Product Management For Hackers

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In general, when I am addressing hackers and developers, I worry about my ability to be taken seriously. Even the Twilio guys posted a blog post this weekend referring to product managers as “marketing lackeys.” With that in mind, I do want to at least say that yes, I do have coding skills. Not great skills, but some skills. I prefer Python, but have recently taught myself C# and the rest of the Microsoft .NET platform. My friend once joked that letting me loose with development tools was like a kid and a hand grenade. The net result is funny, though it’s probably effective and getting the job done, but you don’t want to be in the same room, and cleanup could be messy.

Generally, asking one person about your idea, whatever it may be, is not a good idea. There’s a good bet that if you are asking other entrepreneurs, they are not in your target market, and may not get it. Remember, no one will be as passionate about your idea as you. Also, if you are asking friends and or family who aren’t entrepreneurs, you are likely to meet with resistance born of fear. People generally don’t like change, and they certainly don’t like the idea of taking on risk, say like starting a new company.I will never forget sitting in Mel’s dinner with my friend Jeff. He and I had been great friends since college, and he was at Stanford getting his MBA. He was telling me about this company he wanted to start, and I told him he was crazy. First, eBay would kill the company before it ever got started. Second, why not just finish his MBA. We all know that MBAs are the path to financial success, right? Ha! Had he listened to me, he would not have gone on to form StubHub, and he certainly wouldn’t have sold it to eBay (of all people) for over $300M.

If you start building the very first idea that you have, it’s probably not the right one. In fact, if you spend just a little bit of time thinking through the customer story (essentially the problem you are trying to solve), you will find that you end up with a far better result than your first effort.Have you ever said “I know what I want to say, I just don’t know how to say it.” My eighth grade teacher used to tell us that we didn’t know what we wanted to say. This is very true of your first efforts at the design of whatever it is you are going to build. You probably get so wrapped up in the designing of this new thing, you can’t enumerate the customer pain points that you are really solving. You end up saying things like “of course customers will want *this*.”At IMSafer, we had our original design well before we went out to raise money. I am so glad we spent a bit more time really thinking through our target market and the solution before we started coding. The notion that we would have used the open source code of Snort to build a client side application to analyze the IM conversations of kids for parents was an instant fail. First, client apps, really? For our target market, late 40s, early 50s women with teenagers, this was likely to not be a good plan. Further, how would you keep all the installs up to date, and synched, etc. Lots of reasons not to build the product that way. We spent some more time thinking about the customer story we were trying to tell and solve for, and ended up with a vastly better solution.

I hate to pick on Microsoft, especially since they are currently paying my salary, but this one was too hard to pass up. When C# was originally built, it was called COOL, for C-like Object Oriented Language. Not bad, but when they released it, they went with C#. The problem with that, especially at launch, was that search engines were still quite primitive. The “#” is the delineation for anchor text in HTML, so the search engines were throwing it out. If you saw the press release or a story about this new language and you went to a search engine to find information, you were way more likely to get results for the language “C” and not “C#.” Oops.Not learning that lesson, Microsoft went on to create their functional programming language and named it “F#.” Search engines are smarter today than they were, so you can have exceptions in the search handling, but it’s not perfect.Search isn’t the only way people are going to find your product. You have to spend some time thinking through the different ways in which a customer might try to locate information about your product. Going back to the Microsoft languages example, if you go to the URL “www.microsoft.com/c#” you will see an error page. The same result occurs for “www.microsoft.com/csharp”. Is it unreasonable to think that a customer might try to find information that way? Probably not.

In general, great opportunities come from gaps in the market. Either because the competition is doing a bad job of something, or because they aren’t doing anything at all. Look for those gaps. However, don’t spend all your time looking at the competition to figure out what they are collectively doing well. Innovation is unlikely to come from copying. If you were to ask all white males age 34-55 what their ideal car would be, and took the best bits, you might design the Homer car. (great episode by the way).

