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Product Management is often an understaffed, overworked function. 

Yet, the impact that this organization has on development is huge.  The best analogy is a lever.  One Product Manager can effectively move 10 or more engineers and focus them on the winning requirement.  Done properly, it is amazing!  Done poorly it is a disaster.

We recently performed a benchmarking study that included data from the following companies:

• Apple
• Ariba
• Adobe
• Cisco
• IBM
• HP
• NetApp

The results we found were that most organizations had at a minimum 10 developers per Product Manager, and on the other end, had a maximum of 20 developers per Product Manager.  Outside this range was cause for concern.  Below is a chart that summarizes the data where 3 of those surveyed responded with a point estimate, and 3 gave ranges for the data.

Here are some verbatim quotes:

Please qualify this as an educated guess based on the large company / large teams I’ve worked with: Engineering (including scientists)/Product marketing = ~14. My sense is that the number is lower for smaller teams, e.g. an engineering team of 10 would have ~1 product marketing person. I hope this is helpful.

If we’re talking specifically about (all) engineering to just product marketing , I would estimate something like 10-20 to 1.   I think the numbers can vary quite a bit depending on size of company, number/complexity of products, how much is outsourced.

At my former company, which is a SaaS shop, we had 1 product manager per major product line. For my org, which was about 170 in size we had 7 product managers.

This organization, which built an enterprise app suites, we had it a little better with 120 engineers and 6 product managers.

My take on this is that product marketing heads are proportional to product counts and not engineering heads. Product (ui, requirements etc) and project (schedule) management combined tends to run at a ratio of 1:5 against engineering total, 1 product/project manager per 5 engineers (dev or qa). This ratio may go from 1:5 to 1:20 depending on count and complexity of products, i.e. the lower the count the less product/project management, or the more complex the higher. I’ve tended to see closer to 1:5.

We don’t have that measurement at our company, in fact, we do not have my analog in Marketing (Process Management) so I would not even know who to ask. However, I do know that in the Operating Systems groups the ratio is too low. We hear complaints all the time, and we see the results in churn.

It depends on many factors: complexity of product line, newness of product line, and function (product marketing, product management), and roles (on team, independent, inbound versus outbound), etc. However, the range I have seen is rarely outside 10 – 20:1.

The new economy has put a fresh lens on how we fundamentally view our business models.  There is no longer lots of margin for error – we now live in an environment of tremendous pressure.  Pressure on operation margins, pressure on innovation, pressure on sales growth, and pressure on all expense items – pressure on every aspect of our business.  What can we do?  Where should we turn?

It is time to reexamine our basic assumptions and see if we can make radical transformations in how we convert concepts to cash.  Let’s see how this can work.

First, create timeline line of how you convert an idea to revenue.  Where are the touch points, where are the steps where value is added?  What part of the process can be sourced externally – for lower cost or greater innovation?  Many companies do it all – so no parts of the concept to cash is done externally.  In the former years, all meant everything in a vertically integrated organization.  However, many organizations now outsource some of this process, typically in the generation of the product itself such as – manufacturing or coding. 

But is this sufficient?

It may be for some organizations with the luxury of highly differentiated products and gross margins in the 50% range.  However, for most organizations there is a huge opportunity to improve their lot by increasing the range of outsourcing elements – and having this chain of outsourcing elements linked together.  For example, product definition and industrial design are kept internal.  However, product engineering, manufacturing engineering, production, distribution and warehousing are all outsourced by one or more firms.  Then, at the end of the process of concept to cash, the sales and customer service are kept internal.  This is shown in the diagram below in the “New Brand Paradigm” graphic element.

