Product management requires a multifaceted approach, demanding visionary leadership, strategic thinking, collaboration, effective communication, customer-centricity, and efficient execution in product development. These responsibilities are often carried out under significant budgetary constraints, with the added challenge of working with inadequate commercially available product management tools that may not fully meet the needs of the mission.
Budgetary Constraints in Product Management
In private equity-owned enterprise software companies, R&D budgets typically account for less than 24% of annual revenue, with product management receiving only 10-15% of this allocation. For a company generating $55 million in annual revenue, this translates to approximately $2 million for product management, with discretionary spending limited to $200K to $300K per year.
Strategic Resource Allocation
To navigate these financial limitations, Product Executives have historically relied on three primary levers to create efficient and productive product management departments:
People: Ensuring the team has the right talent to execute product strategies.
Processes: Investing in methodologies and frameworks to standardize activities.
Products/Tools: Procuring software to enhance productivity and collaboration.
However, these levers are not equally effective in driving positive outcomes for the product management function. The current slate of commercially available tools in the product management stack often falls short of delivering significant benefits to the product executive's mission.
A Focus on People and Process Strategies
Given the limitations of commercially available product management tools, Product Executives must concentrate on maximizing the two levers within their control: people and processes. By strategically allocating resources to these areas, they can optimize their product management departments despite budgetary pressures and inadequate tool options. Yet and still, the weakness of the third lever—commercially available product management tools—can undermine the other two levers, hindering their execution even with a solid organizational strategy in place.
How Inadequate PM Tools Affect People and Process Challenges
Weak product management tools can create and worsen challenges when implementing these tactics to execute organizational strategy.
People:
Hiring Highly Skilled and Experienced Talent: Product executives compensate for inadequate tools by hiring from a smaller pool of professionals with extensive experience and domain expertise. They offer higher salaries to these individuals to overcome the execution weaknesses caused by insufficient product management technology.
Implementing a Super Soldier Program on a Kool-Aid Budget: When highly skilled talent is scarce, companies try to develop it internally. Skill development is crucial for every product management program, with trained product managers showing a 14% improvement in competencies like strategy and forecasting (source: ProductSide survey). However, training budgets often compete with hiring remedies and other discretionary spending, limiting widespread implementation."
Process:
Overcompensating on Process: Due to limitations in the current product stack, process improvements have become the primary method for enhancing productivity. Research by ProductSide found that companies with established product management processes achieve a 13% higher skill level among team members compared to those without processes. Process improvement is a good starting point, but it can only enhance productivity to a certain extent. Workflow automation, analytics, and collaboration tools can take productivity improvements even further.
These challenges in the product management environment compound the task of managing products, forcing Product Executives to make difficult trade-offs between people, processes, and product/tools.
The Current State of the Product Stack
Within discretionary budgets, typically 10-15% of overall product management spend, tools often receive only a fraction. For instance, a Product Executive might generously allocate 50% of a $300K discretionary budget toward product purchases.
General Office Tools Rule the Roost
Today's product management stack, while offering some specialized tools, remains highly fragmented and falls short of serving as a reliable strategic lever. My experiences with tools designed specifically for product management activities focus primarily on two categories: roadmapping and user research. Tools like Aha!, ProductBoard, and Roadmunk excel in roadmapping by providing a centralized repository for product initiatives, features, and roadmaps. They also offer mechanisms to prioritize effectively and foster collaboration. Similarly, tools like Pendo and Google Analytics play a critical role in user research, delivering actionable insights that guide decision-making.
Product managers are still heavily reliant on general-purpose tools such as the Microsoft Office tools. Despite these specialized capabilities, a 2023 Product Focus survey underscores the dominance of general office tools such as MS Excel, PowerPoint, and Word, which account for 33% of all tool mentions among product managers. While their flexibility and widespread availability make them default choices for many tasks, they also highlight the inadequacy of specialized solutions in addressing the broader, more complex needs of product management.
A Fragmented Landscape of Solutions
In that same Product Focus survey, respondents offered up over 100 different product being used in the product stack.
Unlike sales (anchored by CRMs) or finance (anchored by ERPs), product management lacks a singular defining tool to anchor its workflows. This absence limits the potential for significantly enhancing productivity in the field of product management.
Table: Product Stack Landscape
This fragmented landscape forces product teams to navigate inefficiencies, duplicative work, and inconsistent data. Unlike other departments, such as sales (anchored by CRMs) or finance (anchored by ERPs), product management lacks a singular defining tool that anchors workflows, limiting its potential to significantly enhance productivity.
