Frank Tisellano: “Business First” Product Management

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Frank Tisellano gave a briefing on his “Cynical PM Framework” at Lean Culture, advocating for a “business first” approach to product management.

Frank Tisellano on “Business First” Product Management

Event Description

Are you striking the right balance between product and customer focus? Join us as we welcome Frank Tisellano, a go-to-market expert at Google, Area 120, Google’s Internal Incubator, Kaseya, and others. Frank shares his journey and realization of the importance of this balance. Discover how understanding a product’s impact on a company’s business is key for success. Learn how to become more commercially focused with his Cynical PM Framework.

The Cynical PM Framework

Slides https://docs.google.com/presentation/d/1giPWRsDfT6vXmYtC_mlPAjtstp4HKBua13xdyantnxE/preview 
Frank’s Blog https://www.ft.io/blog/cynical-pm-at-lean-culture/

Edited Transcript

Sean Murphy: I invited Frank Tisellano to speak at Lean Culture / Lean Startup Circle because I thought his “Cynical PM” framework offered a succinct encapsulation of how product managers–and startup founders who are acting as product managers–need to create value for their customers. Value that customers are willing to pay for, or continue to pay for, or pay more to increase their usage and adoption  of the product.

Frank is a product manager at Google and has worked in product management Google and Kaseya, Mast Mobile, Calling Vault. Frank has a BA in English from St. John’s University.

Frank Tisellano

Frank Tisellano:  My talk is for folks who are craft-oriented PMs because I care about great design and the craft of software development. I’ve been doing product management for over ten years. Today, I’m the PM lead for Google Slides. I’ve managed or mentored over 50 PMs.

I started my career at a time when Apple was on its rise. Since then, I have heard leaders at companies that I admire say that all you need to do is focus on the user, and your business will be successful. I heard that design is how it works–that what really matters is great design. I started out building software and doing design. I believed that the craft mattered more than anything, and that users and buyers will see that commitment to craft and choose my product.

I was a developer who resisted the encroachment of my business peers who only cared about the money. I viewed them as very cynical and lacking commitment to craft, which was antithetical to the success I saw at Apple and Google.

A Rude Awakening: Craft is Necessary But Not Sufficient

Frank Tisellano: I had a rude awakening in my first product management job, where I learned from an amazing manager guy named Dave McCarthy that the PM’s job is to manage three different areas. A PM needs to satisfy the goals of the business and the needs of your customers using the capabilities of your team.

Even though I understood intellectually the need to keep business goals, customer needs, and team capabilities in balance, I was more attuned to customer needs and team capabilities. Business goals were something I acceded to grudgingly.

But I learned. If you only focus on customer needs and team capabilities, you risk building cool stuff that feels good but has no real impact on your business. It may not even have a tangible impact on your customers, just an imaginary one. For example, we did this huge redesign, and now the product looks much better, so much more modern. Unfortunately, none of that mattered to our customers despite how they talked about it.

But ignoring any one aspect causes problems.

  • If you focus only on the business goals and your customer needs, you can succumb to pie-in-the-sky thinking about what your team can achieve. You must also be an expert in your team’s capabilities.
  • ]If you focus only on the business goals and your team’s capabilities, you risk ignoring your customers’ needs. You will fail to deliver something valuable. Customers won’t pay, and you won’t achieve your business goals or fund your team.

What Happens When You Focus on Business Goals First

Frank Tisellano: I decided to focus just on the business side– or at least focus on it more than I had before. I realized that the product is not the end goal. It may sound obvious, but I think it requires articulation because that is not always understood by folks I mentor or manage. They will agree that their job as product managers is to meet business goals, but their behaviors are not always in that direction.

The product is a tool to help the business achieve its goals–and there are only three goals for every software business.

  1. Acquire new customers and new revenue.
  2. Retain customers. It costs a lot less to retain current customers than to acquire new ones.
  3. Expand usage and deepen engagement.

If your product is a tool for helping your business to achieve its goals, then your business is hiring your product to help it acquire new customers or revenue, retain those customers, and help it expand in those customers. It’s  not trivial to define the key job–or perhaps two (it’s rarely all three)–your product needs to do for the business. This applies at the feature level as well: what job does this feature do for your product? More generally, you may not own the entire product or product suite, but I will use “product” to mean the scope of functionality you own. Misalignment about the job of your product makes managing it much harder.

