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Product Marketing

It’s time to get your Ph.D. in Sales Comp

A few years ago, I was working for a large company here in Austin.  This company had recently acquired a series of software startups and was attempting to integrate them into their larger hardware portfolio.  The product team I managed was responsible for the integration, product management, and transition.  What I learned during this time about Sales behavior was a shock to my system – and may help you as well.

Imagine a Fortune 100 company: large, established, incumbent.  Also stale, bogged down in red tape, and struggling to innovate.  A typical move for a large company is to inject innovation through the acquisition of a smaller company.  Often, this makes great sense on paper – the bigger company gets access to technology and talent they don’t have, and the smaller company now has an opportunity to both cash in their hard work and take their products to a much larger audience via an established sales channel.  If you’ve worked in the industry for any length of time, you’ve been through this cycle from one side or the other.  Unfortunately, what looks good on paper can quickly go astray if you don’t understand Sales and the tools you are giving them.

In this case, my team had responsibility for four to five smaller acquisition company products and portfolios.  Luckily, the larger company had done a good job acquiring companies in the same area who had complimentary products, both to each other and to the larger company’s hardware devices.  Essentially, our new software portfolio provided ongoing systems management for the hardware that made up the mainstay of the larger company’s business.  If we could simply start to attach our software to the millions of dollars of hardware deals that were already happening, there was a great chance of success!

To make this picture even more attractive, the larger company’s hardware business was undertaking a long, slow decline both in revenue and profitability.  They were averaging single digit gross margins on hardware, whereas our software was achieving typical software margins in the 40-60% range and higher.  By all rights, it was going to be an easy win…until we starting training the larger company’s Sales teams.

The long, slow decline of established business

Our decline wasn’t this pronounced…but it was close!

The first time we trained one of our hundreds of new Sales teams, we knew we had an issue.  We did a “lunch-and-learn” where we fed the team pizza and spaghetti, while one of our product managers did a demo of the product and talked about how it was complimentary to the products they were already selling into their accounts.  The Sales team was polite and listened while they ate for about thirty minutes.  Then, everything went wrong.

Do you ever want to scream when working with Sales? It doesn’t have to be that way if you know how they’re motivated.

At the end of the presentation, the Director of the Sales team stood up.  He looked straight at my product manager and said:

“John1, I want to thank you for that great presentation.  I think we all now have a clear understanding of your product, its pricing and competitive positioning, and how it can help the company.  I understand that the CEO has identified this as a strategic product.  And you know what?  We are never going to sell it.”

Needless to say, that was not the reaction for which we were hoping.

John tried to recover by asking the Director why he felt that way, and the Sales Director responded by saying:

“To your credit, this does seem like a really good product.  But, it doesn’t match up with how my team is rewarded.  Right now, software sales represent 10% of our quota, and hardware is 90%.  If one of my guys blows up his software number and misses his hardware number, he is fired.  If he blows up his hardware number and sells zero software, nobody cares.”

Very quickly you can start to see the problem – even though the company had spent millions of dollars on this acquisition, they had not put the tools and behavior modification in place with their existing teams to make it a success.

At this point, we needed to get educated (quickly) on how Sales at this company was motivated.  Our next stop was Finance.  We scheduled a meeting with someone that Finance identified as the “Genie of Sales Compensation.”  When we sat down with the Genie we asked her to show us how Sales was motivated, quota’d, and bonused.  That was when she opened her manila folder, and took out a taped-together 3×3 matrix of legal sized paper, upon which was printed in 6-point font an Excel spreadsheet containing approximately three dozen rows representing the different sales teams, and about fifty columns representing various ways the Sales teams were measured.  Some Sales teams had thirty or more variables to determine their quota attainment.2  In short, you needed a Ph.D. in Sales compensation to understand this system.

Yes, it was almost this big.

