Tag Archives: Peter Drucker

Product guy – make one scoreboard

Setting up the product performance scoreboard is one of the most critical tasks of the product guy. But perfecting the granularity level of the information is hard.

Think it is this way. Dow Jones and NASDAQ tell if the stock market is about to fall off any cliff, but using them for stockpicking is risky. ‘42’as the meaning of life has value, but just comedy value. So let’s bake in more parameters, right?

Be careful what you wish for.

During my years at Nokia I saw product performance charts that convinced me that the idea of Balanced Scorecard combined with the infinite capability of Microsoft Excel to add rows and columns can be a lethal combination for human nerve.

Instead of searching for the perfect index or the basket of metrics, the product guy should recognize that the scoreboard needs to be used for at least four different purposes – focus of attention, feedback loop, sense of urgency and rewards – each one of them having different drivers from each other.

Focus of attention

Based on a highly proprietary focus group research, I believe there’s a high correlation between program and project managers and people who love air traffic controller movies.

Air traffic control picture_500px

Those dashboards, those PowerPoints or Excels with a lot of graphs and numbers covering every conceivable dimension of the execution tell them whether the gap between their dream and reality is closing or not. The emotional kicks those people get of staying ‘on top of things’ are hard for the normally wired people to understand, as evidenced by the lousy IMDB scores for the two great flight controller movies – Ground Control (only 5.6) and Pushing Tin (only 5.9).

Now, facing such complexity, the natural reaction is to try to dumb the metrics down, or to craft a super-index. Doing so would be about as useful as removing the altitude parameter from the tool set of the air traffic controllers. Or combining all approaching American Airlines flights under one AA code. Surely, Kiefer Sutherland or John Cusack would have no problem, but any lesser talent would be in trouble.

The highly quantitative approach with a lot of relative numbers can also cause losing sight of the big picture. For example, I worked with feature phones that usually ship in huge volumes. So, for example, in the dashboard of a product family shipping 50 Million units, the yearly product return rate moving from 4% to 5% may look like a blip. But in absolute terms that would mean 500,000 more visits per year to the customer care center. That’s the equivalent of 2,5 days of average total passenger flow through Heathrow Airport.

The dashboards serve best when they are used for understanding where to focus the attention, or what questions to ask. And such data should be kept in the hands of people who know how to interpret them, or at least always supplemented with an expert interpretation.

I saw first hand at Nokia that not much good happens when, for example, sales guys, in need for the product schedule, data tap into the intranet wiki of the product development team, upload some data points and start making their own extrapolations out of the bug curves. Even the highly multitalented Bruce Willis in Die Hard 2 didn’t get involved with air traffic controlling, but let Fred Thompson to figure out how to “stack, pack and rack” all the planes safely home.

 Feedback loop

Now, qualitative feedback i.e. written comments – be it via the scoreboard mechanisms or from the friends of the Board members – is another potential source of information overload. Again, it would be a mistake to try to bottleneck and reduce the volume of such valuable input. The more the better.

But in consumer-facing businesses, the amount can be overwhelming, beyond even Kiefer’s or John’s processing capability.

For qualitative feedback, the product guy should focus on building the most efficient “routers” that somehow split the feedback and route it to the right experts. If there’s a comment about “still camera noise levels not being quite right”, the router needs to be intelligent enough to send the feedback to the camera guys based on the word ‘camera’ (instead of sending to the audio guys based on the word ‘noise’).

Surprisingly often, the free form comments contain anecdotal weak signals about a problem (or opportunity) that only shows up on the dashboard when the crisis (or the unplanned success) is in the pants already. Routing data to the right person fast enough can prevent ugly from turning to bad or make good great.

But right routing doesn’t guarantee right action. Which brings us, again, to human behavior.

Sense of urgency

During my Nokia years, the product quality “lessons learnt” studies often revealed that somebody somewhere had detected the problem and the information was even routed to the right place. But nothing happened.

Hindsight is of course dangerous. These days only product managers and the referees of FIFA-governed football games seem not to have the luxury of video replay. A lot of product information comes in all the time and things can be missed.

