The Product Manager should be the CEO - and vice-versa

In the frame of Sirris’ program called Mistral – a program that advises innovative, mostly ICT, SMEs (small and medium-sized enterprises) on their strategy – colleague Peter Verhasselt stumbled upon a pattern of recurrent problems within young ICT companies delivering a mix of products and services in B2B markets. He also noticed how the pattern seemed "predictable" because of the strife between salespeople and engineers, and with the Mistral team, he established the link to its deleterious effects on corporate strategy.

Peter's keen observations

Young companies that are dominated by either side (Sales or Engineering) behave irrationally and seem unable to adopt successful strategies. Note that this article and the situations it describes don't apply to companies who specialise in tailored projects and custom-made systems – those companies explore the needs of each customer and thrive on proximity.

The frustrated engineer shares his thoughts with the CEO and discovers something ...

The boisterous salesman rants at the engineer but is challenged by the unflappable CEO

Specifically, Peter noticed that companies whose Sales Dept. dominates tend to chase opportunities indiscriminately, reacting to every new stimulus. Their salespeople find no solace even in a sea of commercial opportunities because they feel hamstrung by their Engineering Dept. The companies have a history of forgetfulness and rapidly changing products and services, every new generation replacing the unrelated previous one, whose potential was never explored beyond a short stint, and anyway before the company could accumulate sufficient valuable experience.

What happens when the insanely arrogant salesman takes Product Management decisions over?

On the other hand, companies in which Engineering Dept. dominates tend to over-design and over-develop their visionary Products (or Services), oftentimes disrespectfully of market opinion. The most visible symptom is often an advanced Product/Service that sports an impressive array of functionalities, but which don't seem to clearly fit in with customer needs, or which the prospects don't recognise as the necessary solution to any pressing problem. To the contrary of Sales-dominated companies, Engineering-dominated companies tend to stick stubbornly to concepts of products and services even in the face of lacklustre customer interest, to the dismay of Sales Dept. They blissfully ignore customer feedback, perhaps even going as far as dismissing it as sheer ignorance: "they [the customers] even fail to understand the greatness of our product".

Suppose the Engineer takes over the company and uses it for his most bizarre dreams, which he considers to be perfectly reasonable. What happens next?

Needless to say, both types of companies are very often doomed to fail. To play on the safe side, whenever we met a company in that situation we tried to help them address their blind spots and provided ideas and guidance, but were often rebutted as incompetent, insensitive consultants with a dim grasp of their unique business case. A rather frustrating situation with plenty of déjà vu.

Peter's Insight

At the core of this article resides a rather simple Insight that Peter brought forth. While looking for the root causes to those destructive patterns, Peter noticed that many ICT SME companies lacked a dedicated way of resolving the tension between Sales and Engineering functions. He then envisioned the leading position in innovative companies to be a sort of "Über Product Manager" job. That job should obviously be blessed with the powers and duties of the Chief Executive Officer but should also arbitrate the predictable tensions between Sales and Engineering around the Product and its management. Specifically, the "CEO plus Product Manager" should:

  • select and set customer needs as the core of the Company's Mission
  • define the borders of the Product that responds to those needs
  • define the specifications of the Product and hand them to Engineering Dept. with the mission to develop the corresponding Products
  • select the customer space and direct Sales Dept. towards a well-defined target area of customers

The C-level managers realise they ought to become the company's Product Managers

In Peter's Insight, company management is akin to a pyramid on top of which sits Product Management, necessarily guiding and balancing Sales and Engineering:

The innovative company necessary hierarchy, as envisioned in Peter’s Insight

The Insight does away with the naive belief that Product Management is a specialised function, at best an expertise usually found deep within the layers of Marketing Dept.

Enter Steve Blank

This chapter refers to the "Four Steps to the Epiphany", Steven Gary Blank's seminal book on growth strategies for technology-driven start-ups. In it, Steve Blank details a growth strategy methodology based on certain key insights, among which the recognition that companies go through discrete maturity steps in their lifecycle and growth. In the last steps of his strategy, which he calls the “Company Building” step, Steve Blank asserts that the company structure that best executes the company's Mission Statement is structured like this:

  • the top management layer (called "C-level" management, thus "Chief ... Officer" positions)
  • a Sales department
  • a Marketing department
  • a Business Development function
  • an Engineering Department entrusted with Product Development

Company hierarchy in the “Company Building” step, as per Steve Blank’s “Four Steps to the Epiphany”

In Steve Blank's vision, the C-level may serve as arbiter between departments, but the frame of that arbitrage is not entirely clearly defined. Should the C-level concentrate on the financial view of the business? Or on the IP view? Or should it look into all directions at the same time? Steve Blank states that the C-level management team should develop the company Mission and bring it to every corner in the company, for example by translating the rather high-level Corporate Mission to Missions specific to every Department and Business Unit. The C-level takes ultimate responsibility for all areas of the Company, but that statement unfortunately hides the importance of bringing Product Management to the C-level in a sea of duties.

The synthesis of "Four Steps" with Peter's Insight

By bringing the "Four Steps" strategic theory together with Peter's Insight, I watched the following ideas emerge :

  • Within the C-level management team's responsibility of drafting and writing the Company's Mission Statement, the Statement captures the motivations and goals of the Company, notably by clearly identifying customer needs and customer profiles, and by targeting the customer needs the Company intends to satisfy
  • The Mission statement is then translated into sub-Mission Statements for Sales, Marketing, Business Development and Engineering functions (Departments)
  • The C-level management team becomes the reference "Product Management" entity for the whole organisation, providing ideas and the necessary guidelines to all other Departments. The C-level management team concentrates in selecting the needs profiles and customers it wants the whole company to satisfy (the goal), in defining the boundaries of the company offering (what we do and don't do at this Company), and in guiding the Company's customer relationship strategy.

Company hierarchy in the “Company Building” step from Steve Blank, augmented with Peter’s Insight


C-level managers congratulate themselves for taking over that key Product Management role

I can say that Peter's Insight greatly clarifies the mission of the C-level management team as described by Steve Blank, and exposes the need to reflect at C-level on the company's product management.

In practice

We observed how companies whose top management welcome this insight suddenly understand, then eventually overcome, the endless tension between Sales and Engineering. They give to their Products and Services a much sharper edge. Good Product Management entailing things as listening to your customers, they feel progressively acknowledged by the Company and gradually find in its offerings what they had always said they needed most. And companies roll out precisely those Products and Services that their customers wanted to buy in the first place. Recognising the advantage of the "Product Management CEO" over all other configurations seems to be, from our experience, an ingredient for success.

Background: the Brussels story

Part and parcel of Sirris' mission to the Belgian technological industry, the Brussels office launched seven years ago "Mistral", an advisory service designed for innovative and technology-driven Small and Medium-sized Enterprises in the Brussels region. With the help and support of my colleagues at Sirris, among which Peter Verhasselt, my team and I analysed competitive situations, reflected on strategic frameworks, and helped managers make the best strategic choices. Beyond the service we provide to an audience of mostly ICT companies lies our own intellectual production of ideas, insights and theories. Here above is one of them, and I may say that this is an insight with a touch of genius as it is both enlightening and simple.

(comic strips credits: thanks to Comiker! 2012, visit http://www.comiker.com/)