have the leading product in a market because they just need to maintain the status quo. A great marketer likes the challenge of winning with a product that doesn’t necessarily win on all of the features. It was a painful lesson the first time I learned that it is not enough to have the best product on the market, you must also have great marketing to let people know about it and get people excited about buying.
Have you and your competitors reached near parity? Do you differentiate using price? Does sales laugh when you point out differentiating features of your product because those features don’t really matter? Do you wordsmith new “features” just to have something the other guy doesn’t on your product slicks?
We’ve had “winning product solve customer problems” beaten into our heads as product managers. In every market there is a set of features that solves the customer’s problem that everyone’s product has, e.g. the “baseline” feature set. This is the barrier to entry that any new competitor must meet to play in your market. You use features above that baseline to differentiate your product.
In commoditized markets, the size and relevance of the features above the baseline shrinks to near zero. The importance of marketing increases as differentiation shrinks. Eventually the barriers to entry become so low that nearly anyone can enter, at which point operational efficiency becomes the most important aspect for success, and marketing becomes primarily packaging and pricing.
One of my mentors used to work as a brand manager in consumer goods for P&G. He told me a story about laundry detergent that is a great metaphor for where we are heading in technology. The laundry detergent market is highly commoditized. There are dozens of companies selling everything from luxury to economy detergents and everything in between. P&G sold several different brands under different names, aimed at different customer segments. The ability to segment and target customers in consumer goods is astounding – they have it down to a fine science. “College educated Caucasian mothers under 40 with 3 kids living in a major metro area with a household income of >$125,000″ is an example of the level of their segmentation. If you go to the grocery and turn the detergent boxes on their side and read the ingredients, they are all nearly identical. The major differences are pricing, and packaging. It turns out that the mother above just doesn’t feel comfortable buying the “economy” brand, and will instead opt to pay more for Tide to basically buy a prettier box. That much is obvious; the really interesting piece was the product differentiation.
People buy the pretty box but they aren’t dumb. They open the box and see the white powder, the same stuff in the economy box, and they resent paying more. P&G experimented with lots of options, and ended up adding green crystals to the Tide powder. What did these crystals do? NOTHING. People assumed that they got their clothes cleaner or smelled better. They were there to make you feel better about buying a nicer box with “power crystals.”
Over time, if you take several companies competing for the same market, they will commoditize it even without product management. You don’t need product management to copy your competitor. Lots of companies that have identified operational efficiency as their core competency are happy to let other companies take the first mover risk and be the second mover into a market. If all of those companies have good product managers, they’ll be talking to the same kinds of customers and potentials, hearing similar problems, and developing similar products and features. Price will become the differentiator and the market will commoditize.
I see a lot of green crystals in technology today. There are lots of products where the baseline has risen to “good enough” and the differentiating features either aren’t compelling enough to justify paying for them, or customers just don’t care. On the cost side, we’re squeezed by free and open source products. What role does the product manager play in a commodity product? I hypothesize that the markets where companies need product managers will shrink at roughly the rate that those markets commoditize.
What do you think – are we entering the post-Product Management economy?
Peter Drucker once said, “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.”
That’s simply not possible without understanding consumer needs and predicting where the market will go next, which is what real product managers do. (Sorry, Seth!)
In a commodity business, the product manager should ideally be focused on growth through innovation.
Whether that’s illusory innovation like the little green crystals or actual innovation–the product manager is the one to closely evaluate the market, examine the consumers, and find new ways to meet those needs.
- Chris
Web: http://christophercummings.com
Twitter: http://twitter.com/chriscummings01
Interesting post, though I tend to take a bit of a different view of the issue and a broader view of product management.
As long as product management (add marketing and sales) seek differentiation only in the product itself (whether detergent or high technology), price will always win and there is no need for professional product management (sales and marketing strategies must change as well). The primary goal is lowest cost production.
However, taking an extended view of the product—maybe that’s why so many people talk about solutions these days—the notion of solution tends to encompass much more than the product. Here are opportunities for the organization to differentiate itself tremendously even with commoditized products. The differentiators are not product differentiators, e.g. green crystals, but rather other differentiators, e.g. the buying experience, logistics management, delivery, risk management, even relationship issues.
Great product manager, along with great marketers and sales professionals will always take an extended view of their offering, finding non-product differentiators that maintain margin, share and competitiveness.
I don’t think the overall state of software is good enough from the experience design viewpoint to commoditize yet; we still don’t meet user needs.
Perhaps one day, but not yet.
Paul,
“Post-Product Management economy”? I’m still waiting for the economy that understand product management!
I guess it depends on how you define Product Management and what their role is. Does P&G have product managers for their commoditized products? Certainly.
The focus moves from the technology – so to speak – to the business and marketing areas. This is where the definition of PM in technology companies collides with the definition of PM in CPG companies.
For the record, I don’t think we’re entering a post-PM economy. Unlike Tide, technology has not reached a steady state level of maturity.
I’ve written about it in a couple of posts.