Through experience people will get better with the information triage. If they have the right attitude. If they don’t….well….there is no easy solution to ignorance. But the product guy can impact behaviors that result in the ignorance blossoming.

First, stop measuring against yourself. “We met the plan. Hence we succeeded” is a train of thought that doesn’t account how often the plan sucks, or the measurement is too massaged from the get-go. Sales guys have a worldwide reputation for being experts in low-balling and sandbagging, but it is only because the product development community is lousy with their PR work. Further, in getting things done, following the plan isn’t the goal. That’s not to say plans wouldn’t be important. They are but they also partially exist as change management tools so that you know that you change for the better and can execute it in a synchronized manner.

Second, find ways to get around the ‘burden of proof’ problem to separate an anomaly from an epidemy.  Do you have to prove that generally rappers don’t make long-lasting box office hit actors? Or do I have to prove that Mark Wahlberg wasn’t a fluke? Or is it inevitable that we end up arguing whether he was much of a rapper so start with? A tough one. But this level of intellectual, quality dialogue about the product feedback is needed.

Rewards

It is impossible to start a discussion about performance and rewards without ending up to the links to Dan Pink’s talks and articles on why Carrots & Sticks don’t work, and how the Autonomy, Mastery & Purpose is the new religion. So let me save the effort and link to some of the most read and viewed material – here, here and here.

Don’t get me wrong. I am definitively not saying “So what?”. I very much believe Mr. Pink is onto something.

I can’t say I have a lot of evidence on my claim. The compensation schemes at Nokia – as often in massive companies – were set very top-down. So there was not a big sandbox to experiment in. But still I saw enough. I became convinced that the more clever & complex (meaning Ph.D. in Definitions required) or the more bold & binary (“If X happens, you get Y (as in yelling) and Z (as in zilch)”) the incentivisation scheme is, the more likely it will fail miserably, stifle creativity and create an attention-diverting headache to manage, stealing focus from what really matter – the product, the consumer and the team.

At the same time, the thinking of not linking performance and rewards at all is a little bit of utopia. Equality is a good starting point because, whether people admit it or not, there’s a socialist streak in every compassionate human being. It just may not reach the level of accepting the pay level of the most un-deserving member of the team. It may just be to the level of protecting that nice guy from being booted, which in realistic terms would be the way to free salary budget for others. And every knowledge worker surely is socialist enough to agree that not all the profit from the great wisdom unleashed should go to the capitalist class.

So a hard problem to solve….

Hence, the scoreboard design must take into account that its data ends up most likely being used for rewards purposes. Hopefully just not through some arbitrary, difficult-to-predict formula, but rather as a data point, or a piece of evidence, people can use to describe what consistutes ‘fair’.

The simple scoreboard that sucks the least

I wrote earlier how I think the combination of three metrics – Net sales, gross margin, Net Promoter Score (NPS) is the closest thing I’ve found to a working scoreboard.

Those metrics are from perfect and can easily be executed wrongly as any other scoreboard (ref: my post about the NPS stimulus problem), but around those metrics I believe it is doable to create a holistic system that works and is cost efficient.

Think NPS as the overall thermometer. If that is in red color, it is proper to declare a higher DEFCON class even if every other single metric is in green. Because something is not quite right. The program manager’s dashboard combined with the written NPS comments from the feedback used in the Dr. House way is then the way to figure out what the root of unhappiness is and how to improve.

In closing, in perpetuity

Unlike in sports, the buzzer of the product scoreboard should never sound full time. It’s a perpetual scoreboard that also becomes better – more accurate, more understandable and less latent – all the time.

That’s because the product guy plays a game that never ends. As the late management thinker, and the only official guru of the product guy series, Peter. F Drucker said, “The purpose of the company is to acquire customers. And keep them”.

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Happened in the previous episodes of Product Guy series:

Stay tuned for the next episode: Product guy – find your inner hipster

 

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Product guy – know your theories

Aristotle shutterstock_112275572 500px wide

Every product looks like a winner at the time of its inception. It’d better. What would be the point otherwise? Unfortunately, between the go-decision and the delivery date, things tend to change. Even if the plan would hold – and that’s a big if – the world around the product will surely change. That is not all bad news because conquering the uncertainty and delivering the better future is a part of the thrill. It’d be so boring to have the perfect crystal ball (well, not really, but let’s move on).

