The future of product management (1)

This is part 1 – part 2 (to be published soon) looks at some recent articles I have seen that support this approach

In one of my day jobs I get involved with product management and I often find that bridging the gap between our limited investment budget and the poorly defined needs of our customers to be a real struggle, more specifically I find:

1. Customers are not able to clearly articulate their needs, and we don’t invest much in helping them do so
2. The metrics we collect from the services we currently deliver are not designed to give us insights into how that service needs to evolve
3. Customers are largely disconnected from the investment decisions that we make and so don’t feel that they are engaged in a partnership with us that is to the benefit of both parties (this is especially disturbing because we are engaged in multi-year contracts)
4. Neither our customers nor ourselves are well placed to plan for disruptive waves of change, so we both tend to wait until its too late.  For us that means we fail to secure new markets and retain existing ones, for customers it means they miss out on opportunities to gain or at least maintain their competetive advantage

About a year ago I started to think about how we could improve the situation, and I came up with a new approach that would entail placing more control over our investment decisions into the hands of our existing customers, and internal company analysts responsible for spotting disruptions.  In more detail I proposed the following:

1. Our customers are engaged in long term relationships with us, are motivated to help us and our fairy representative of the needs of future customers.  This means we can largely trust their motivations
2. We can get a fairly robust short list of potential investment areas through our research into emerging trends and current service “issues”
3. If we converted our investment budget into virtual dollars we could give it to our potential virtual investors, these investors would be primarily customers, but also a small amout would be reserved for existing service delivery directors and our own researchers into disruptive opportunities
4. Potential investors would get a chance to review our short list of investment areas and suggest additions
5. We would present to customers our investment ideas in an event, in much the same way that companies seeking investment might pitch to VCs.  During the event our potential investors would get the opportunity to grill us, suggest changes and discuss the options between themselves.  Investors might need to sell their preferences to other investors in order to secure sufficient investment to make sure enough funds were secured to make their favourites happen
6. Once the new short list of ideas had been established a second round of funding would probably be required because some investments would not secure enough funding, in addition some customers might decide to invest their own real money to make sure some activities that were really important to them actually happened
7. Once all investments had been decided investors would often be strongly motivated to see them succeed and would hopfully offer to work with us in partnership
8. Customers would then track their invesments and be ready and waiting to “buy” the services once they were complete
9. We would continue to pole customers on their liklihood to buy so as to get reliable demand forecasts and to make sure the solutions were on track to meet their needs.  In some cases we might need additonal investment funds as we moved through the development phases, these re-investments by our customers would keep us on track

Although initially we would probably allocate virtual investment money to customers based on the revenue we got from them a refinement to this scheme would be to reward customers in later years who invested in services that were most successful for us, making the scheme much more like a real investment market.

Unfortunately key stake holders in my company felt that this scheme was a bit too radical and I suspect that they were reluctant to give too much control over to customers.

The ideas for this approach were drawn from many sources, but briefly:

1. CFO magazine had a good article on the use of investment markets for improving decision making in business
2. The Wisdom of Crowds is a useful book that explains how a large group of independent peoples decisions can be aggregated to create decisions that are better than any individual specialist, if you like to listen to your research there is a good talk by the author available here and a great summary by Dave Pollard here
3. Tom Malone talks about the power of predictive markets here
4. Clay Christensen describes the concept of disruptive innovation here and here,  that’s why in my approach I don’t allow existing customers to hold all of the investment but also reserve some for investment in continuous improvement and some for investment in disruptive alternatives
5. Dave Pollard provides a great summary of Christensens work on innovation here