Sunday, April 15, 2012

Product Management: don't be wedded to cash cow

When your product gets a traction and starts making money, you are on your way to having a proverbial cash cow.  You will soon have customers, feature requests, product roadmap, release planning, etc.  All these activities will require you to scale your sales team, support staff, engineering team and product management team.  Once you are caught in this expansion cycle, it's very difficult to look away from your cash cow.  It's even more difficult to start up experimental project that can be seen as resource drain.

Keep your cash cow,
but take risks in venturing out other areas;
use MVP to minimize your risk
But that's exactly what you should do.  It's because changes are always closer than what you expect.  Market will change, customers will have alternative, your cash cow will stop paying sooner than you can ever expect.

You don't have to look far to find examples of cash cow shrinking rapidly.  Kodak has run into it with film market largely disappearing.  Yahoo has run into it with rise of searchable web brought by Google.  Google is running into it with Facebook bringing social network for hundreds of million people.  Even Facebook is running into it with company like Instagram coming up with new cool way of sharing from mobile devices.

Problem of having a cash cow is getting wedded to it.  So wedded to it to a point that you start slowing down your innovation to avoid upsetting your existing customers and employees.  People have natural tendency to continue on what they have been doing.  Newton's first law applies.  Changing course is hard because it's full of unknowns and there are always many reasons why it can fail.

Slow down of innovation and shrinking risk appetite are very contagious.  It quickly finds its way into cultural fabric of a company and becomes a way the company thinks about solving any problem.  Employees put their existing customers on their top priority.  Combined with aversion to failure by employees at various ranks, it's easy to continue on milking the same cash cow that you know.

No doubt that cash flow is important.  It's also a no-brainer that existing customers are valuable.  But there has to be active risk taking.  You have to invest in creating a new cash cow when you have cash flow.

Doug Rauch, former president of Trader Joe's, talks about importance of encouraging risk-taking

As a product manager, you have to be a thought leader in creating an environment where taking calculated risk is encouraged and rewarded.  Having an executive sponsorship is critical.  It's also important to know how to minimize your risk of failure by implementing minimum viable product and iterating fast, so that you fail fast and fail often.  Once you fail, you can learn from it and change your course.  But do that fast.  Very fast.

Facebook-deciding-to-buy-Instagram fast.

No comments:

Post a Comment