5 Ways to Predict Product Value When You Have Minimal Data
The art and science of product management can be summed up into one goal: to deliver products that create value for customers and the business.
As a product manager or team leader, you must make difficult decisions every day, from bug fixes or feature enhancements to creating new product lines. Collectively, these decisions contribute to the overall value your product creates. If great product managers have a track record of building high-value products, then predicting value is the goal of prioritization.
The solution for predicting product value can be easy, we’re told, if we make data-driven decisions. Making data-driven decisions smooths conflict, right? Data-driven decisions define a factual “good” and “bad” product investment, right?
Not so much, as it turns out.
If data-driven decisions were easily adopted and routinely used, then why are product managers reporting that getting to consensus on product priority decisions and setting roadmap priorities are their top challenges, according to ProductPlan’s 2021 State of Product Management report? Further, in the same report, product managers indicate that the top skill lacking by their peers is prioritization.
Companies — large and small — struggle to ingest and organize product and business data in a way that enables product prioritization decisions. Whether this is due to the product having a limited customer base from which to gather data, tracking tools missing from your toolkit, or your analytics team being in the process of building data architecture, clearly, our collective vision of data-driven product priority decisions is unrealized.
But we can still make great product priority decisions by creating a framework from these top five determinants of product value.
5 Ways to Predict Product Value
- Know your roadmap stakeholders.
- Align product strategy with company strategy.
- Develop a custom weighted rating system.
- Always consider revenue and growth.
- Understand your customers’ goals.
1. Know Your Roadmap Stakeholders
Your primary stakeholder is the person, or people, at your company who have the final word in product roadmap decisions. While an individual contributor (IC) product manager is responsible for making the final recommendation about product roadmap decisions, they are rarely given carte blanche.
A team leader, executive, or cross-functional board is usually given veto power. As a product manager, you must know who the ultimate decision-maker is for your roadmap, and what their primary goals are. If you put forward a product roadmap that does not solve problems for your primary stakeholders, your roadmap will be rejected.
2. Align Product Strategy With Company Strategy
Do you know what the top three to five strategic priorities of your company are? Do you validate this understanding on a regular basis? If your product priority decisions do not align with company priorities, they are unlikely to be perceived as valuable by your business leaders.
However, if your research, passions, or instincts are pushing you to prioritize features that do not align with company strategy, you should pursue your idea, as a curious product manager.
But if you do pursue your idea, make sure you have a solid business case for why your initiative should be prioritized. Perhaps there are creative ways to move your initiative forward, such as by attaching smaller deliverables for your goal initiative to a top company strategy.
3. Develop a Custom Weighted Rating System
There are many popular rating methodologies, such as RICE (Reach, Impact, Confidence, Effort), as well as a multitude of product planning software options that can assist with roadmap prioritization. RICE is attractive because of its simplicity, but why not develop your own formula that is specific to the interests of your organization?
For instance, if your organization is hyper-focused on building your competitive differentiators, this should be a criterion in your prioritization formula, possibly weighted higher than the other criteria. To implement a customer rating system for your company, meet with your product peers and team leader to agree on five to eight criteria that you will use to evaluate new product features and requests. Determine if any values should be weighted higher than the others, and develop a simple formula.
Using the following formula:
- Priority value = (Reach x 15%) + (Competitive differentiation x 35%) - (Development effort x 20%) + (In-year revenue/wins x 30%)
(Note: We subtract development effort because it is a cost to building a feature.)
Here’s an example of what that might look like:
With your team, agree that every item entered into your roadmap must have this value calculated. The resulting priority value should not be the final criteria for ranking your product roadmap, but it can be a starting point for assessing the value of a single feature or a group of features when you have a feature backlog that will grow to hundreds of requests.
4. Always Consider Revenue and Growth
It is unlikely that you can ignore revenue potential when considering product decisions. Even if you are the product manager for an internal toolset, you need to be able to tie this back to revenue growth, possibly in the context of employee productivity.
For example, if your account managers had better tools, how much extra time will they have to devote to providing excellent customer service? And how will that result in additional sales or decreased customer churn? If your finance team had more streamlined reporting, how would this reduce the account payables timeframe?
You can argue that there will always be small features on your roadmap that don’t have revenue associated with them. Challenge yourself on that assumption. In other words, if the feature does not provide enough value to warrant a customer to pay for it (directly or indirectly), then why would you advocate for spending company resources to build it?
5. Understand Your Customers’ Goals
It is an understatement to say that product managers need to know their customers’ pain points, interests, and goals. If you have a new product or a small customer base, which may make it difficult for you to use direct customer data, then find proxies for your customer personas and interview them. Record their comments, in their exact words, and use this qualitative input to anchor your product direction. Customer anecdotes can be just as powerful as charts and graphs of product usage data.
Regardless of the sophistication of the product and business data you have readily on hand to make product priority decisions, rest assured that you still have the ability to make smart product prioritization decisions. Set a goal to improve your product data set, but in the meantime, focus on creating a business case for every item on your product roadmap using the five categories of prioritization discussed here.