A Product Manager Should Know Where the Profit Comes From

A product manager should know where the profit comes from.

Product managers are often encouraged to obsess over customers.

They should.

But the company has another requirement:

The product has to create economic value.

That means a product leader should understand far more than features and roadmaps.

• Revenue.

• Price.

• Gross margin.

• Product cost.

• Development investment.

• Inventory.

• Portfolio complexity.

• Warranty.

• Channel economics.

• Supplier economics.

• Lifecycle.

A technically wonderful product with bad economics isn’t a successful product strategy.

Neither is a high-margin product that customers don’t value.

The product leader has to connect both sides.

I have managed product businesses where the most powerful opportunities came not from a breakthrough feature but from changing:

• the development model,

• the supplier relationship,

• the portfolio structure,

• pricing,the sales approach,

• or the technologies we chose to stop supporting.

That’s why I’ve come to believe:

1. The product manager’s job isn’t to maximize the product.

2. It’s to maximize the value created by the product business.

What financial metric do you think product managers understand least well?