PRODUCT BLOG

create value - but what #HowToManageAProduct

I have worked on products with quite a few teams and people. Engineers, designers, sales people, business executives, CEOs, other product managers, just to mention some of them. While working with these people I learned a lot. I learned a lot about their aspirations, views, visions, goals and execution methods too. I engaged in a lot of thoughtful discussions, plenty of debates and decision-making processes too.

After many debates I noticed something. It may look like a tiny thing. But it is huge. In the world of products there is this very important concept that is almost always misunderstood. It is not even just misunderstood but also biased by personal preferences.

This concept is the value you create.

Why is this concept so important?

Some phrases that I often hear when people are arguing about products:

  • "we need to create value"
  • "our goal is to create value"
  • "is this really valuable?"
  • "let's create value for the user"
  • "there is no value in this feature"

Don't get me wrong. I'm also using these in many cases. The problem is that we should only use "value" as an argument if every one of us who's in the discussion interprets it the same way. Otherwise we're just trying to use a word that sounds great and hides our intentions.

According to Marty Cagan we should create products those are valuable to the customers and to the company, usable to the people who want use it to get value and feasible to build given the time and tools that you have.

Unfortunately most of the people translate it this way: "Let's create a feature in 1 month that is nicely designed and people would pay for it."

Well in this case things are lost in translation.

What does "value" mean then?

I won't give you here an economics-focused definition. Neither I won't go into philosophic details. I will leave it to you to do that. Value is a very hard concept in itself and it would be hard to say that this is the absolutely correct definition.

One thing is sure: many people confuse user value with business value. And this can be deadly.

They are connected but they are not one and the same things. Of course you need to look after both if your job is connected to a product. But you always need to be able to distinguish the two if you're a product manager.

User value: The value that a user gets from the product. (Tweet this)

Business value: The value the business gets if the user is using the product. (Tweet this)

This shows the difference. You need to create value for the user first and then you can capture that for your business. If you do it the other way then you're going to die as a business. The reason is simple. Your existence depends on the people who use your product. (Tweet this) Therefore if you don't create value for them they will leave you. So when there is a debate about if a feature creates value or not, then please clarify that you're talking about the user value first.

 
 

User value

A practical question can be: how can I identify user value? There are multiple techniques to do this and I will write about in another post, but let me help you a little here too. I will talk about three basic models.

  1. Find User Problems
  2. Find Jobs To Be Done
  3. Find Magic Moments

Find User Problems

The most commonly known theory/model is that if you solve a user problem then you create value. Hence the basic technique is that if you know that X is a user problem and you create Y as a solution (e.g. a cool feature) then you create value. Easy. The hard thing in this is that user problems are not crystal clear in many cases. There is an interesting thought that there are the Painkillers and the Vitamins. Obviously painkillers are solutions for real problems, while vitamins are nice to have. Although this may sound appealing if I would ask you to define the user problem that Facebook or Twitter solves, it would be hard to come up with a "painkilling" phrase that explains why over 1 billion people use them. Anyway using this technique can work. And I suggest not to ban it entirely in discussions because it's a common language many people speak.

Find Jobs To Be Done

Another theory/model that is getting more popular and I like it very much is the Jobs-To-Be-Done model. It was first introduced by Clayton Christensen. Here you can find a great collection of articles about the framework and a lot of connected techniques. The main concept is that people "hire" products to do a "job" they want to be done. As legendary Harvard Business School marketing professor Theodore Levitt put it, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!" Based on the model the only thing we need to do is to discover these jobs. This essentially means we need to look for the needs.

One thing is common in these two models. And that is you need to discover the needs/problems. (Tweet this) You need to know that the solution you are building is a valuable product. This leads us to Get Out Of the Building.

Find Magic Moments

Let me give you here a third theory/model. I really like it too and it is very much related to the discovery aspect of product management. It is coming from the good Tom Chi, who's the Experience Lead at Google X. He essentially says that you need to find "magic moments" with your user. (Tweet this) These beautiful moments are actually what your product is all about. "Your product is not the search box, the ad algorithm, your user records – it is this magic moment, and your task is to get out of the way of the magic moment or to amplify the magic moment." (Martin Eriksson's transcript) The only way to identify these magic moments is to talk with people and show your product/feature/prototype to them. If you find a magic moment, that is the user value.

This basically equals with the 80/20 rule. The real user value in your product is that 20%. So anytime you're in a debate with someone if this feature is valuable or not, please ask if that feature would create a "magic moment" or not. Remember though that anything what you say is just a conjecture. It's not reality unless you have built at least a prototype and have shown it to a user and have some data from that test. Facts are the only reality. The same goes for magic moments.

Business value

Business value is not always revenue. (Tweet this) This is important. Let me illustrate this and also the controversy between user value and business value with an example.

Let's say you have an e-commerce product. People can use this product without signing up with their email addresses or Facebook accounts. But if they sign up then you can have their email addresses, you can retarget them, bring them back to the site so they can use it more and eventually they will probably buy more. Obviously it means business value for you.

There are two mindsets how you can approach the situation. These mindsets are significantly different. Here are two quotes those illustrate them.

  1. "Business Value First" Mindset: "How to make people signing up more? Should we make sign-up mandatory to have more revenue eventually?"
  2. "User Value First" Mindset: "How can I create value for the user by solving a user need? What problem can I solve where I need the user's identity?"

"Business Value First" Mindset

"How to make people signing up more? Should we make sign up mandatory to have more revenue eventually?"

It's very likely that you will come up with a solution what I call artificial user value generation. That is, you start limiting your product, by limiting one of your features. You create necessity. A typical action created from this is: change the product so that a user can only use the advanced search filter if s/he signs up. If you do this you don't actually create user value, you just create necessity.

"User Value First" Mindset

"How can I create value for the user by solving a user need? What problem can I solve where I need the user's sign-up?"

Apparently this is a tougher question to answer. But in the answer there is the real user value. It is very likely that you will come up with a feature that is something like personalised recommendations. You aren't able to create this feature without getting the identity of the user. If you do this on your e-commerce site you're likely create user value. (This feature is just an idea. I'm not 100% sure about the solution because I haven't tested it. Based on what Amazon does this seems like an obvious thing though.)

Don't get me wrong. Business value is not from evil. It is necessary. It is the gasoline you need to have to get from A to B with your car. But your real goal is to get to B and not to pile up gasoline.

Conclusion

In this post I wanted to clarify the main difference between user value and business value. User value is the value that the user gets from the product. Business value is what the business gets when the user is using the product. Many people confuse this and because of different personal goals in a business it often leads to biased decisions. Please try to clarify this anytime you feel that you're not having the same goals when debating about a new feature. It is crucial.

There are two things I would like to leave you with:

  1. Look for the user value first. After that try to capture the business value. Business value is the gasoline in your car but the real goal is to get to B and not to pile up gasoline. (Tweet this)
  2. If you're working on a product, please ask: "What is the magic moment in my product?" (Tweet this)