Product Prioritization

Customer requests and custom projects will be operationalized and owned by the customer teams without direct involvement from product management. Technology will service these operational requests using pre-allocated capacity based on the expected client needs. Product management will own the development of a target product state to deliver incremental value to the business and its customers.

Within the development workstream, the goal is to prioritize features, products, and services based on expected economic benefit (i.e. reduce costs or grow revenue) in order to deliver the right solutions in the right sequence to maximize economic value to the company.

• RICE considers variables that impact economic benefit, including customer reach, impact, time to deliver, and confidence in delivery.
• SAFe recommends economic prioritization based on WSJF (Weighted Shortest Job First), a lean business case, and other relevant information.
  • WSJF (Weighted Shortest Job First)
  • Business Case

RICE is an adequate framework for product management to use when prioritizing features within a technology organization, assuming it does not have access to detailed financial projections from finance or business teams within a general management organization to prioritize features. However, as mentioned above, the goal is to prioritize features based on expected value to the business which can be quantified by revenue, efficiency, retention, or other metrics.

The following section dives deeper into this topic to align on the right framework to prioritize features based on business value and focus product development on optimizing customer-centric metrics that impact the business - also known as North Star Metrics (NSM).

Expected Value Prioritization

A product organization would like to prioritize its products, features, and services based on key metrics such as revenue, efficiency, or retention. Product leaders must identify and focus on the key inputs to drive business value and deliver them with the right quality and in a timely fashion. Each product should ideally have 1-3 key metrics, which are also known as Objective Key Results (OKR), to guide their product prioritization based on their inputs to creating business value. Product managers then report on these key product metrics, also known as North Star Metrics (NSM), during Stakeholder Updates.

North Star Metrics

The North Star Metric is a product state that you want your customers to experience when they interact with your business. Once you know your North Star Metric, you can start to measure how well you are achieving it.

Here are a few examples of NSMs for popular products today:

• WhatsApp - Messages sent
• YouTube - Minutes watched
• eBay - Gross merchandise volume (GMV)
• Airbnb - Nights booked
• Facebook - Daily active users
• HubSpot CRM - Weekly active teams

Both operating costs and revenue map to these NSMs in a predictable manner for these self-service business models. Often, an organization will need to consider more than one NSM/OKR for its product. See example below.

Below is a framework for selecting North Star Metrics (NSM) based on the product's ability to drive or impact business key performance indicators (KPIs):

• Identify the most critical business metric to improve
  • Relevant business metrics include:
    • Cost to Serve
    • Retention
    • Share of Wallet
    • Order Velocity
    • Customer Lifetime Value
    • Annual Recurring Revenue
    • Net Revenue Retention.
  • A trending business metric to improve is Net Revenue Retention (NRR), which equals:
    (# of last year's customers renewing this year × Average spent this year)
    /
    (# of customers last year * Average spent last year)
    • Improving the product increases NRR by increasing expansion revenue and decreasing customer churn.
• Identify the top drivers to change this business metric
  • An organization will focus on these drivers to drive change within its product and services.
    • For example:
      • Key Metric - Share of Wallet
      • Drivers:
        • Product availability
        • On-time shipments
        • Product quality
• In the example described in the chart below
  • Key Metric - Operating Profit
  • Drivers
    • Active Campaigns
    • Creative per Campaign
    • Custom Requests
    • Servicing Hours per Custom Request
    • Active Customers
    • Avg Active Campaigns per Customer
      
• Identify the product’s emotional north star.
  • Research what engagement (i.e. NPS, page views), looks like in your business.
  • Relate engagement to the top drivers identified in #2
• Based on the rough sketch of drivers mapped to the business KPI, I’ve suggested the following two North Star Metrics for HMM’s product team:
  • # Creative Analyzed - product objective is to grow this key # (OKR #1)
  • # Servicing Hours (per time period) - product objective is to reduce this key # (OKR #2
• Create positive experiences for customers to reduce negative emotions and deliver a more positive overall customer experience.
  • Put your findings into action and close the loop.

By following these steps, businesses can create a better connection with their customers, which can lead to increased sales and loyalty.

Additional Resources:

• The 3 True-North Metrics that Your Product and Business Need
• Every Product Needs a North Star Metric: Here’s How to Find Yours
• What Is Your Product’s North Star?

Product North Star Metrics and Business KPIs

Example: Decompose Product NSM and Business KPI into Key Drivers / Supporting Metrics

Release Tiering

We recommend that organizations evaluate and tier their planned products, features, and services according to their impact on the customer. For example:

• Tier 1: Scheduled major releases tied to strategic themes
• Tier 2: Scheduled minor releases tied to simple features or enhancements
• Tier 3: Bug fixes, security fixes and performance enhancements

Because tier 1 and 2 releases will open up an organization to new customers or campaigns, calculating the business KPIs and North Star metrics used for prioritization may require forecasting. However, the impact on North Star metrics should be readily determined based on planned tier 3 enhancements. An organization should customize how it defines the tiers and adjusts its prioritization process accordingly based on its business needs.

Tiering product releases enables product managers and stakeholders to be very selective about how they spend their time, particularly as it relates to prioritization, marketing or other work activities. All planned products, features, and services should be consistently tiered based on their customer impact to determine how much and what kind of work is spent driving its development.

Additional Resources:

• Great CEOs Are Lazy: How Exceptional CEOs Do More in Less Time
  This book argues that great CEOs are not actually lazy, but rather they are very selective about how they spend their time. CEOs focus on the single biggest constraint to their company's growth and eliminate it, rather than spreading themselves thin on a variety of tasks. This book offers a good lesson and perspective on the importance of prioritization.