Unlocking the Power of Aligned Product Strategy and Financial Goals
As product managers climb the corporate ladder, they transition from focusing on the day-to-day delivery of features and functions to making broader contributions to the company. This shift involves setting overall business strategies, driving reputation, and ensuring profitability. A crucial aspect to keep in mind is that the sheer volume of features and functions released by a team is irrelevant if they don’t significantly impact the organization. One key area of impact is the profitability needle.
The Harmony Between Product Strategy and Financial Goals
To ensure that product releases contribute meaningfully, it’s essential to align product strategy with the financial goals of the company. This harmony is critical because companies exist to generate revenue from their market (except for non-profit organizations). To achieve this alignment, we must first understand what product strategy and financial goals entail.
Defining Product Strategy and Financial Goals
Product strategy refers to the step-by-step approach implemented by an organization to achieve its mission and vision. It’s based on factors such as identifying target customers, understanding how the business benefits from the product, maintaining a competitive edge, and considering macroeconomic conditions. On the other hand, financial goals involve achieving profitability and building a sustainable business. Key financial metrics include percentage growth of monthly subscription revenue, monthly churn percentage, and percentage of users moving from free to paid tier licensing.
The Advantages of Alignment
Aligning product strategy with financial goals offers several benefits:
- Material Impact: Ensures that every product release significantly impacts the bottom line, justifying future work and measuring the effectiveness of changes.
- Unified Objectives: Aligns different siloed functions within an organization to a common objective, mitigating fragmentation and ensuring that decisions made have a positive impact on the company’s overall health.
- Motivation: Creates a positive atmosphere within product teams, motivating them to do their best work and contributing to the company’s growth and success.
Methods for Achieving Alignment
To align product strategy with financial goals, consider the following methods:
- Understand Financial Goal Setting: Dive into information about how financial goals are set, asking questions like “What made customers pay for the product previously?” and “What will make customers pay for the product in the future?”
- Create and Validate Assumptions: Make assumptions about the kinds of features that customers may be after, and discuss and test them internally with teams that have a direct line to the customer.
- Analyze Competitors’ Strategies: Consider what competitors are doing, how they price their products, and what features they offer that yours may lack.
By following these tips, you can create a product strategy that aligns with your organization’s financial goals, driving growth, profitability, and success.