High Output Product Management
I recently re-read the book High Output Management written in 1983 by Andy Grove, former CEO and Chairman of Intel. You might be thinking: “1983? Hasn’t the business world changed incredibly since then?” Yes, it has, but this book is a timeless classic. I believe it should be required reading for professionals in every organization — startup or big company, regardless of industry. It’s certainly required reading for any product manager. Ben Horowitz wrote the forward for the newest edition of the book.
Why does this book matter for product managers? One of Andy’s key principles in his book is, “The output of a manager is the output of the organizational units under his or her supervision or influence.”
Product managers lead cross-functional teams of engineering, design, and other stakeholders (legal, product marketing, sales, etc.). The individuals in this cross-functional team are influenced by the product manager — the products or features that are prioritized by the PM are what the cross-functional team will pursue. Therefore, the output of a product manager is the output of the cross-functional teams under his or her influence.
The goal of all product managers is to deliver high-impact products that solve customer problems and create business value. You can substitute the word “impact” for “output” to understand why product managers want to deliver high output.
So what can product managers do to increase their team’s output, and therefore their own output? Here are three recommendations:
- Select the right output metric
- Prioritize your products using the output metric
- Choose high-leverage product features
Let’s look at each of these in some more detail.
Select the right output metric
As a product manager, it’s incredibly important that you select the right output metric by which to measure your product’s output. The output metric is the indicator that you use to measure business value.
The indicators you use to measure value can be any number of higher-order metrics: revenue, costs, number of customers. They can be aspects of your value chain that would drive increases or decreases in the higher-order metrics: conversion rate, order value, retention rate. As a PM, you should understand what the key metric is that you and your team are responsible for driving, and how that metric impacts the overall company performance. And then your own output is measured by the how your team improves that metric with the products that you deliver. You should be able to measure a causal impact between the products you have built, and the output metric.
When selecting an output metric, be careful not to confuse output with activity. For example, when measuring sales performance, you would rather select something like number of orders or revenue (output), rather than number of sales calls (activity).
Prioritize your products using the output metric
Whenever considering a new product opportunity, you want to do is validate the market need with customer research. Along with convincing yourself that there is a real market need, you can use the output metric as a way to prioritize high-impact (high output) products for your team. The output metric becomes your initial screen for product opportunities — you can evaluate potential product ideas against the output metric you intend to drive. This will give you a sense of the opportunity size. How much will the product improve the desired output metric? You can then prioritize a number of potential product ideas by output and effort / risk.
Ideally, you will pursue the low-hanging fruit of high output, low effort/risk first. And you definitely want to avoid low-output products entirely. Part of the problem for many PMs is that they are not thinking big enough — they might agree to pursue a product that has only medium or low output. Don’t settle for anything less than high output products. This is a surefire way to improve the output of your team.
What about products that are potentially high output, but are also high risk? (“Important but requires effort or risk”) For these high risk/high reward products, you want to constantly monitor how you’re performing against the output metric. After each iteration of an MVP process, compare the output metric v. where you thought you would be at that stage. If the product is way behind your forecast at a particular iteration, you have three choices: continue iterating, pivot or stop work. The point of pursuing an MVP approach is to constantly test your riskiest assumption, and compare performance against your output metric. At a certain point, if you don’t believe that there’s any hope of getting back on track towards your forecast, it’s better to pivot the work or even shut down the effort. As Andy Grove mentioned, you want to reject the project “at a stage where its accumulated value is at the lowest possible level… We are better off catching a bad raw egg rather than a cooked one… In short, reject before investing further value.” In other words, it’s better to fail as early as possible, before you have invested too much engineering effort into a product, than to fail at the end.
Select high-leverage product features
In his book, Andy talks about how you can increase your productivity (and therefore increase your output with the same resources) in a couple of ways. You could squeeze more out of your existing resources — you and your team could work faster, longer, or harder. That approach may not be sustainable, and may result in errors as the team burns out or cuts corners in order to work faster.
The other approach is to change the way we work by focusing on the highest leverage activities. “Work smarter, not harder.” Certain activities are high leverage because they generate high output; other activities are low leverage because they generate low output.
As a PM, you can apply this concept to product development. If you substitute the word “features” for “activities,” then the advice from Andy is to focus on fewer high leverage features, rather than building a mix of high and low leverage features. That way, your scarce engineering, product, and design resources are applied to the high leverage features that deliver high output — and they are not wasted on features that deliver low output. I’ve written about how you can simplify your products, by focusing on a few core attributes of your product and by having a singular purpose. Just be sure that those core attributes — the true essence of your product — are a set of high leverage features.
Andy Grove’s book, High Output Management, is a timeless business book with many important insights and lessons. In this post, I have taken a few of his lessons and interpreted them specifically from the lens of product management. As we discussed earlier, the output of a product manager is the output of the cross-functional teams under his or her influence. You can therefore measure the success of a PM by measuring the output (aka impact) of their products.
What can PMs do to increase their output?
- Select the right output metric
- Prioritize your products using the output metric
- Choose high-leverage product features
Take the time up front to select a meaningful output metric, and make sure that everyone on your team knows that this is the key metric you want to drive. Understand the opportunity size of each potential product idea you could pursue, and prioritize the ideas by output and effort/risk. (Push yourself to think big — don’t accept medium or low output products! As Larry Page often says, “Think 10x.”) And for those products you decide to pursue, be sure to focus on high-leverage features. If you do all of these things, you are likely to be a high output product manager.
If you enjoyed this article, please click “recommend” and check out additional posts in my publication PM Insights: Lessons from Being a Product Manager.