Many people refer to Sales as “coin operated,” by which they mean that Sales operates in whatever way will help them get the most coins.  This is exactly how you want Sales to act, but it reinforces that if you aren’t very clearly part of their compensation, they won’t spend time worrying about you, regardless of how strategic or important to the business you think your product should be.

In the end, we found that adjusting the Sales teams compensation models to account for our products was so fraught with politics and peril that it was doomed to failure.   Prioritizing our products in terms of comp meant deprioritizing someone else’s products, and every Sales comp line had an advocate in the form of a powerful executive for some other product.  That is when we realized that we needed to sidestep the issue by creating our own overlay Sales team that was only measured on our products.  This worked, but only after a lot of pain and suffering.

This month, Pragmatic Marketing’s bloggers are going to be writing a lot about various Sales tools and ways we can enable Sales teams.  Remember however that the number one most powerful Sales tool in the Product Team’s bucket is the compensation model.  If you get this wrong, or your product is not represented in it, it will not matter how slick your competitive training is, or how good your positioning is, the strength of your competitive analysis, or how well you priced your product.  As the CEO of your product, you must understand how your team is motivated – and take corrective action where required.

What other challenges have you run into with Sales, and how did you overcome them?  Weigh in below in the comments section.

1 Name changed to protect the innocent
2 This is when I realized that I prefer smaller companies to larger ones

Join me at PIPELINE 2014!

On this Friday, June 6, 2014, I will be presenting at a virtual conference called PIPELINE 2014.  PIPELINE is put on by Planview, and will include presentations about a wide variety of topics of interest to Product Management and Marketing professionals, including innovation, ideation, prioritization, and how to change your culture.  I will be giving a talk entitled “The Cornerstone of a Market Driven Organization,” and if you’ve always wanted to go to a Pragmatic Marketing training, but never had the chance, this is a good opportunity to get a taste of our philosophy.  Best of all, PIPELINE is free, and the presentations are all archived online for you to watch at your leisure – all at once or over the next year!

You can read the entire agenda of presenters here, and see what catches your eye.  Register for free at this link.  See you on the 6th!

The Problem with Building Products in an Agile World

Over the past decade, there has been a ton of ink spilled over Agile development.  Much of the Agile narrative has focused on the pros of implementing Agile methodologies, such as better planning, faster feedback, and the ability to quickly pivot and make changes.  These are all good things.  However, from a Product Management standpoint, Agile has some major problem areas that can create inefficiency at best, or completely wreck a project at worst.

Before we continue, I want to be clear: I love Agile.  The teams I have managed and worked as a part of have delivered lots of user stories and requirements to Agile teams and seen success.  Agile can be wonderful.  In my travels over the past four years as a Pragmatic Marketing Instructor, I’ve also witnessed several “Agile traps” that jump up and grab teams.

1) Agile makes it harder to be disciplined with regard to strategy

Because of the nature of Agile, multiple sprints happen every two to four weeks.  Organizationally, we now have the ability to change direction more quickly than ever before.  This can be helpful to react to changing market conditions (or the needs of big deals).

Unfortunately, this ability to quickly change is a double edged sword.  Because we can change direction quickly doesn’t always mean that we should.   I often see Agile teams building half-solutions to dozens of problems instead of actually fully solving anything, because they are flipping from solving one problem to the next one too quickly.  Agile requires extra discipline to stick to the strategy when it’s tempting to continuously change direction.

2) Agile values feedback from customers (sort of)

Agilistas would say that they strongly value getting constant market feedback at the end of every sprint.  That’s good.  In my experience, what actually happens is that most teams recruit four to five customers who are willing to provide that level of constant feedback and then roll with them – for the rest of the release or even multiple releases.

Going back to the same customers for feedback creates a two-fold problem.  First, do those four to five customers really represent your overall market segment?  Or, are they the “noisy 20%” of your market segment?  In my experience, the types of customers who are willing to sign up for regular meetings to provide feedback every other week don’t typically represent average users; they represent power users and experts.