New Software, now with blue dots!
http://onproductmanagement.net/2008/02/18/new-software-now-with-blue-dots/
Product Manager vs. Product Management (part 1)
http://onproductmanagement.net/2007/09/20/product-manager-vs-product-management-part-1/
Saeed
There is no doubt that markets for software commoditize over time, making it more difficult to differentiate on features. I agree with the premise that “the markets where companies need product managers will shrink at roughly the rate that those markets commoditize.” The interesting thing I’ve seen at many software companies, however, is they (the people who drive the company) do not want to sell “commodity” software. Therefore, they look for new markets or niches they can sell their products into, and they discover new products they can build to meet new new market needs.
When product management is functioning at a high level, the product managers are the “they” who discover the new opportunities for products. For this reason they do not suffer from commoditization. In this light, the Product Management Economy is just getting started.
-Michael
I read Seth’s post as saying not that he’d rather have a good or bad product, but that he’d rather have a polarizing product–one that people react strongly to. Like the Prius: Lots of people hate it; some absolutely love it, but few people are neutral about it.
It’s the “good” products that are commoditized to the point where customers just don’t care. (IMO)
-Mark
I think Godin’s point was that we should strive for remarkable products, not just ones that are “good” by conventional standards.
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Godin is simply saying that a “good” product is not a remarkable product. And that’s his primary premise on product development… if it’s not remarkable, then it’s not really good.
Product managers in consumer goods know it best, the hard work comes when the competitors product looks just like yours. Sometimes it means adding more green crystals!
My experience tells me that product management is more important as products mature and the differentiation gaps begin to narrow between the competition. It just – at times – may not feel as satisfying.
I think that Dave hit the answer on the head – yes, we’ve moved on from an economy that was product focused. We are now in a solution based economy where the customer wants their problem to be solved and it may require more than your product to do it.
Remember, the reason that the iPod was such a hit was not just the hardware product, but also the online service. Together these products created a solution that was irresistible.
- Dr. Jim Anderson
The Accidental PM Blog
“Learn How Product Managers Can Be Successful And Get The Respect That They Deserve”
The answer to the question is really “it depends”. It depends on the industry. If we’re talking about non-durable goods like household chemicals and laundry detergent then yes it is a post-product management economy.
However, high-tech or more specifically software systems which I believe the original post is targeting, the answer is “no” and probably “never”. The reason being primarily the amount of innovation in high-tech. Problems, that may not even be recognized as problems today, will be solved through innovation. For example, 8 or even 5 years ago who thought it was a problem that you couldn’t get e-mail on a mobile device? Today it is almost mandatory.
As long as there are a steady stream of new problems to solve, and innovation will make sure there is, it will be easier to fight becoming a commodity. It will happen to specific technologies but that is when you reposition and reinvent.
I liked the couple of posts on solutions.
PC microprocessors commonditized back in October of 2000. Software commoditized all the time, but during the dot bust, everything commoditized. This has nothing to do with whether the underlying technology still has headroom. It’s a matter of whether customers will pay for the additional improvement in functionality.
When a category leaves Moore’s tornado, it faces an explosion in fast following copy cats, and it faces price-based competition. That is one face of commoditization. The customer’s are not yet unwilling to pay for improvements, but they are very close to that point.
When you cross over into Moore’s late market, or the consumer market, you are commoditized by the utility economics of SaaS, or the commodity nature of the consumer market. That a lot of software skips the product stage and goes directly to the service stage means that they jump right into a commodity market.
As for solutions, enterprise software was always sold as a solution via solution selling.
Even with a great product fighting off the fast followers, maintaining the margins, transitioning Moore’s serial markets, and avoiding the stock stall makes product marketing difficult. Nothing is static. The market lifecycle isn’t particularly slow, particularly when you start out in the late market.
When everything is easier, get harder. Get harder, because it’s just as easy for your fast followers. Getting harder will put you further ahead of them, because if they were going to work hard, they’d have come up with their own idea.
OK, late to the party, sorry. Been listening to Seth’s provocative comments for years and love the discussion they stimulate. I believe this one contains multiple subtle points (including the “good”/remarkable gap) and jumping off points for the readers’ own views. I believe one lead point is about our addiction to improvement. Do you feel a PdM or product with steady 86% performance for 3 years is better, or one with year-over-year improvement of 10% reaching 84% ? That year-over-year growth is more likely with a product with some room for improvement. Most would agree that the first is more likely to see a later decline, and that may be what Seth means by dangerous.
Additionally, I see a slight inverse sarcasm about real skill in PdMgrs. If the product is not good, there will be criticisms and evidence and probably some indication of direction, making the job clear. There are several ways to move ‘up’. Hungry markets pay attention to change. When the product is good and performing well, many product managers will want to do little to avoid screwing up the cash cow. It takes *more* skill, then, and cajones to find the more complex, non-obvious thing that would kick it up or make the success more sustainable in a dynamic, entropic world while risking several ways to move ‘down’.
So, I don’t think we are post-PdM at all. It just takes more to stand out as a PdMgr or as an accomplishment of PdM.
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