Financial Terminologies that a product manager can be familiar with


Whilst a lot of product managers are familiar with gathering requirements, working with management, user experience, development and testing teams, and other aspects of product development, not many of us are familiar with the financial aspects of running a business or development of a product.FinSt_$St

Some product managers are responsible for P&L of their products’ business, and I thought I’ll jot down some basic financial terminologies that we can be familiar with to understand financial statements.

Revenue

  • It is the total sales of a company after deductions for returned goods and discounts. It is calculated by simply multiplying quantity of sales by the number of units sold.
  • Revenue = Net units sold * selling price
  • AKA Top Line

COGS

  • It is the sum of all direct costs that go into the production of goods sold by a company — cost of raw materials and direct costs relating to manufacturing/production.
  • Indirect costs such as those for transportation and distribution are not part of COGS, but will be part of Operating Expenses.

Operating Expenses

  • Operating Expenses (OPEX) are expenses incurred by a company for running its business operations.
  • Expenses towards R&D, licenses, employee salaries, sales, marketing & advertisement, IT, utilities, and G&A can be considered OpEx.

Operating Income

  • It is the profit before taxes.
  • Operating Income = Revenue – COGS – OPEX – Depreciation
  • AKA Operating Profit

Net Profit

  • It is the net amount that’s realized as profits that companies can use for various purposes such as investment in same/new businesses and paying dividends.
  • Calculated as Net Profit = Operating Income – Taxes
  • AKA Bottom Line

Here’s a simple financial statement that’s prepared for a tea shop called ‘Chennai Tea Shop’. I have kept it simple and avoided comparative figures w.r.t. previous periods.

Chennai Tea Shop – Financial Statement for April 2014
Currency: Indian Rupees (INR)

ChennaiTeaStall

 

 

 

 

 

 

 

 

 

 

 

 

 

 

When does software development end for a product?


Many a times we notice development teams getting annoyed and frustrated by feedback requests to improve certain features/experiences. annoy

Is their attitude acceptable?…

 

Let’s look at it objectively.

Software product development, particularly in the consumer industry (B2C space), is highly driven by user experience. There’s no way the Product Manager and UX designers could get it right unless it gets used by folks fitting the target persona attributes. Feedback from users is very important.

As Alan Cooper, author of ‘The Inmates are Running the Asylum’, put it:

The primary purpose of a persona is so that you won’t design for yourself, or for your boss, or that loud, annoying client.

Software development does not end with the ‘last development sprint’ of the release, but it continues until the product is deemed to be acceptable by the target users. Some developers get it but most don’t.personaacceptance

Most often than not it’s only after the last development sprint that product & user-experience acceptance phases begin with Dog Food and Beta tests. Any feedback that’s provided by these users will be evaluated by product management and queued up for incremental implementation.

 

Would love to hear your thoughts on how we (i.e. product management) could make software development think about the product from an end user’s perspective and take them on-board in the journey of building innovative-yet-user-centric products.

Product Management is NOT User Experience


There is an interesting article on this topic by Jeff Lash, and I wanted to share my opinion too.

Product Management and User Experience are different teams in companies — even though they work collaboratively tYou are herehe organization structures are completely different. Both functions are not the same — there may be some overlap but they are not the same.

Whilst User Experience is critical to any product, product success is beyond UX design. Some companies are completely oblivious to the difference and they treat both teams in a similar fashion.

UX teams have managers. UX teams have directors. UX teams have ownership too. If the UX team comes up with a design which is to the best of their ability, and if that gets poor reviews (by management, beta testers, or end users), then why should the Product Manager be held responsible for it?…

Everyone has an opinion!!


Everyone in an organization, especially in a consumer product development company, has an opinion on what new features should be implemented in the next update to the product. When given an opportunity people come up with all kinds of weird asks with the punch line ‘that’ll be cool‘.

Right to opinion3Okay, it’ll be cool to them and may appear great with its face-value, but may not be appropriate to the targeted market segment and may even go in the direction of derailing the product strategy. It is true that everyone has the right to provide feedback and have opinions but that does not mean every opinion will be correct and will add value to the product.

So who decides what matters the most — and how to justify the same. Winnowing out opinions from true ‘stories & facts’ and justifying the same with a great deal of detailed explanations and debates is an ongoing challenge product managers live with.

