Master the Art of Product Management
The psychology behind building great products
You’ve decided that you want to build a product from scratch or you’re interested in understanding more about how to make great products. Whether you want to build the product yourself or are interested in understanding more about how to build it in the future, you have to be sure that you want to get into the mindset of product building. If you come from a services background, then I would like to introduce you to the product mindset. There is a psychology behind product management. It is a mental framework that can be developed. Infact, it is present within all of us since birth. We just have to discover and polish it. Remember those days when you were a child and you would build clay models or just paint on chart paper? Yes, finishing a painting on chart paper is as good as executing a project from scratch. Fetching accolades for your painting from your teachers and parents is also as good as monetizing it. The playing fields are different. Stakeholders differ. End users vary. Oh wait, did I just use the word end user? When you want to build a product, you’ve got to be sure that you’re doing it for a user. A painting or a clay model is just a representation of a product. It is not a product in itself. There is no user using a painting. It is an abstraction of an idea, a concept, or a theme.
So, what is a product and what is the ideal product mindset? How is it different from the painting we discussed previously? When we were kids, we heard the word mechanical advantage. We learned about machines and how machines provide mechanical advantage. Mechanical advantage reduces work. It makes our lives simpler by reducing the effort, time, and cost required to accomplish a mission. The end objective could be simplifying human life.
According to popular trends, there are a few attributes of a good product thinker. Not only does s/he like to solve a problem, but s/he is also quick to capitalize on market opportunities. S/he is quick to spot an opportunity and identify the need to solve a problem. A product executive is usually very resourceful because of the multiple stakeholders that s/he has to deal with and manage. Product management early on in one’s career may lead to future entrepreneurial opportunities. A lot of entrepreneurs start their careers building products as product managers.
In terms of talent, a product management executive has to have a knack for design, technology, and growth. It is important to have a design-oriented mindset as good design often leads to clean and intuitive interfaces that create a “wow” effect on the customer. I was recently working on an ERP system that involved heavy data processing. It often helps if the interface is built in a way to accommodate good categorization of data and great aesthetics in terms of colors, fonts, spaces, etc. In other kinds of applications such as an e-commerce website, or a mobile app, it helps to have good-looking interfaces as people tend to fall in love with beautiful things. Let us try to look at the correlation between human psychology and aesthetics. And in my honest opinion, to be a successful product person, you have to study psychology or understand it well as a lot of exercises that involve product discovery including market study, research, need identification, feasibility analysis, and surveys will involve dissecting the human mind and thought to come up with creative use cases or creative options around human-centered thought. The first step of design thinking is empathy. Empathy is when you step into the shoes of the customer or user and try to imagine what his journey or experience using your product would be. Naturally creating a product would involve a heavy understanding of the human mind and sensory organs. The human eye perceives situations and experiences in a magical way. We get attracted to every aesthetic design that is simple to use and conveys its usability in an intuitive manner. Similar is the understanding of design. You have to understand what appeals to the user so that he just doesn’t want to bounce off the page. In order to understand what the user likes best; you have to carry out a series of usability tests with a sample size population of a relatively large number. Usability testing is one of the first steps to identifying blockages in user experience and understanding what it is that users are experiencing a problem with.
Economics of building products
What do you understand by economics? Economics stands for the science behind allocating scarce resources for human consumption. How do you determine what is scarce and what is human consumption? There is no such thing as scarcity because our needs are unlimited. Even a rich man has unlimited wants and needs, so scarcity could mean a different thing to him than it could to a poor man. But let’s face it - there is scarcity everywhere in our lives. Economics is driven by demand and supply. When there is a greater demand for something, there is likely going to be a bigger market for that product. With a bigger market for the product comes the question of who are the primary users and who are the secondary users. The primary users who are ideal to consume your product comprise the target market. The rest of the users who are indirectly impacted due to consumption or fall beyond the ideal range of users comprise the secondary user base. They may or may not be part of the target market. Well, let’s just say that they should not have a direct influence on your decision-making as you decide on the characteristics of your product.
Coming back to demand and supply, one of the main objectives for a product management executive is to obtain product-market fit. If there is demand for a product in the market, the product is selling well and its customers are spreading the good word about the product - then there is said to be a product-market fit. According to Marc Andreessen, who is often credited with developing the concept, product-market fit means finding a good market with a product capable of satisfying that market. While your initial market research can determine how large the target market is, determining whether your product suits the target market well is something that is achieved in the APMF phase. Marc Andreessen divides the lifecycle of a startup into these two key stages depending upon the product-market fit: BPMF & APMF (Before Product Market Fit and After Product Market Fit). As you may have seen already, there are two phases of product-market fit: BPMF & APMF. Before obtaining product market fit, you’re still experimenting with your product in the MVP stage, iterating and then reiterating to find the set of features that work the best with your users. Performing A/B tests or conjoint analysis often helps understand which features in your product the users value most. You could also use heatmaps to unravel usage density. There will be some features that won’t lead to your product achieving PMF, you just have to eliminate those. Overall, it’s an iterative process that is experimentative and pretty random until you get to a stage where you are able to achieve stability out of the initial randomness. User assertion through constant feedback and validation is the key. Proximity to the market is an extremely important metric to gauge in the initial stages of the product lifecycle. The closer you are to the market, the easier it gets to gauge user sentiments.
There is a very important concept in economics that plays the key in deciding which products to build or which features to include in your product. As much important as prioritization is to your product backlog, the substance behind effective prioritization will always be a cost-benefit analysis. You would have to calculate, rather than estimate, whether the effort you’re putting in is worth the time and money that you’re investing in the product. Is the product going to reap enough fruits of your labor in the future? Would you rather invest in something that has greater financial rewards but would take less time and effort to build?
Unit economics is also a very important concept that you should master while building a product. Unit economics describes a specific business model's revenues and costs in relation to an individual unit. Let us examine why unit economics is important for any product:
- 1. Unit economics can help you forecast profits. It presents a granular picture of the product’s profits per unit basis.
- 2. Unit economics can help you optimize your product by providing data to suggest whether marketing expenses are worth it or not. Also, helps understand the value of a product - by reflecting whether it is undervalued or overvalued.
- 3. Unit economics can help you assess market sustainability. At a per-unit level, it helps understand many other factors such as operating costs and factors that lead to variable operational expenses which lead to lower profitability and thus make sustainability difficult in the long run. If you’re able to uncover the unit economics of the product, you would be able to assess market sustainability better.
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