Customer input, at the left hand side of the diagram is critical.  Sales at the right hand side is also critical.  So how much between those handoff points must be done internally?  The new lean brand paradigm outsources, using integrated partners, as much as possible.  The result of doing this can be to take as much as 10% reduction in overhead, 5% improvement in cost of goods sold, and by using some related strategies to leverage distribution to other geographies, 5% increase in sales.  The net is an improvement in operating profit (OP) by as 15% as a percentage of sales without accounting for the lift in revenues.  This is huge as it turns a business with an OP in the 5% range to something north of 20%.

The company focuses on customers and the DNA of their brand – and leaves the rest to others who can do a better job for less.

We all would like to leverage the power of the user community in innovation, speed, and customer satisfaction, but what really works?  We have examined the leading case studies and researchers and have found lots of heat, but little light.  Why? 

1. Organizations don’t know how to manage the effort in the context of strategy – it is a “one off” effort
2. They are under resourced & expectations for quick payback are set too high
3. Functional silos prevent the diffusion of great ideas back to the domains of need

So what have we found to ensure success?

First, pay to play.  Either this will be a resourced activity with a “Plan for Success” or it will be doomed to failure.  You will need to commit to a vibrant community – and this means more than 100 users and a site host that keeps the community coming back.

Second, the users must win.  Address this issue first.  Why do communities grow and others die – those that survive, survive because they address users’ needs.

Third, leverage providers.  There are some technology solution providers that can assist with implementation once a concept is defined.  In the innovation area there are:

• Brightidea
• Innocentive
• Imaginatik

In the community area, there are a number of solution providers – within and outside the firewall.

• Communispace
• KickApps
• Mzinga
• Ning

How often have you wondered how a supplier, relationship or employee will last?  How often have you been surprised when something that you expected to be constant suddenly changes?  All too often, we would like greater insight into the future, but lack tools for estimation.  One very useful estimation tool has been put forward by J. Richard Gott, a Princeton astrophysicist based on the notion of the “Copernican Principle”.  The Copernican Principle is named after the astronomer who rejected the notion of Ptolemy and proposed that we (on the earth) are not at the center of the solar system.  Gott’s application of this astrophysical theory to time based estimation is to indicate it is unlikely we are making an observation at a special, but much more likely to be predicting the future from an unremarkable time.

Solar System with Sun at the center

The time analog to the center of the solar system, is we are not observing a phenomenon at a special time, so it is just as likely that we are sampling a process at a random point in time.  In fact the longer something has been around; the longer it is likely to last.  For example, if one were sample a process and desire to make a prediction at the 95% confidence limits, it is unlikely that this point in the process is be in the first 1/40 whole duration (2.5%) so it is just as likely to last 39 time longer, and conversely, it is probably still in the first 39/40 of its total lifespan, and not in the final 1/40 – so you can predict the remaining lifetime is likely to be at least 1/39^th of the time.  These two estimates, defined by the upper and lower 95% confidence limits define a range (rather large) of the possible duration.  And if we look at 50% confidence limits, it is just as likely that we are in the first half as the second half of the process, so we would estimate the total duration as twice the time of existence.

This range of estimates corresponds approximately to the 2 sigma limits, and the mean, in the Gaussian curve below.

Gaussian Distribution with 95% confidence interval (+/- 2 Standard Deviations)

Similarly, we can predict to the 50% confidence that we are in the middle of the lifespan, so if a process (such as the lifetime of a Broadway play, something Gott analyzed) has lasted 52 weeks, our best estimate for the total lifetime is another 52 weeks (again, without any other information or better estimates).

The range of T/39 < t < 39*T for 95% confidence is often too wide to be of use in technical & management consulting, but using the point estimate of the average can be a very good gage.  Here are some examples where this estimation technique can provide useful guidelines.

-          Lifetime of partner relationship

-          Lifetime of a consulting business

-          Length of an engagement with a client

-          Lifetime of  a startup

-          Lifetime of a vendor

-          Lifetime of a business

-          Duration of employment

-          Time to fill an open requisition

-          Longevity of a process

-          Time in position

So in the future, you are trying to estimate the likelihood a partnership will be around in another 2 years, the first thing to ask is when did we get started.  Although it is a very coarse estimate, a coarse estimate is much better than no estimate.

