Product Managers and P&L

Live from Product Camp DC

Navin Ganeshan, a product manager, within Network Solutions, led a session this afternoon called "Adventures in P&L."  A standing room only crowd gathered to discuss topics such as:

·         "Who should own P&L?  CXOs, Product Managers, General Managers?"

·         "Which types of margins are most important to measure (e.g. contribution, net, gross)?"

·         "How often do you measure P&L?"

One the biggest challenge for product managers is the lack of control over the activities of other organizations.   Navin talked through four good examples of activities performed by other teams that ultimately impact the P&L, which product managers are accountable for:

1.       Marketing runs a campaign for 70% off Product A, drives X new customers, destroys margins and then declares success!  What was the goal again?

2.       The technology operations group wants new $1M hardware and allocates cost across your product.  The ambiguous expense is now looking for a home

3.       The product delivery team is overstaffed for the volume of products sold.   Such variable costs are not truly variable.

4.       Your engineering team for Product A has 8 developers, of whom only 3 work on Product A.  Who are these guys and what do they do again?

Three additional challenges I captured during the P&L discussion (and earlier sessions) were:

·         Macaroni & Cheese - One of the audience members stated that frequently C-level executives make comparisons between technology product management and the brand management function at packaged foods companies.  Is managing a cloud-computing product the same as rolling out a new type of macaroni & cheese?

·         Must Haves - In other cases, products are developed and commercialized because the features are required to meet minimum expectations for the target market segment.  Navin explained how there are certain market segments where we have to play even though it is barely profitable, because it adds to overall value proposition.

·         Market Driven - In an early session John Mansour of ZigZag marketing asked a good question, which is "Should we measuring P&L for market segments or individual products?"  Companies which are market-driven think about their business as targeting specific market segments, rather than selling individual product lines.  With a market-driven approach, should product-specific P&L be measured?  Or are market-segment P&Ls better? Or both?

Navin offered four recommendations for success:

·         Monitor cost drivers – understand all the dimensions

·         Understand (and negotiate!) cost allocation – your financial analyst is your new BFF

·         Agree on overarching "neutral" goals – customer value, strategic goals, etc

·         Provide guidance on pricing ranges within channels

Follow Product Camp DC live on Twitter using the hashtage #pcampdc.  More posts next week on my marketing blog – www.outsideinmarketing.wordpress.com

Steve Keifer