“Is that a fact? Or an opinion?”

By definition, the uncertainty also means that there are, strictly speaking, no facts about the future. Only opinions. And probabilities. Yet product decisions have to be made.

An easy way out is to declare opinions as facts. The product guy can declare, as the urban legend goes about one Nokia exec: “Yes, for me this is an opinion. But for you, dear team, this is a fact. So just go do”.

That kind of works. Sometimes. But for most people because of luck, not skill.

A better way is to do the hard work and think your way through. But not factually, because that is not really possible because there are no facts, remember.  The product guy must think conceptually, and for that some simple theories can provide the framework.

Theories are useful because surprisingly often you don’t need to know the exact number. You just need to know whether your parameter is more or less than something that the competitors are likely to have or what consumers would expect. Or whether your product will provide more of the same, or something different. In other words, a good theory can give answers that math can’t.

Knowing which side of the gravity you are, or which ballpark you plan to play at, will often be enough, because at the end, everything in the market place is relative and contextual. In absolute terms, the E.T. looks like a cheaply manufactured plastic toy (a direct quote from my 12-year old goddaughter this Christmas). But what really matters is that in 1982, when the movie came out, it looked as real (or more real) than the movie aliens that had passed the audience test before. And, more importantly, the E.T. wasn’t the umpteenth science-fiction story about inter-galactic heroes in colorful tights, but a new kind of heartwarming story about a lonely boy who finds a new friend (Ed. note: This is a long post, so fully okay to have a small break here in case you get emotional)

Old skool theories rule

Now, I don’t want to take away anything from the How-to and 7-steps (upgraded to 10 with the emergence of the internets) type of books (especially if I end up writing one of those one day) but for product work it is a good idea to keep the theory base simple. The review meeting tends to be long enough, even without the one-hour theory class up front.

Old theories have not only the odd chance of people knowing them already (meaning, saving time), but also tend to have survived the test of time. For example, the insightful wisdoms of great Greek philosophers like Aristotle and Socrates have remained relevant for millenniums. The simple persuasion principles of ethos, pathos and logos have aided great speakers from William Wallace and Bill Clinton to Herb Brooks.

Great theories also, unlike for example Police Academy movies, get better over time, including the time after death. Once, one particular Nokia EVP declared in one strategy sharing: “There is only one management guru I believe in, and he is Peter Drucker……and he is dead.” To this day it is unsure whether he trusted him because he is dead, and hence can’t change his mind, or because Drucker’s theories outlive the guy himself. I believe the latter. That may not be just luck. Peter.F Drucker (1909-2005) honed his theories over 60 years from the time of pre-WWII to post-war to industrial revolution and all the way to the information revolution, teaching his last class in 2002 at the age of 92.

Also keeping it simple worked for Rocky Balboa. He did beat Ivan Drago at Russian turf, with the good old training technique of carrying logs and doing sit-ups at the barn. And an inspirational playlist.

Last, Aristotle was again ahead of this time when he believed logos (logic, reason) is most often the foundation. Again, that’s not to say all three wouldn’t be important. It is just that the people who occupy the Corporate Board Room tend to have an alpha dog personality. They do want to see the product guy display passion – eye of the tiger and burning heart – but at the end, they need the product guy to provide foremost the logos. That’s because they themselves are happy to provide the pathos and ethos when the time for the product launch or the hero article in Fortune comes.

Choosing your theories

You need to decide yourself what is your playbook. What matters as much is that you, the product guy, have done your homework on the theories you choose. You may not need to be lecturing them into your nineties, but you need to know them well enough to be able to apply them in your own thinking and in your own argumentation logic.

