Business: Crucial Product Management Skill 7/20
10 August 2024 ‧ 3 min read
This post is part of a series of short articles about the 20 most crucial product management skills. I started this series in 2021, and then it... fell asleep. This is the first new article after a two-year hiatus of the series.
What it means
Business domain skills are about understanding and making correct trade-off decisions about the business model, go-to-market approach, and competitive position. It means representing the business interests within the cross-functional product team and making sure business considerations are taken into account in product decisions.
Business domain skills include both a knowledge component (knowing about the business model, go-to-market approach, etc.) as well as an empathy component (understanding the perspectives of stakeholders from the business side, including marketing/sales, finance, operations, legal, strategy, etc.).
Why it is an important skill
First and foremost, business domain skills are important because they are what makes the product viable in the first place. A product without a working business model is just an expensive hobby, and for important product decisions, the business model needs to be understood and taken into account. Even in the cases of notable exceptions like Facebook pre-IPO, understanding the business hypothesis of massively and quickly growing the audience to build out a network effect and be able to monetize that audience later is key to making the right product decisions.
Business skills are particularly important for product managers because they are typically the only person who can represent the business concerns in the cross-functional product team. If you think about the classic PM Venn diagram of UX/business/technology, you usually have a designer (also) representing UX, and engineers (also) representing technology, leaving the PM as the only one to represent the business perspective. Similarly, if you consider Marty Cagan’s four risks, the PM is most responsible for business viability.
Moreover, these skills are also helpful in communicating and forging relationships with stakeholders from the go-to-market side as well as external stakeholders, for example partners or investors.
What great looks like
Product managers with great business skills understand how their business makes money from the product, and how their work contributes to their business making more money. They can tie product work to business KPIs and vice versa.
They also understand how their business acquires new customers (eg. through paid customer acquisition, virality, inbound or outbound sales). Regardless of whether the growth of the product is primarily product-led or marketing/sales-led, they understand how product contributes to the growth of the product.
They also communicate effortlessly and effectively with stakeholders on the business side, including marketing/sales, but also other functions like finance or operations. They are able to understand and even expect concerns that business stakeholders will have with product decisions.
Lastly, they understand the competitive landscape extremely well (this is where this skill overlaps with customer & industry skills). They are able to understand the strategies that different competitors are employing as well as their strengths and weaknesses, and thereby are able to expect how competitors will evolve their products over time, and how to evolve their own product to account for the competitive positioning.
How to improve your Business Skills
Do an MBA. (I kid! Although I do have an MBA, and some of the knowledge I got from it is useful, it’s not the fastest and definitely not the cheapest way to improve business skills. If you want to do an MBA, go for it, but definitely don’t do that just to become a better PM.)
In the shorter term, the best way to get better at business skills is talking to the business stakeholders in your company, and understanding their perspectives. Great empathy skills help with this. The more you do this, the more you should be able to expect how these stakeholders may react to product decisions. You can even ask them to explain certain aspcts of their work in more detail, eg. getting a finance person to explain an income statement to you.
Beyond that, the most useful way to build your business knowledge is probably reading and listening to podcasts – I would mention Stratechery here as essential reading for every product manager, as well as Lenny's Podcast. Also, a lot of VC content is very useful in this respect – you can think about VC funding what you want, but a lot of the writing is useful in laying out the fundamentals for tech company business models in any case.
I hope you found this article useful. If you did, feel free to follow me on Twitter where I share thoughts and articles on product management and leadership.