Second, customers aren’t dumb.  Soon, those four to five customers figure out that they have a disproportionate amount of influence on your direction, and realize that their feedback can turn you into essentially a custom development shop for their particular needs – again, that’s not market driven, that’s customer driven.

3) Agile’s roles can actually prevent you from being market driven

When teams implement Agile, they often look to create new roles.  Specifically, the “Product Owner” role is one that is often tasked to Product Management.

Unfortunately, the Product Owner role is extremely noisy and tactical and requires a lot of day-to-day interaction with Development in daily standups, sprint planning sessions, and retrospectives.  While there is nothing wrong with making the Agile team run efficiently, I have seen teams get so obsessed with “making Agile work” that they start sacrificing what Product Management really should be doing – which is spending time with the market.

I speak to Product Team members every week who are doing the Product Owner role, and they all tell me that 95-99% of their time is spent on internally facing Development activities, and they rarely, if ever, speak to anyone in their market.  That’s not a recipe for being market driven.

4) Agile helps us run faster, but are we running in the right direction?

Are you running in the right direction?

Agile’s big promise is that it will help us run faster in Development (or whatever), but it doesn’t say anything about if we are building the right thing to begin with.  That is the role of Product Management to find out.  I see Agile teams often getting so obsessed with the machinations of Agile that they forget that you can be the most efficient company in the world, but if you’re building something that no one wants, it’s pointless.

How is your team using Agile today?  Are you running into any of these issues, or others?  Please share your experiences in the comments section.

Who Owns Design?

One of the most frequent questions I receive is “Who owns Design?”  Should the designers report to the Development or Engineering team, should they report to Product Management, or perhaps Marketing?  Or, should Design be its own group?  The answer might surprise you.

Before we can define where Design belongs in an organization, we must first define “Design.”  There have been dozens of books written on this topic and the debate will continue to rage online long after this blog turns to dust.  For now, let’s turn to “Paul’s Pragmatic Definition of Design”

“Design is the role in a team that understands a market problem, and comes up with a solution to that problem.”

It’s doesn’t have to be harder than that.  To determine where Design belongs, lets examine whom the Design primarily works with on a day-to-day basis.  Design works sits as the middle layer in this diagram:

Problem-Design-BuildTypically Product Management is responsible for the top layer of finding and quantifying the markets’ problems.  Development is typically responsible for the Build layer of bringing the designed solution to life.

However, to make this picture more complex, Design doesn’t mean just one thing.  At a minimum, there are two flavors of design:

  • Front-end Design, and
  • Back-end Design

Front-end design is what most people mean when they say “Design.”  The titles found in front-end design include User Interface, User Experience, Human Computer Interface (HCI), and Human Factors Designers – all titles found predominantly in software projects.  But front-end design is not limited to software.

Front-end Designers in hardware applications are concerned with ergonomic design, user fatigue, eye level, placement of power cables and interfacing to larger systems – such as how a server might mount into an equipment rack.  In services, a front-end designer might think about how many key presses a user must make on their phone when they call into an interactive-voice-response system before they can talk to a human.

Back-end Designers are often called “Architects.”  In software, they are typically concerned with items like choice of codebase, code re-use, selection of libraries, how to build a system that is both scalable and secure, and whether to use Amazon EC2 or another cloud provider.  In hardware, they might choose the clock speed of the processor, or how much memory overhead needs to be planned for in the system for future upgrades.

Design is measured differently than Product Management and Development.  We teach that Product Management should be measured on its ability to be market-sensing.  That is, members of the product team should be measured on their effectiveness at bringing accurate market data into the business to feed better decision making.  Development is often measured on a combination of scope, time, and quality.  Design is not measured using these metrics.

How to effectively measure a Design team is a large question that incurs significant debate.  But, suffice it to say that designers have their own set of metrics to test the effectiveness of their designs.  For Design, measurement needs to answer the core questions: “Does the design effectively solve the user’s problem?” “Does the design fit into their daily life or workflow?”  “Does the design act in a way the user expects it to act?”