When everyone has an opinion and if Product Managers go towards the direction of ‘data’ and ‘market trends’ to look for usage patterns and market direction, where will innovative ideas come from? In my opinion, looking at data is more of a reactive approach, but what can companies do to be more proactive and innovative? How do organizations ‘innovate’; what should be the organizational culture to inculcate innovation?…

Would love to hear your experiences and thoughts.

Experience is king!!


After moving from B2B to B2C space, I’ve realized that ‘Customer Experience ‘ (aka Experience) is of tantamount significance in the consumer market. In the B2B market, solving customers’ problems was the key — experience was definitely not in the driver’s seat, at least in my experience.

cust_experience2Let’s take a look at what contributes to customer experience. With what I’ve learned so far, everything about a product can be considered to be having an experience ‘angle’ and contributes to the overall experience. Every customer touch-point with the product contributes to experience. It starts from:

  • How people get awareness about a product
  • What kind of a first-impression that gets set in people’s minds
  • How easy it is for people to learn more about the product
  • What do people perceive is the value of the product
  • What do people think about the price of the product
  • How easy it it to purchase the product
  • How easy it is to get access to product information
  • How easy it is for people to start setting up the product
  • How simple is the product design so users feel ‘self sufficient’ in using it
  • How easy it is (or who to contact) to find answers to questions about the product
  • How easy it is (or who to contact) to find solutions to problems
  • How easy it is to provide feedback about the product
  • How easily are people able to know when will be the next version of the product
  • How simple it is to get rid of the product:-)

To summarize, customer experience is all about the what’s, how’s, when’s, and the who’s of the product.

Would love to hear if you have anything more and specific from your experience!!

Differences between B2B and B2C Product Management


Here’s an article through which I wanted to share my thoughts on the differences between B2B and B2C businesses and products which I hope will be useful for product managers transitioning from one type of business to another. Please do share your feedback.

Target market size

  • The target market size for B2B products is very niche and may be broad in some cases depending on the product, but the market size for B2C products is normally large.

Business survival

  • B2B businesses can survive with a handful of customers, but millions of consumers are required for successful B2C businesses.

RFPs

  • Product Managers often provide inputs to RFPs in a B2B environment, but there is no concept of consumer-initiated RFPs in the B2C world.

Problem solving

  • Solving business problems is a key consideration in B2B, but all B2C products do not solve consumer problems. Some solve, but some are just out there doing other stuff, improving people’s lifestyle, for example. A B2C product may not solve an existing consumer problem, but may introduce a problem and then solve it.

Usability

  • As solving business problems is important in a B2B product, usability takes a back seat, but not completely ruled out though. On the other hand, usability is the lifeline in B2C products. As Steve Jobs put it “you’ve got to start with the customer experience and work backwards for the technology”.

Product demonstrations

  • Constant product demonstrations to specific customers is a norm in the B2B world, but demonstrations in B2C are normally to a general audience.

Professional services

  • Some B2B solutions, especially in the enterprise market, require custom implementation work which gets fulfilled with professional services. But there is no such concept in B2C.

Impact of social networking

  • B2B products use less of social networking for their business, but B2C products depend heavily on social networking for marketing and advertising campaigns.

Sales cycle

  • B2B products have a longer sales cycle when compared to B2C products wherein the buying process is usually a single step.

Brand identity

  • Brand identity of B2B products is driven by size of the company and customer relationships, but in the B2C space brand identity gets created through repetition and imagery.

Impulse purchase

  • Otherwise called as emotional buying, is rare in B2B businesses but very common in B2C.

Getting bored as a Product Manager? Try these tips…


Getting bored with your job as a product manager? Well, any job if its routine will get boring overtime, unless we add some spice to it. Product managers also perform certain routine tasks, and it is very natural for us to get bored (a little at least!) as well.

Listed below are a few things that I’ve practiced to overcome boredom at work; all these are entirely based on my experience. Please feel free to share tips on what you will do when boredom overcomes at work.

Tips to overcome boredom

1. Get back to product management basics. Think through how strategic your role is. Think about the value you bring to the organization.

2. Read interesting articles and blogs related to product management.

3. Relive successful project experiences from the past. Get inspiration from successful past projects.

4. Hangout with fellow product managers.

5. Write articles about your product management work; this will rekindle the thought process and increases your interest in work.

6. Do some unusual things; like working from your apartment balcony, reading product manager job descriptions:-)

Hope this list is useful; please do share your experience on this boring yet important topic.