Creating smarter, faster product teams for the Digital Age

It’s a great time to be a product manager. According to LinkedIn’s recent Most Promising Jobs report, postings for product management positions rose 74 percent last year. And Inc Magazine claims that the product-manager role has become the training ground for the next generation of CEOs.

Products (along with the people and processes to manage them) have been around for a long time. So why all the fuss now? Because the definition of a “product” has changed a lot in the last decade, and so has the role of product manager — especially as more companies look to Silicon Valley as the new normal in the Digital Age.

To get a read on the state of product management today, Prophet recently conducted an in-depth study of more than 20 companies — each building market-leading digital products. We found that these firms are integrating five core capabilities within their product teams — design, engineering, research, product management and data science and analytics — a recipe we’ve affectionately dubbed “DERPA.” Using these ingredients, product teams are transforming how they launch, nurture and manage the solutions they bring to market. And they’re using newfound speed and agility as a competitive advantage. Modern product management is critical to winning in the Digital Age, and a key component of what we call an Evolved Organization.

Redefining products (and the teams that build them)

In just the past few years, technology has transformed our definition of a “product.” A hundred years ago, a product was typically a physical thing one bought and used — an iron, a can of soup, a car. Today, a product may be anything that creates unique value for customers, with a discrete team of resources behind it.

In the digital world, this includes subcomponents of an overall experience. “Features or functions become meaningful products when they create an impact for a group of people,” Kenneth Berger, the first formal product manager at Slack said in a recent conversation with Prophet. Even if people don’t think of them that way, Netflix and Amazon’s recommendation engines are products. Chatbot assistants are products. And Spotify’s search function is a product. Though a customer can’t buy them, they have a direct impact on consumers’ behavior. And all of them have development teams supporting them.

Experiences may also be treated as “products.” Take State Farm’s claims experience, for example. Most policyholders submitting a claim have recently experienced a car accident or other traumatic event. So submitting a claim can be an emotional, high-stakes touchpoint with the brand. And with the company processing close to 35,000 claims a day, it’s also a major driver of business performance. State Farm’s claims experience team has dedicated resources, constantly working on ways to improve the experience for customers and for the company.

As our definition for products is evolving, so too are teams and processes that build them.

Approaches like design-thinking have been around for decades. But as they’ve become more mainstream, customer research and insights teams are playing an increasingly active and integral role in product teams. Products are launched differently too. With today’s premium on speed to market, lengthy development cycles and “big bang” releases are a thing of the past. Consumers expect the products they use to get better — and quickly. So product teams need to incorporate customer feedback faster, and release product upgrades more frequently. “If you’re not embarrassed by the first version of your product,” LinkedIn founder Reid Hoffman famously said, “you’ve launched too late.” Once a product is in-market, data-savvy product teams are increasingly using the “digital footprints” of user behavior to find patterns and drive improvements.

In short, product management in Digital Age is a rapidly evolving game. And it’s challenging traditional product organizations to keep up.

Where traditional organizations struggle

In most companies founded in the last 20 years, modern product management approaches like those above are the norm. And leading companies like Spotify and Zappos have been open and transparent in providing a window into their own product organizations. But if these approaches are no secret, what makes them so hard to implement in more established companies?

Engineering-oriented organizations often find it especially hard to implement new approaches. In many of the engineering organizations we studied, the culture rewarded technical expertise, giving technologists an outsized voice in product decisions. Where a technical-bias eclipsed commercial knowhow, products more often struggled with product-market fit and were slower to respond to customer needs.

On the other hand, highly process-oriented organizations can become a victim of their own success. Anchored to tried-and-tested playbooks, budgeting and planning procedures often encourage what’s been done in the past. And while old processes may be fragmented and complex, they’re familiar.

That’s not to say it’s game over for established organizations — far from it. We’ve recently worked with a number of organizations who have leveraged strong leadership and a simple framework to evolve their product organizations for the Digital Age.

Introducing DERPA: a recipe for modern product management

From Prophet’s conversations with over 20 digital product organizations, we have identified five core capabilities for building and managing successful digital products: design, engineering, research, product management, and data science and analytics.

From Prophet’s conversations with over 20 digital product organizations, we have identified five core capabilities for building and managing successful digital products: design, engineering, research, product management, and data science and analytics.

Exhibit 1: The DERPA Product Capability Framework

Most companies already have design teams, engineers and data analysts today. But our research highlighted two key insights around how these roles are represented in modern product teams.

Insight #1: modern product teams require direct support across all five capabilities.

Today’s digital products and experiences require design expertise to help shape products, research to understand where customer needs and technologies are going, engineers to build them, and data analysts to monitor their use. Product managers reserve a special place as visionaries and orchestrators across other capability areas. “A product manager has three main responsibilities,” says Charles Warren, who heads design for Twitter Timeline and has had similar leadership roles at IDEO, Salesforce and Google. “The first is maintaining and fostering trust relationships across the whole DERPA [team]. The second is a whole bunch of structured communication about the present and future of the product: the priorities we create, the health of the product. And finally, they’re meant to shape and define a vision for the product.”

Product teams that lack support for one or more capabilities struggle to either develop products that the market wants, or to evolve them in line with what users need.

Insight #2: product maturity determines how best to organize DERPA resources

There is no one-size-fits all organizational structure for product teams. Products have different needs as they evolve from fledging offer to market leading solution. And so the organization structure of a team should be a function of their product’s maturity.

Our research found that successful companies take a proactive approach, tweaking both product team structures, and product manager roles, as the product evolves. As the founder of a major SaaS company shared with us, “There needs to be a conscious, ongoing organizational design — we flex around the product, around the customer, and around the brand regularly.”

In a follow-on post next week, my co-author Mike Welch and I will share a DERPA maturity model and discuss how a product’s maturity impacts the role of a product manager, how insights are developed, what pivots are available and the likely nature of product innovation.

(Part II is now posted here.)

(This article is also cross-posted on LinkedIn)