The bottom line is: Design is a huge role, encompassing a wide variety of areas.  It’s very rare that one person highly skilled at both front-end and back-end design.

TL;DR, Just Tell Me Who Owns Design!

In my experience, back-end design almost always reports to Development.  Because of the intertwining technical nature of the decisions these Architects are making every day, it makes sense that they would sit within the reporting structure of the team creating the solution.

Front-end design is a very different answer.  In the past decade, front-end design has migrated, from reporting to Development, to reporting to Marketing, to Product Management, to their own group.  Sometimes, they are contracted resources that report to whoever hires them.

Like Product Management, there is a natural tension that exists between front-end design and the Development (and Marketing) teams.  This tension arises from differing (sometimes competing) goals and different measurements of success.  Typically, this tension is a good thing.  However, when we subsume that tension and shove front-end design under Development, or Marketing, the tension resolves in favor of the executive who owns that team.  For instance, a Development team who owns Design and is measured on “hitting the date,” will naturally pressure its designers to create designs that help them hit their date.  This is probably not conducive to good designs for the user.

So who owns Design?  The designers, of course.  And who owns the designers?  I believe that the goals of Product Management are highly aligned with Design, so I can easily see these reporting up the same structure.  I can also see success for Design as an independent part of the Product Team.

Wherever you place Design in your organization, ensure that you have an honest conversation about how designers are measured.  If you measure Design like Development or Marketing – the results will be sub-optimal.

Take the Pragmatic Marketing Social Media Survey

In an effort to learn more about how you use social media in product marketing and management, we’ve created a 9-question survey that we’d love for you to take. We’ll share the results of this survey next month on this blog and the others you see listed on the right hand sidebar.

Thanks in advance! Here is the link: Social Media Survey

Join me for ProdMgmtTalk Today at 4PM PDT

I am going to be participating in a Twitter-based chat today with the crew from #ProdMgmtTalk at 4PM PST (6PM Central). The topic is going to be the Product Management X-Factor, a presentation that I’ve shared at several ProductCamps around the soft skills that make certain leaders rise to the top where others stagnate. I’d love it if you participated with us, so join the Twitter chat room and follow along, or ask a question.

Resources and the transcript will be posted here and on the ProdMgmtTalk website afterwards for you to read if you can’t participate live and in person.

You Might Be a Product Manager If…

Since we at Pragmatic Marketing just released our 2010 Product Management Survey, the time is right to revist one of my favorite topics: You Might Be a Product Manager If…  In the spirit of the American comedian Jeff Foxworthy (“You Might Be a Redneck If…”), this year, product managers around the world contributed to the #YMBAPMI list over Twitter, LinkedIn, and this blog.  And the results were excellent.  So without further ado, I present the 2011 list:

