Strengthening product ownership is a key strategy for recession survival..
Economists are warning of a coming recession. No one knows how bad it will get or how long it will last, but wise business leaders are taking steps to ensure their business survives the downturn, and ideally, comes out the other side even healthier.
What a Recession Means for Product Orgs
For product orgs, a recession means 2 hard truths and 1 potential opportunity.
First, the hard truths:
- You probably have less development capacity due to layoffs or a slowdown in hiring.
- Your customers have less money to spend or are at least being more cautious in their spending.
And the potential opportunity:
- Your competitors, unless they’re flush with cash, are also experiencing limited capacity.
Great product ownership is the key to making the most of all 3 of these.
Typical Product Ownership is More Wasteful Than We Realize
In a product organization, the top expense is the people. A typical 7-person software development team has $1.5-2m/year in loaded cost. A 2-week sprint is a $75k investment.
One oft-cited Standish Group study showed that as much as 2/3rd of custom-developed software is rarely or never used. That’s “custom developed,” i.e., someone specifically asked for those things that are never used. This particular study may not be perfectly accurate, but the results ring true to our experience. And whatever the exact number, this situation makes sense—people who ask for software features are making guesses about how they’ll behave and what they’ll want in the future, and humans aren’t very good at predicting their future preferences and behavior.
The result is a backlog that looks like a venture capital portfolio. Most features won’t get an ROI, so a few features have to be wildly successful. But, unlike a VC portfolio, the bets typically aren’t very diversified—the same people are making most of the requests and the same people are implementing them. So, it’s hard to be confident in those big wins.
By the way, if you’re saying to yourself, “My org isn’t like this. We’re surely not wasting that much capacity,” ask yourself the following:
- Can you identify hypotheses that didn’t work out?
- Do you know which features are used most and which didn’t land with your customers?
- Can you connect the dots between making a change to your product and seeing a positive impact on revenue and/or costs?
If the answer to those questions isn’t a strong “yes,” you’re operating on faith that you’re much better than average at product ownership.
In good economic times, organizations can afford wasteful product development. Enough features work out that they can subsidize the low-value, rarely-used features. And a good period with several wins can pay for a dry spell. When the economy gets tight, the margin for error gets smaller, and strong product ownership goes from “nice to have” to “essential for survival.” Not to mention, when your competitors are also struggling, strong product ownership becomes a major competitive advantage.
3 Key PO skills for Recession Survival
The product orgs that do well during this recession will be those that develop and employ 3 key product ownership skills.
#1 Customer understanding
The most expensive way to figure out what your customers want is to guess. You’ll build a bunch of stuff and hope some of it lands.
When your customers are being increasingly careful about their expenses and when you have less development capacity, this approach is unsustainable.
In a recession, it’s critical to build a strong capability for customer understanding. Get good at customer problem interviews. Develop a variety of customer observation techniques, both small (e.g., “day in the life”) and large scale (e.g., search trend analysis). Learn your customer’s business processes and business model and be able to explain how your product can resolve their key constraints.
#2 Product Assumption Testing
Even with good customer research techniques, you’re still only forming hypotheses about their future preferences and behavior. Building features is the most expensive way to test those hypotheses.
In a recession, it’s critical to have a toolbox with a range of product assumption tests from solution interviews through MVPs. If you always run the same kind of tests, you’re probably missing opportunities to learn more quickly and cheaply. And with limited capacity, that savings and speed matters more than ever.
Every product idea, every feature, every user story has high-value parts and low-value parts. Most orgs build it all or build whichever parts they turn out to have time for.
In a recession, it’s critical to be able to slice work at every level of detail so you can focus your team exclusively on what matters most. Within a new product idea, you should be able to find minimum marketable features to get early value, learning, and risk-mitigation. Within every feature, you should be able to focus on the highest-value user stories. Within every user story, you should be able to identify what’s critical and what can be deferred or cut.
You have less capacity—you need to use it for what matters most. Your customers are spending more cautiously—you need to be able to demonstrate overwhelming value in everything you build.
In every recession, some companies die, some survive, and a few emerge stronger. The latter will be those who grow a more valuable, customer-focused product, those who eliminate wasteful product ownership by guessing. You can choose to be in that group by investing in your product ownership skills.
We can help! Join us in an upcoming CSPO or A-CSPO workshop or dive into our self-guided 80/20 Product Ownership online course, where we teach these 3 key skills and more.
Course Offerings Online Learning