As the ISO standard continues to evolve, it is interesting to observe how successful companies have embraced the standard to increase the quality of their products and services, while balancing the pressures of time to market and product cost.

We were interested in learning how some of the best consumer electronics companies were implementing ISO standards in product development, and what were the best practices that were being implemented to optimize the product delivery process.  In the day-to-day business of developing and shipping products to market, was ISO a benefit or a deterrent to time-to-market?  Did it help?  Or did it hurt?  Our study included the following questions:

• Does your unit/division/BU follow ISO for Product Development?  If so, which standards?
• How deeply is it applied to product development?
• How do you ensure that it does not impede time to market?
• How has it helped or hurt?

And here’s what we learned:

• The main business driver for ISO compliance is access to foreign markets.
• When trading off quality, schedule & cost, quality is the priority.
• ISO compliance is primarily controlled by limiting exposure to a small number of documents, and defining a flexible process for deviating from the documentation.
• ISO compliance is contained within the existing product development process.  No additional processes or documents are generated to support compliance.
• The range of documents/processes under audit ranges from 3 to 140
• Typical is around 25
  • Almost all have systems that customize the implementation at the project level to limit impact to time to market
  • “Shrink to Fit”
  • “Rapid Decision Model”
  • “One Director can waive”
  • “2 Year sunset”

So what does this all mean?

Of the nine technology companies benchmarked, all implement ISO within the product development process.  In all cases, efforts required for ISO compliance do not surpass the defined product development process and every company has incorporated a flexible approach in applying the standard and in managing deviations.  Overwhelmingly, ISO compliance is not seen as an impediment to time to market, but has proven to be a key factor in supporting companies in shipping higher quality products to markets.

Below are six best practices that have driven the success of ISO implementation in the area of product development:

1. Reduce the number of product development documents to a best practice of three.
2. Reduce the number of signatures to deviate from those documents to one.  Allow anyone at the director level or above to approve deviation
3. Implement a document “sun setting” policy to eliminate documents from the product development process that are not viewed within a two year timeframe.
4. Do not generate additional documentation in support of ISO compliance.  Certification should be based on existing documented processes.
5. To limit audit exposure, reduce the number of mature processes.
6. ISO compliance allows companies to avoid costly and time-consuming customer audits.

While the motivation to achieve ISO certification may have originated as a “necessary evil” in order to compete in the global marketplace, we have found through this study that the companies that have embraced this standard and applied intelligence to its application have reaped the benefits of higher quality products and increased organizational efficiency.

Some companies require up to 4 times the capital to reach the same place as a competitor.  How can that be?  The Silicon Valley way is to throw money at the problem (often by making expensive hires, for example), but is it the right solution to the right problem?  For example both Zazzle and Café Press compete in the custom designed clothing area, but Zazzle, which raised $46M is behind the leadership position of Café Press which has raised $15.5M.  Wouldn’t it be better to have an understanding of the drivers that will lead to the most rapid and efficient achievement of a goal, and execute those drivers efficiently?  Unfortunately, too many companies have put in place development processes that slow down, rather than speed up, product creation.

These companies are lost in the weeds of process.  You have all seen the symptoms of these organizations with their endless phase reviews, PowerPoint presentation decks of sixty slides (thirty of which are in the appendix), long and large meetings in large conference rooms with unnecessary participants, pre-meetings and follow up meetings and yet slips in schedule still occur.  More time is spent on creating the documentation for reviews and going over checklists than actual design work.  More time is wasted preparing and formatting information for management than focused on moving the project forward.  This situation is all too common and results in low morale, low productivity, and often missing the big picture such as the case with Zazzle and Café Press.

