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Four Elements of Risk for Product Management Organizations

the wall requires a delicate balancing

“A compelling vision and a clearly defined value proposition conveys where you’re headed and encourages your clients and prospects to come with you.”

Central to every business plan is the concept of risk and reward. Risk is an accepted concept that you must successfully manage to reap reward. However, the concept of risk management in the world of product management is often not as clearly defined as it might be in other areas of your business. Product managers often manage a variety of risks on behalf of the organization: business plan attainment, synchronization, market, and development plan achievement risks. Understanding and managing these risks is an essential part of a product manager’s job. Let’s look at each of these risks more closely… Business Plan Risk Regardless of whether your product managers hold a profit and loss statement, they directly impact the success or failure of your organization’s business plan. The decisions regarding their products’ vision, value proposition, capabilities, and growth plans, as well as the outcome of their collaboration with sales and marketing, significantly impact the company’s ability to attain its business plan. A product line vision outlines where you want to take your products in the market. A compelling vision coupled with a clearly defined value proposition conveys to clients and prospects alike where your organization is headed, and it encourages them to come with you. It also allows your organization’s entire market-facing team to speak with one voice. Too often, if you lack one or more of these elements, the message your well intentioned client-facing staff relays changes with each client and prospect interaction. Left unchecked, this leads to an increasingly skeptical client base whose trust in your organization is progressively undermined.

© Greg Geracie, All rights reserved.

Even if your company does have a compelling vision and a clear value proposition, it may still face business plan risk. This second tier of business plan risk can be mitigated by building product management communication mechanisms that regularly connect customers and prospects. You can do this by pulsing the information you need to keep clients in the loop and proactively avoid disconnects.

Four Elements of Risk for Product Management Organizations Deploying fully resourced product roadmaps and solid tactical execution (i.e., doing what your organization says it’s going to do regarding releases) are essential components of managing this aspect of business plan risk. Customers will often tolerate only a modest amount of execution failure if other options are available. Without other options, they may muddle through -- but only until something better comes along.

“Without other options, your clients may muddle through your failures – but only until something better comes along.”

With a product line vision and a differentiated value proposition in hand, as well as a resourced and well communicated roadmap that outlines what clients can expect at regular intervals, the final business plan risk is ensuring that your customer-facing team members are solidly behind the plan and able to manage customer expectations appropriately. The communication between product management and these teams needs to be well thought out.

Synchronization Risk This linkage between product managers and the rest of the business is a synchronization risk. This type of risk arises when a product manager does not effectively leverage internal resources or does not find ways to align cross-functional and market-facing teams behind the vision or tactical roadmap. This is a common occurrence and results in internal dissonance that can fester, potentially requiring senior management to intercede. Synchronization risk can also occur when a strengthening product management team takes more control of product direction when there was previously no central person responsible. As the new team takes on more responsibility, product managers must minimize the potential discord. They can do this by communicating the product management methodology being used for decision making and allowing others who have a vested interest in the outcome to have a voice in it. Left unchecked, synchronization risk can have a corrosive impact inside the organization and waste energy that could be used on execution. To manage this risk, you must identify cross-functional contributors and thought leaders that need to be incorporated into the product management process, and set up objective criteria for making key decisions.

Market Risk

© Greg Geracie, All rights reserved.

Market risk is the third leg of the stool. Product managers are in the unique position to collect and synthesize information from multiple sources and build a composite picture of a market. Market research, competitive information, first- and second-hand customer and prospect data, business partners, industry analysts, and other data points roll up into a birds-eye composite view for product managers. However, neglecting market risk is often a serious threat, as product managers are often pulled in a variety of directions – from sales support, messaging, development plan activities, synchronization efforts, and others.

Four Elements of Risk for Product Management Organizations These necessary activities force product managers to spend too much time internally focused. Markets are dynamic and they live and breathe. Taking your eye off competitive markets is a significant danger, and if taken too far leads to irrelevance. In other words, you might execute your vision and tactical plan well, but if you lose sight of the market, your business plan can fail. To manage market risk, you must take the time to stay in tune with the market and set up processes to ensure near real-time access to market data.

Development Plan Risk

About Greg Geracie Greg Geracie is the President of Actuation Consulting and the author of the global best seller Take Charge Product Management. Greg is also the Editor-in-Chief of The Product Management and Marketing Body of Knowledge.


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Š Greg Geracie, All rights reserved.

Finally, product managers need to manage development plan risk. Releasing products or product enhancements is akin to nurturing the life blood of the company. Given its importance, managing development plan risk is a high priority. Development plan risk has two components: external impact and internal impact. The external element is based upon the faith your clients have in your history of successfully fulfilling your market commitments to them. Failing to execute undermines your clients trust. From the internal perspective, development risk can arise from the lack of a clear vision, a lack of understanding of what clients truly want, not funding the development activities upfront before work begins, not effectively managing the scope of the release(s), or not having the right team members and incentives in place to reward performance. Any one of these internal elements being misaligned can adversely impact performance. Product managers share this risk with other cross-functional team members and often rely on project managers to ensure that the projects stay on track and to proactively identify threats to the plan. However, senior leaders hold product managers accountable for the success or failures of their products and their underlying releases. Therefore, managing development plan risk is a significant aspect of a product manager’s job. In small organizations, product managers spend even more time managing development plan risk, because there is no one to act as their proxy. In larger organizations, a technical or downstream product manager may relieve the primary product manager of some of this time burden. However, the primary product manager is still responsible for the outcomes. These four types of risk are embedded in product management organizations and are often not well understood. Successful product managers are aware of these risks and mitigate them by thoughtfully allocating their time, following well communicated processes and introducing objective standards of measurement coupled with strong interpersonal skills to successfully steer through the risks on the way to market success.