In my years at Nokia, I learned to use four core theories:

  • 4P’s – Product, Price, Place, Promotion. This split of marketing mix – actually not invented by Philip Kotler, the author of Marketing Management, but by a guy called Jerome McCarthy in the 60’s – is as classic as it gets, and one of the (rare) things that I actually remembered from the Business School. True to the nature of marketing, there are so many variations (7P, 4C) that it can get confusing. Hence, I use this theory mostly as a checklist to remember to direct my attention holistically. For anyone with a geeky streak, it’s so easy to get carried away with the Product P and think that all the other P’s fall into place afterwards somehow. They usually don’t. And by the time you notice that you may have locked some of the product parameters – such as design or component list (i.e. Bill of Material) – making the sales and marketing job the equivalent of trying to cast Leslie Nielsen into a serious role.
  • Technology adoption cycle. This simple social behavior model puts some bones on why the product guy’s excitement over some thing is often met with a blank stare from the sales guy. I have found out that theory holds well in the mobile and consumer electronics in general. There’s an evolution of the theory called “chasm theory” by Geoffrey Moore. I have found that useful too, though with the caveat that it is easy to mistake the differences in context with the differences in need between the segments (see e.g. my post about QWERTY users and their need for smartphone).
  • Disruptive innovation theory. All good will come to an end at some point, or at least carrying it too long can result in this “yeah…I am supposed to be wowed but I am not “ feeling that can be borderline embarrassing, like watching Bud Fox/Charlie Sheen cameo in “Wall Street: Money Never Sleeps”. I’ve found Clayton Christensen’s disruptive innovation theories to be really helpful in understanding the dynamics as industries mature and collide, resulting in multiple ways to “get the job done”. Compared with the previous theories, the disruption theory is much newer and much more complicated to apply. Hence, like in the case of Nokia Nseries being steamrolled over by Apple, I’ve been able to use this theory mainly in the Flash Forward or the C.S.I. way (i.e. to reconstruct what is about to happen or decipher what did just happen) than in the Armageddon way (i.e. to prevent it from happening).
  • The DVD minibox of Band of Brothers. This is my choice, but you may interchange it to any story about respect and humility, provided by your favorite religion, book, movie or TV-series. Further, as an anti-gun, anti-war type of guy, I definitively do not want compare the horrors of war with the cozy life of modern corporate world. Yet I feel the importance of personal reflection about one’s own role in any challenging endeavor comes across well in the quote from Major Dick Winters:

Winters quoted a passage from a letter he received from Sergeant Mike Ranney, “I cherish the memories of a question my grandson asked me the other day when he said, ‘Grandpa, were you a hero in the war?’ Grandpa said ‘No… but I served in a company of heroes.'”

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Happened in the previous episodes of Product Guy series

Stay tuned for the next episode: Product guy – make one scoreboard (scheduled when ready)

 

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It’s harder to invent than innovate

Apple store Sanlintun

It’s not easy being Apple these days. Apart from the massive market cap and people always answering your calls, last night people basically told them “We love you for not having featurecreep, but please give us some new cool features we haven’t yet seen”. And when they didn’t, the tweetosphere – from men/women on the street and industry pundits to wannabe-celebs and semi-famous athletes (I follow a bunch of them) – exploded with adjectives like ‘non-innovative’, ‘underwhelming’, ‘boring’ or ‘disapointing’ (this one is from the athletic department, as you probably guessed).

This is a classic case of invention and innovation being mixed up. Building something that Planet Earth hasn’t seen is definitively both. Making things people need better or solving their existing problems with new ways is “just” innovation, but most people don’t perceive it that way.

The challenge with smartphones is that – at least if the extra-terrestrials would be asked – the whole planet is one big red ocean. In the category of 4” touchscreen internet smartphones, so many companies have already come and lifted their leg over some corner of what people need.

Further, throwing your existing customers under the bus by implementing crazy features just in order to capture the headlines of the day is not that smart either. There is a reason management guru Peter Drucker didn’t say the purpose of businesses being news headline creation, but creating and keeping customers.

Little of this matters in the short term. The best will always do well, and in smartphone type of emotion-loaded category the best will also capture an unfair share of voice, profits and country club memberships. But in mid-to-long term, the perception of non-innovation will matter.

In order for Apple to retain its innovative image, it practically needs to invent and innovate in a new, adjacent product category that builds on their overall experience.  Like many industry pundits, I suspect television/video space being the primary candidate. I interpreted most of their portable range going 16:9 widescreen as one more preparatory chess move to that direction.

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