Bureaucracy of Government versus Size Chart

The potential impact of streamlining development is huge.  The Global R&D spending of the 1000 largest corporations totals $384B and is growing at a rate (until recently) at 6.5% per year (Booz Allen Hamilton Global Innovation 1000 Study).  If by simplifying processes and focusing on doing the right things, a modest reduction in waste would bring staggering savings in absolute dollars.  Furthermore, at the company level, this can be the difference between winning and losing.  For a startup, it can mean the difference between survival or cash-out.  For more established companies, it can mean the difference between being first or second to market.  In this economy, you can’t afford the wasted expense.  In this competitive climate, you can’t afford being late to market.

Given that the natural tendency is more bureaucracy over time and organizations by their very nature become more risk averse as they age, what can be done about this chronic problem?  There are two approaches:  Bottom up – starting with nothing, and Top down – paring down with what you have.

Consider the analog to zero base budgeting – zero base process.  Start with a clean sheet and then describe the few essential phases of design:  Definition, Design, Realization, Test & Release.  For each one of those phases define a key deliverable (or two) and determine if a management review is required.  That is the zero base process.  In the case of each deliverable, define the minimum standard for that deliverable – the so called core content that addresses the central questions that the deliverable addresses.  Start at the most basic level and omit the rest.  Over time add more if required based on rigorous analysis of the degree additional process would help to get things done better and faster.  We have written about this approach and called it “Goldilocks and the Three Bears.” Also, Agile methods can be used that break tasks down in to small rapid iterations performed by a small software team.  Each iteration leads through the normal development cycles above, but in a four week period.

If this zero base process approach is too radical for you, you might want to consider a top down approach, which is where you eliminate non valued added steps – documents, deliverables, checklists, management reviews and also lean down the size of work that is generated just for the sake of management.  Start with a meeting and deliverable inventory.  For a typical effort, list every type of meeting the team members participate in (both for the project and non-project meetings).  Rank order the importance of these meetings, draw a line, and stop holding or going to meetings below the line.  Sometimes you will need to get management approval to cut, but demonstrate why this does not add value, and they will be receptive.  Do the same process with the deliverables too.  Critically review all documents that are for management (versus those for upstream or downstream organizations), rank them, draw a line and eliminate those below the line.  Once that is done, lean down the content too – just deliver the essential core documentation.

Regardless of which approach you use, zero base process or top down, carefully review any standing meetings.  Weekly (or other regular periodic meetings) are vast time sinks and should be cut to the bone.  There is no reason to have any more than 1 standing meeting per week involving the entire team with any project.  Supplement the need for rapid and regular communication with instant messaging for quickly called, quickly held meetings.  Also, a best practice that we find helpful for ensuring that issues do get communicated and resolved quickly, with fewer management meetings is the “Out of Bounds” review process.  By defining and documenting clear boundary conditions, there is no need for management oversight and constant reporting that everything is OK.  However, if the team detects that they will cross a boundary, and may fail to meet performance, quality, or schedule goals, they hold an ad hoc Out of Bounds meeting (or resolve it by sending an email with recommendations).

Predictive Metrics are important in the simplification process.  We like to manage change by measuring behavior.  In that regard, how does one ensure that we are really walking the walk with respect to the new process?  In larger organizations where there are ten or more programs going on at any one time, you can measure the percent of programs that are following the newly simplified process.  Because this transition cannot happen overnight, a metric target should be devised to estimate how fast we will get to 100% conversion, and then you track this every week or so.  Besides measuring change in the process, a simple predictive metric can be put in place to gauge the speed of the project.  We call this “Schedule Prediction Accuracy” and it is a line graph that plots the estimated release date over time.  An ideal program is a flat line, since the predicted release date does not change when the schedule is periodically updated.  This one simple graph can displace the complicated dashboards and other cumbersome metrics systems that are often deployed in development organizations.

Regardless of which path you choose to take, there is no better time than the present to look critically at the development process and eliminate the waste.  There is much less risk than you imagine, and much to gain in labor savings and morale.