You Might Be a Product Manager If…

  • … you count number of iPads, iPhone4s, and/or Droids you see traveling, and consider how that compares to your hometown. @cheubaum
  • …you have a #roadmap for Thanksgiving. #prodmgmt @barbaragnelson
  • …the bartender in the Admiral’s Club knows you by first name.
  • …you only buy clothing that has multiple use cases @austinogilvie
  • …time with family at holidays is rationed in FAB order? :) @johnpeltier
  • …you have “elite” status with >2 airlines and >3 hotel chains.
  • …you know how to skip straight to a certain slide # in PowerPoint without leaving presentation mode (hint: type the slide # and hit enter).
  • …your spouse can rattle off the kill points for each of your top competitors…
  • By virtue of my surname, I would like to bend this a bit…You might be a REDNECK product manager if you’ve ever looked at a piece of blue tarp and thought to yourself, “Now THERE is some great product packaging!”  – Jim Foxworthy
  • …you find yourself tackling home improvement projects in terms of buy, build or partner, “Should I do that myself? Should I outsource it? Or maybe I can just use someone else’s?” – Charity Mason
  • …you know how to challenge development’s first response of “that is not possible” or “that is not how users would use it” @gopalshenoy
  • …you can look at something and quickly Roadmap the next two releases.  – Ratul Shah
  • …you’ve plotted a strategy matrix for your love life.
  • …you look at common everyday products (think broom, backpack, stapler, etc.) and immediately think about what the requirements would be for the existing product and usability improvements for version 2.0, 3.0, etc. (Broom 3.0: knows when the floor needs to be swept, sweeps it, empties dustpan, puts itself back in the broom closet, plugs itself into the outlet to recharge.)  – Irina Doliov
  • …you refer to your kids as “release 1.0,” “release 2.0,” etc!
  • …you look at your child’s stuffed Eeyore toy, saw how the tail was attached and thought “wow, some product manager must have had to fight with engineering to get that extra feature”, and then wondered what the COGs impact was. – Christina Hausman
  • …you make all your personal decisions in Excel with multiple scenarios to go over with your wife.  – Kirk Sadler
  • …when trying to figure out how to use a new product you’re thinking, they must have missed the usability requirements.  – Lynn Sigler
  • …you ask your kids “what problem are you trying to solve?” when they ask for a new toy…
  • …you are an expert at herding cats @gopalshenoy
  • …you ask your spouse what they consider to be your distinctive competence. (credit: John Milburn)
  • .. you’ve set up individual buy-in meetings with each member of your family before making a big family vacation/purchase/etc decision and have them all do what you wanted them to do without any of them knowing it! – Melanie Curtiss
  • …you wish Amazon presented an ROI argument for buying Amazon Prime. :) – Jon Guild
  • …you are thinking about your own “customer requirements” as your kids pick out a new pet. – David Critchley
  • …you might be a Rural product manager if you stack rank your firewood. – Scott Overhill
  • …when awoken in the middle of the night, you roll over and mumble “It’s on the roadmap” – Mathew Lodge
  • …it’s dangerous to get between you and the white board – Mathew Lodge
  • …you realize that you can’t keep everybody happy and some decisions are just tough to make. It is normal. @annua
  • …u know that ever changing priorities is like the New Eng weather. If u don’t like it, just wait & it will soon change again. @gopalshenoy
  • …when 11 y/o wants a tree house, you ask “What are your requirements ?” @DigitalDon
  • …you discuss WHY you make each decision in your home remodeling project and use it to resolve stakeholder disagreements @sehlhorst
  • …you use the word ‘feasible’ when asked a yes or no question #prodmgmt @rattay
  • …you have a 100 to 1 ratio of ideas to resources and get interrupted every hour with new ideas to add to the list #prodmgmt @rattay
  • …you can stack rank your children.

Apologies if I missed anyone’s contribution, we had a lot of great entries this year!

ProductCamp Rules the World!

What started as an interesting idea, then grew into a wave, has now become a tsunami: ProductCamp is changing product management and marketing everywhere.  In just the first few months of 2011, there are ProductCamps scheduled in Austin, Vancouver, Atlanta, Boston, Silicon Valley, London, Dallas, and more.  ProductCamp has now spread to four continents (S. America, Africa, and Antarctica, we’re waiting on you).  If you live near a major metropolitan area, chances are there will be a ProductCamp near you.  Anyone in a product management role is officially out of excuses for missing one of these events.

ProductCamp is winning because it solves a real problem for product managers: we have traditionally poor access to “our people:”  people that do jobs like ours, think like us, and run into similar issues.  Most product managers know their peer product managers at their current company, and the dozen or so people they’ve met throughout their career.  If you’re lucky, your city has a local organizing group for product management and marketing, but these groups have spotty coverage and are of various quality.  If you don’t have access to this group, you’re forced to look elsewhere to network and learn.

On the other hand, if you are highly experienced, or have recently done something unique and want to share that experience with the world, your options are also limited.  You can start a blog – but writing isn’t everyone’s forte.  You might get invited to speak at a local marketing meeting…only to find that the audience is made up of more traditional brand management or marketing communications people who aren’t interested in what you are doing in product management.