While specialized tools provide value in certain areas, the overall product stack remains disjointed, making it difficult for Product Management Executives to rely on it as a comprehensive solution for departmental needs. Despite the availability of specialized tools, the current product stack remains highly fragmented and inadequate as a strategic lever.
Challenges and Limitations
This patchwork of solutions creates several challenges for product teams:
Inefficiencies
Duplicative work
Inconsistent data
Unlike sales (anchored by CRMs) or finance (anchored by ERPs), product management lacks a singular defining tool to anchor its workflows. This absence limits the potential for significantly enhancing productivity in the field of product management.
In conclusion, while specialized tools exist for certain aspects of product management, the industry still heavily relies on generic solutions. This fragmentation highlights the need for more comprehensive and integrated tools that can address the diverse and complex needs of modern product management.
The Promise of the Product Stack
The promise of an evolved product stack lies in its potential to unify workflows, provide advanced analytics, and streamline collaboration across departments. Emerging technologies, particularly GenAI-powered tools, are beginning to address some of these gaps. For example:
Automation: GenAI tools can handle routine tasks such as prototyping, user story development, and competitive analysis, freeing up time for strategic activities. Quick prototype development can be performed in minutes to move on to customer evaluations to assess the solutions potential to solve targeted customer problems. I can personally attest to the effectiveness of these tools. I've rapidly prototyped solutions for customers in my Fractional CPO business for quick fast customer feedback.
Advanced Analytics: AI-driven insights could enable more informed decision-making, aligning product strategies with business goals. The current instantiation of GenAI based analytics requires validation by a knowledgeable product professional. I have witnessed mistaken logic and magical statistics being formed out of nothing by GenAI -- irrespective of the LLM used.
Collaboration: Integrated platforms could facilitate seamless communication among product managers, designers, engineers, and stakeholders.
Communication: Streamline communications and document creation using GenAI to polish up grammar and topical flow. This is another god-send that has rapidly increased my ability, in my business, to go from thesis formulation and thought-flow to a polished article for sharing.
However, these solutions are still maturing and face barriers such as cost, adoption challenges, and limited commercial availability. The product stack is not yet a reliable lever that Product Executives can consistently depend on.
In the Meantime and In Between time - Prioritize People and Process Strategies
Given the current limitations of the product stack, Product Executives should focus on maximizing the two levers they can directly influence:
People: Invest in hiring and developing skilled product managers. Allocate budgets for training and coaching to elevate team capabilities. Build a strong team culture that fosters collaboration and accountability.
Processes: Implement standardized processes to reduce inefficiencies and improve alignment. Adopt frameworks and methodologies that align with organizational goals. Continuously refine processes to adapt to evolving business needs.
Conclusion and Key Takeaways
While the evolution of the product stack holds immense promise for the future, Heads of Product must focus on the actionable levers within their immediate control: people and processes. By hiring and developing talent, implementing robust processes, and advocating for tool adoption when feasible, Product Executives can build resilient and high-performing teams. This balanced approach ensures sustainable success, even in the absence of a fully evolved product stack, while preparing the organization to leverage tools more effectively when they become a reliable lever for productivity and innovation.
Key Takeaways for Product Executives
1. Recognize Current Tool Limitations:
o Understand that while some specialized tools provide value (e.g., roadmapping and user research tools), the current product stack lacks integration and scalability to meet the full spectrum of product management needs.
o Accept that generic office tools, while flexible, underscore the gap in specialized, comprehensive solutions.
2. Prioritize People:
o Invest in building a skilled and capable team through hiring, training, and fostering a strong, collaborative culture.
o Emphasize developing strategic and operational competencies to overcome resource constraints.
3. Refine Processes:
o Implement and optimize processes to reduce inefficiencies and ensure alignment with business goals.
o Continuously adapt processes to address evolving challenges and improve workflow integration.
4. Monitor and Prepare for Tool Advancements:
o Keep an eye on emerging technologies, such as GenAI-powered tools, which are beginning to address gaps in automation, analytics, and collaboration.
o Advocate for the adoption of new tools as they mature and align with departmental needs.
5. Balance Resources Strategically:
o Make thoughtful trade-offs between headcount, processes, and tools within the constraints of financial limitations.
o Focus on leveraging existing resources effectively to achieve departmental goals.
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