Defining Lean Product Management
I wrote a blog post back in January of 2010 entitled “It’s Time PM Became Lean“. It was a call to action for the PM Community to focus its attention on developing new practices that would allow product managers to become 100% more effective. I followed that with a number of posts around Lean issues and also spoke about Lean Product Management to a packed room at Silicon Valley P-Camp later in 2010. I’d like now to begin a new series specifically on Lean Product Management and what a Lean Product Management Framework might look like.
In this first post, I will merely look to define Lean Product Management. James P. Womack, author of Lean Thinking defines Lean as “Creating ever more value for customers with ever fewer resources.” Dan Olsen adapted the definition to product management in his Silicon Valley P-camp 2011 talk “Lean Product Management” as “Achieving Product-Market Fit quickly in a resource efficient manner” which better captures Lean from the product management perspective. Building off Olsen’s definition, I consider Lean Product Management to be the pursuit of:
Achieving ever better product-market fit in ever less time with ever fewer resources
Thus, Lean Product Management is a journey. It is a process of continuous learning and improvement. There is no point where we can say “We have arrived.” We can only say “we did better today than yesterday, and I believe with the following changes we can do better tomorrow than we did today.”
Lean Product Management can also be expressed in a simple yet powerful formula that can help guide the product managers decision cycle:
Looking at the formula, we want to perform activities that will increase product-market fit, decrease our time to market, and decrease our costs. The first half of the equation deals with revenue and the second half with cost. The expression is a proxy for Profit = Revenue – Cost. A team starts with a given structure, process and capability, so the formula focuses on changes or deltas that might be implemented. Although it would be impossible to accurately quantify every decision, the formula can be used to guide decisions. For example:
- By answering a research question, the product achieve greater differentiation in the market leading to a higher price point and increased sales. If the incremental profit from the better fit is greater than the cost of the research, then the activity should be performed.
- If time to market can be decreased by 30 days with the help of an outside vendors and the profit during those 30 days is greater than the costs to accelerate the project, it is worthwhile.
- However, if time to market can be reduced by skipping important concept testing that ultimately will decrease fit, then this is a bad tradeoff that will make the product less profitable.
Ideally, the improvement cycle is reinforcing, improving two or all three variables together. For example, decreasing time to market by increasing collaboration between groups produces revenue sooner and reduces costs because the product team‘s salaries are now going towards the next project of value.
Lastly, it is important to optimize the whole system and not a local function. For this reason, the formula looks at time to market and not time for individual steps. For example, if the product manager pushes user stories without good satisfaction criteria to development, he may have saved himself time, but the stories will require additional iterations to achieve acceptable fit and lengthen the overall time to market and to market fit.