Example: Misalignment with Sales Team

Frank Tisellano:If you are developing software for business applications, you may have faced a situation where the sales team asks for features that prospects request. However, the product team disagrees, pushing back with features customers have told them they need. In product team discussions, someone will ask, “How could the sales team possibly think that these other things are more important than these things that we know to be really important?” It’s tempting to write it off as a flaw of the sales team–or sales as a profession. But it’s a lack of alignment on the job your product needs to do.

The sales team thinks the job of your product is to help acquire new customers. They’re incentivized to focus on the needs of the potential customers evaluating your product. They develop expertise in why prospects say no. The product team can find it easier to talk to paying customers, working with customer success and account management teams to improve the product for people already using it–driving retention. Sometimes, new customer acquisition needs have little overlap with retention requirements. You must agree on the high-level strategy: how do we balance new revenue with retention? If you argue at the detail level, you are missing the root cause of the disconnect.

Example: iCloud Drive vs. Dropbox in 2011

Frank Tisellano: Another example, it’s 2011 and you’re the PM for the newly launched iCloud Drive. You are up against Dropbox as the incumbent who owns the majority of the market for people who want a file syncing service.

The Dropbox PM is managing the company’s only product in 2011. Its primary job is to acquire new users. Dropbox used a freemium model, providing high-value services to attract users they could upsell. They gave away a couple of gigabytes of storage for free as a loss leader and were very successful. Dropbox had amazing cross-platform support, excellent web sharing, and a well-thought-out permissions model with fine-grained access control for sharing. They support every device under the sun, including Linux, Windows Phone, Android, and IOS.

So, you are the iCloud Drive PM; what do you prioritize? The first thing to understand is that the role of iCloud Drive is not to acquire new customers for Apple but to help retain customers and expand their use of Apple products. These customers are already using Macs and iPhones, so this service encourages them to put more files on Apple’s cloud, enabling them to get more value out of existing purchases and making migration a lot harder. So retention and expansion drive PM priorities. This leads to some high-margin subscription dollars because you are cross-selling existing Apple customers. The Apple PM will prioritize deep integration with IOS and MacOS and ignore other platforms and operating systems, with a UI that makes it look native to those systems and other Apple services like iMessage. We want to sell this to folks that are already using Apple products. This is not for anyone else.

Example: Apple’s iMessage

Frank Tisellano: Let’s take a look at positioning. For folks who may not know,  positioning is how your product is perceived in the minds of your target market relative to other products in your market. It’s like brand in that you can try to influence your positioning, but the final determination is in the mind of your target customer.

Let’s go back to our friends at Apple. Apple’s corporate goals and how they have structured their business for a long time is to grow revenue on the back of very high margin expensive products. They make the absolute best product they can and charge a premium to create very high margins. The iPhone is probably the best example of how Apple executes against corporate goals. It is a very high revenue product; it is incredibly high margin, especially for a hardware product. And it has many features and differentiators that make it fantastic for acquiring new customers.

I worked in an Apple Store when the iPhone was first released. I saw a complete transformation in Apple’s go-to-market: they had been begging people to switch to Macs using tools like Parallels and some incentives to derisk making a change to Mac. Suddenly, the iPhone is the center of people’s lives. It becomes the primary way Apple acquires a new customer. Buying a Mac becomes a no-brainer once you’ve put your life into an iPhone. So, the iPhone is now directly aligned with Apple’s top-level goals.

But even though Apple’s top-level goals are high revenue at high margin revenue, every product does not need to take on that job. Some products have different jobs; they are not about acquiring new customers. Because once you’re at the point where you’ve almost saturated the entire planet, you’re running out of human beings to buy your devices. You need to start thinking about ensuring those folks don’t leave: retention becomes as critical as new customer acquisition and new revenue acquisition.

The purest expression of an Apple product that is not high margin but still supports Apple’s goals is iMessage. It has a little over a billions users who send more than 8 billion messages a day. Apple spends billions of dollars to support the iMessage infrastructure. But iMessage is free to iPhone and Mac owners. Apple generates no revenue from iMessage directly–it has negative margins. It only runs on Apple platforms so it does not offer non-Apple customers an experience that encourages them to switch. iMessage does not create new revenue, it’s job is retention.

Maximize Overlap of Your Business Goals With Customer Needs

Frank Tisellano:I’ve talked about several products that customers love that also support their supplier’s business goals. The job of the product manager is to figure out how to maximize the overlap between your business goals and what your customers need. Because if you don’t meet your business’s goals, you won’t be around very long to deliver great products to your customers. And if you don’t meet your customer’s needs, you won’t be able to meet your business goals.