I know you are all developers and you want to start writing code right away. I want to save you some agony and ask that you spend an hour writing the press release for your product. There is some value from us marketing lackeys, and doing this one exercise will pay off in spades. If you write the press release, it will really crystallize in your mind what the product is, who your customers are, what problem you are trying to solve, and why people are going to want to get this product or service from you. It’s a great hack and doesn’t cost a lot of time.A benefit of this exercise is that if you find yourself using a lot of adjectives, you don’t have anything. Trust me.A hack I have tried recently, while selling an idea internally at Microsoft, was to write the influential blog post instead of the press release. I wanted to put myself in the shoes of a TechCrunch blogger, and write the post as they would see it about an idea I wanted to push forward. The effect was pretty dramatic, and certainly garnered much more attention than had I just put those ideas in email. Several execs had the reaction that they were actually reading a TechCrunch post (despite the link pointing to an internal server) and reacted as such. Very effective.

Stats. I love me some stats. Talk to my dev teams and they will tell you they hate me because of this. Stats are incredibly important to the success of your business. If you aren’t thinking about the unique stats required to measure the health of your business from day one, you are in trouble. Refactoring code and database tables to accommodate real time stats is no fun.

I have heard many hackers say that they would drive awareness of their new app by buying adwords. This works, to a point. The most important point I would like to make abut that is that you can only buy as much traffic as is searching for your product or service.Using IMSafer as an example again, but with real search data from the Microsoft AdCenter product, I want to show you what happens when you start with a small sample of very obviously relevant keywords. You can blow that list up to a bigger list of keywords, but find out that across those words, for the last 30 days, there was a total of 37,524 impressions and only 856 clicks. All those clicks didn’t go to one advertiser. Assume you got 25% of those clicks. 215 clicks. Per month. A 10% convert rate to a paying customer (which is ridiculously high) would yield 21 new customers a month. Certainly not enough to feed your developers.AdWords are great, but you are going to have to find alternative sources of traffic. Organic search results are great (we were seeing 50% organic new customer adds in the months before we sold the company), but remnant ads can also work. It turns out, for our target customer, the punch the monkey ads were very effective. It was very low CPM traffic, and with good creative work, the cost per user signup was very low, and they converted to revenuable customers at a very good rate. This brings me to…

You must mustmust know what “the funnel” is for your business. If you don’t know what a customer looks like, and how they get to the point where they are generating revenue for you in some form or another, you are in trouble. How can you grow such a business? How can you expect to invest money in activities if you can’t measure the success rate, or even know what is working and where? The data that I am showing here is exactly as it was presented in our board meetings, including the ugly arrows, as we were beginning to ramp up our customer acquisition.IMSafer had a user funnel which took user signups to downloading a client, to a successful install (meaning the code phoned home), to a successful monitoring of an account. Once a customer was sending us IM traffic, we had a customer we could *attempt* to charge. As you can see from the funnel and the percentages, while it cost us $1.67 to get a user to sign up, it costs us $9.36 to get a customer we could even begin to think about charging on the up-sell. As you can see, we would have needed a high convert rate or a high price at the end of the funnel to make this make sense from a financial standpoint. It also forced us to think about customer churn and the potential lifetime value of a customer.Lastly, it’s important to know the drop out percentages on the funnel so that you can make incremental changes in your process, test theses, and adjust in real time. I have some data in a couple of slides that demonstrate how this helped us immensely.

The lower your starting price, the harder it is to get it to move up. It is way, way easier to lower prices than to raise them. Even if your product is free, there is a price associated with it. For example, if you are ad supported, the price advertisers are willing to pay is the price of your product. Also, with a free product, getting over the penny gap (Josh Kopelman of First Round Capital first coined this phrase) can be much much harder than raising your price from $0.01 to $0.02.I like to say that there is a gravity associated with your price, and the smaller it is, the denser the price. The denser the starting price, the more rapidly your new price will trend back in that direction. There’s a reason why enterprise software companies don’t like to publish prices. They are high and have very little density, giving them considerable flexibility in their pricing and negotiating.

Most businesses will boil down to one or a small handful of numbers which can help you gauge the health status at a glance. You have to know what success looks like for your business and then discern which of the stats you are tracking give you the best window into that success. For IMSafer, we used the total number of user signups and the cost of customer acquisition. We actually had the cost of a registration as one metric, but as you saw from the funnel, we measured the cost of getting a customer to each phase in the funnel.A couple of notes here. First, the jump in the blue line was hiring a PR firm. Don’t do that. They are expensive, and you (the CEO/founder) are the front man for the company. You should be doing the leg work to get in front of the press. No one is going to pitch with the conviction and passion like you will. PR people should be brought in when you can no longer handle the inbound requests on your own.Second, the drop in the red line was a result of a pretty dramatic change that we made in our user signup process. These are monthly numbers, so the drop looks smaller than it was. Since we were measuring stats on an hourly basis, the effects were immediately obvious, and we only let the new change run for a couple of days before deciding to revert to the old process. Further, since we understood our funnel well, we were able to take some good from the change (we increased the number of downloads), but remove the bits that caused a very dramatic fall off in successful installs.