ProductCamp solves both the consumer and the producer problem by bringing both parties together under the same roof.  Mixed in with solid networking and you get a volatile concoction of interesting people and insightful sessions that bubbles with energy for a day.  The kicker: it’s 100% free to the participants (for most camps).  ProductCamps around the world are now riding this formula to success.  We’re on the precipice of a golden age for product management, where our luminaries will be uplifted by our peers and companies will have a chance to recruit from the clear cream of the crop.

The best product management and marketing talent tend to show up at ProductCamps, for a few simple reasons.  First, the best people are interested in networking and learning from their peers.  Second, great product managers are often great presenters, and rarely get a chance to show their stuff to people who “get it,” and care.  You will find some amazing presentations from product managers and marketers at ProductCamp.  Third, people who suck at their jobs or just want to skate by generally aren’t interested in burning up a Saturday (when most camps are held) talking with other people about their jobs.  No one comes to ProductCamp because their boss made them do it.

Recently I had a chance to participate in both the inaugural Rocky Mountain ProductCamp and ProductCamp Austin 6.  Both were great experiences and I made dozens of new contacts and learned a lot.  Each camp brought new ideas to the table and showed how the ProductCamp template is evolving and changing.  For example: ProductCamp Austin is now on it’s sixth edition.  Rocky Mountain ProductCamp (RMPC) was on its first.  The organizing committee for RMPC had traveled to Austin for PCA5 and borrowed heavily from the Austin template: in-person voting, best session award, sponsorship levels.  RMPC also had new ideas, such as online streaming of certain sessions, which Austin duplicated.  Each event had its own local flavor, and received rave reviews from their participants.

At both RMPC and PCA6 I was selected by the voters to present in a session I titled “The Product Management X-Factor: How to be a Rock Star Product Manager.”  The idea behind this topic is that there is a set of personality traits and skills that are inherited and learned, which some product managers have figured out how to use in order to become more effective in their careers.  I was fortunate enough to win “Best Session” in Denver and “Best Session Runner Up” in Austin.  I will do some more in-depth posts on this topic later; what was interesting for this post was the level of engagement and involvement the crowds in both Austin and Denver.  I have received dozens of requests for follow-up and additional information based on two presentations.  If you are doing something interesting and want to interact with people on it, there is literally no where else you can go to hit such a targeted group of people.

The bottom line is: if you want to be a thought leader in product management today, you need to present in front of your peers at a ProductCamp.  It will be one of the most intense, but rewarding experiences of your career.  Hit me up in the comments or by email if you want some tips on how to make an effective ProductCamp presentation.

It’s That Time Again! Submit for the Third Annual “You Might be a Product Manager If…” List!

After you’ve taken a few minutes to fill out the 11th annual Product Management and Marketing Survey, you might be feeling a little feisty.  Well, you’re in luck!  I am officially moving the annual “You Might Be a Product Manager If…” list to be in conjunction with the survey so you can get everything off your chest at once!  I’ll release the full list on this blog in January, and need your participation!  If you’d like inspiration, you can read the past lists.  Some of my personal favorites include:

You might be a product manager if…

  • You do a SWOT analysis before making any major purchase
  • Your wedding included a powerpoint presentation.
  • You spend more time with your development counterpart than your spouse.

Submit your best ideas in the comments below, or @ reply me on Twitter!  Best submission might even get something cool…

Participate in the World’s Largest Product Management and Marketing Survey

Pragmatic Marketing is running our 11th annual “state-of-the-profession” survey for product management and marketing professionals. Completing the survey only takes a few minutes, and you’ll get valuable data on where you stack up against the rest of the product management community with regard to experience, salary and bonus, hours spent in meetings, emails sent and received, and time spent on strategic and tactical activities. Full results are typically published in January.

You can also see the results of past surveys.