I stressed the need to satisfy business goals in this talk because it seems to get the least attention. I want to encourage you to integrate business goals into your thinking about customer needs and team capabilities because it will make you more successful as a product manager.

Sean Murphy: Thank you for a compelling presentation. That was that was an excellent overview that goes well beyond the examples you cited in the article. We’ll take from the audience.

Q: How to Apply to a New Startup?

Question From Audience:  I’m looking at ideas for a startup, how would I apply these principles?

Sean Murphy: Let me build on that. My sense is that startup founders are going to focus on new features in the following order:

  1. New customers  / New Revenue
  2. Drive Retention / Minimize Churn
  3. Drive Revenue Expansion from current customers.

Do you have rules of thumb or guidelines you can offer for when to shift the focus from a primarily acquisition-centric set of strategies to retention and then when to focus on expansion? What what do you look for? How do you navigate that?

Frank Tisellano: I’m very much a B2B Product Manager, so I will answer from that perspective, in particular, a team that’s bootstrapping.

  1. Are we able to acquire customers? If the answer is no, then that’s where you need to start.
  2. Are we bringing in enough revenue to fund the team? This can be accomplished with a few customers who pay a lot–whales, for want of a better word–or more medium-sized firms or many small firms. The average deal size drives the number of customers you need to target and has a substantial impact on the shape of your business.
  3. If customers are not renewing, if you are not meeting their expectations, you need to address that.
  4. If customers are not expanding their usage, then, depending upon the nature of your product, you may want to consider adding either expansion offerings in supplemental modules or add-on products that complement your base offering.

Product-market fit is never permanent. Markets evolve, and you need to react. For example, competitors will respond to your offering and may start to take business from you or make it much harder to acquire new customers. You will need to respond in turn.

Retention issues can sneak up on you. I was effectively in a turnaround situation at a previous company: retention was poor, and churn was very high. My number one job was to stop churn by focusing on existing customers. New customer acquisition was secondary until we figured out how to keep customers happy. Churn issues have been the death of many software businesses.

How To Tell If Prospects Value Your Product Enough to Pay For It?

Question From Audience: How can you tell if prospects will pay for your product?

Frank Tisellano: Try to sell it. Product managers must do discovery, and the only way to determine if the product offers enough value that customers are willing to pay is to try to sell it. I’ve worked in companies where the founders attempted to outsource sales early, and they all failed. The products failed, and the companies failed. People didn’t want the product, and the founders were too disconnected to realize that and make the necessary changes in time.

Sean Murphy: Too many founders associate selling with pitching and stretching the truth. But a good salesperson sells with their ears. Early sales efforts are more about listening to the customer react to your product’s value proposition as clearly as you can frame it.

Frank Tisellano: I agree fully with sell with your ears, right? Selling is the best way to do discovery, because you’re asking people to evaluate your ideas with their own money. If they’re willing to pay, that tells you that at least one of these three things is true:

  • Your product is very valuable.
  • You are able to describe the value your product offers
  • You’ve discovered how to reach real prospects.

At least one of these has to be true to get started, and you will need all three for an effective go-to-market strategy. I resented the sales team early in my career. I viewed them as cynical liars only interested in making money. But great salespeople have as much craft as developers or designers. They are expert at honing a message so that prospects understand the value. Effective salespeople listen more than they talk, and they adjust, experiment, and refine their message and their questions until they get it right. When PMs sell, they can shape the product based on feedback from prospects who initially say “not interested.”

What Can User Research Contribute?

Question From Audience: UX researchers argue that you can gain a lot of insight by understanding what prospects currently do and their pain points. You advocate trying to sell your solution. What can user research contribute?

Frank Tisellano: I see user research as complementary to discovery-driven sales. I am a huge believer in research. While it cannot tell you whether a prospect will pay, it can identify a spectrum of problems to solve and assess the prospect’s priorities. You can understand their view of the most important problems to solve. Research can help you understand how good your proposed solution is. All of these methods can provide inputs to your strategy, which articulates what you will say yes to and what you will say no to. But in the end, you have to determine your strategy by aligning customer needs with the goals of your business and the capabilities of your team. Customer needs are essential, but you need to define a product that’s feasible to implement and will satisfy your business goals. When PMs focus on customer needs and feasible solutions and neglect business goals, they will not craft a viable strategy.

Sean Murphy: And that’s what we will end on. Frank thanks again for a great presentation.

Frank Tisellano: Thanks everyone! Awesome.

About Frank Tisellano

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