So that’s it. I love this sign because it’s just awesome, and you can look at it for a long time and your brain will oscillate between it making sense and not. If you enjoyed the content, please check out my book at www.TheFailingPoint.com and by all means you can follow me on Twitter at http://www.twitter.com/brandonwatson.

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Product Management For Hackers - Presentation Transcript

Product Management for Hackers
Brandon Watson
Director, Developer Platforms
brwatson@microsoft.com
twitter.com/brandonwatson
What You Need To Know
This will be a fast and furious discussion of Product Management for hackers who are either:
Long on development talent, but short on business acumen
Or think marketing types are idiots =)
All hard data taken from my last company (IMSafer, sold in 2008)
Content adapted from my book in progress:
The Failing Point - www.TheFailingPoint.com
Finally, this isn’t madness:
Do I Have Coding Skills?
Yes, but it’s kind of like…
+
The net result is funny, but you probably don’t want to be in the same room, and cleaning it up could be messy
Under No Circumstances Should You…
Test Your Idea With Only One Person
Most of your friends are probably just like you
Most people are afraid of new things or things that involve risk
$340M sale
Sorry I told you not to do it Jeff…
RT @BrandonWatson Whatever you do, make sure you talk to more than one person about your product/service.
Start Building The First Idea You Have
More than likely you are going to be wrong in the first go round
“I know what I want to say, I just don’t know how to say it.”
Take time and think through your idea to get an optimized result
RT @BrandonWatson It’s very easy to get caught up in designing first and thinking second. Understand the story/needs of your customer.
Not Choose Your Name With Care
By what methods are people going to discover your product? (i.e. search engines)
Is it memorable & does it convey the right message?
RT @BrandonWatson Your name matters – it should be searchable, easy to spell/remember, and think about what URLs customers will type.
Focus Only On The Competition
If you are going to build something, you should be doing it better
A market opportunity means your competitors are missing something – why only copy them?
Taking all the good from all the competitors is seldom the right answer
RT @BrandonWatson Your best ideas will come from your team and your own pain. Innovation seldom comes from copying.
Write Code Before The Press Release
Helps set in your mind who your customers are and what the product does
Too many adjectives and you have nothing
Try writing the influential blog post first instead
RT @BrandonWatson Your best ideas will come from your team and your own pain. Innovation seldom comes from copying.
Worry About Stats “Later”
Raise your hand if you like refactoring code
Raise your hand if you like refactoring database tables
RT @BrandonWatson Stats specific to your application should be a first party citizen. Build them into your product from day 1.
Think AdWords Is All You Need
You can only buy as much traffic as is searching for your product
Find alternatives
RT @BrandonWatsonAdWords will only deliver as much traffic as is search for your product. Find alt. user acquisition sources.
Not Understand Your User Funnel
What does success look like for your business?
How did your customers get to be customers?
Stages allow you to test and tweak, but too many cause unnecessary friction
1,000 User Signups
70% download
50% install
70% monitor an account
245
RevenuableCustomers
$1.67 /User Signup
$3.38 download
$6.76 / successfully install
$9.36 successfully monitor
Revenuable Customers
RT @BrandonWatson Understand your true customer acquisition cost – the cost of getting them to the point where they will pay you.
Start With A Low Price To Attract Customers
Gravity
Free can work, but can you get over the penny gap?
Raising prices is way harder than lowering them
The lower your starting point, the faster the return to that price (i.e. higher gravity)
RT @BrandonWatson The density of price is inversely proportional to the price itself. Raising prices is harder for lower starting prices.
Price
RT @BrandonWatson Knowing the key numbers that run your business will help you spot trouble early.
Not Know Your Business’s “Number”
Most businesses boil down to one or a few numbers
Knowing them allows you to spot trouble early
Signpost Zen
If you enjoyed the show:
Please follow me on Twitter (@brandonwatson)
Check out www.TheFailingPoint.com