Product Onions
note: I read a thread on Twitter the other day that was like solving a delicious product puzzle - each response led to more questions, like peeling back layers of an onion - so trying something different with today’s post and sharing my inner dialogue as I read the thread
I managed an API product where leadership’s only benchmark was revenue! And on my first day on the job everyone was trying to figure out the north star metric! Is this guy reading my mind?!
LOL. This guy is bringing product thinking to a revenue party. Your customer does “stuff”. “You don’t get to see what happens for the ultimate end users” - the constraint is spelled out in the question. It’s B2B2C. Maybe even B2D2C (your customer is a developer business like an ISV or SI). Don’t get me wrong, it’s the right instinct to try to connect the dots to the end user workflow, but this is Twitter - the answer is going to be short and sweet, not “do user research”.
hahahahahaha - in B2B products, you have to connect to revenue (generation or preservation)
We’re now assuming that API usage connects to revenue, but we haven’t confirmed that. I love, love, love “I’d still go out and find a way to talk to end users”, but you have to talk to your internal sales team first (probably quicker too).
one metric! the quiz asked for a north star metric - this is a mix of leading indicators, lagging outcomes, and tension metrics
Now we’re getting somewhere. If revenue is the goal, we need to understand the product usage → revenue link. And I love the idea of a proxy metric, because the product team can control product activation / adoption / engagement, but actual revenue is the result of many other factors beyond the product team’s sphere of influence. I was surprised no one said “revenue” is the north star - it makes a certain sort of sense, but would completely demoralize and gut the product team over the long-term.
The next layer of the onion is revealed…Now we know usage has nothing to do with revenue.
Nice try, but no. Since we don’t care if the product is actually used, trying to optimize the activation journey is pointless. Note: I’m not saying it’s bad thinking, I’m saying this is a very constrained product problem and you can’t just redefine the parameters based on how you like to operate.
I’m pretty sure he said unlimited usage. How API products are “typically” priced has no bearing here. Many, many, many PMs can’t get over how things are “supposed to be”. Play the hand your dealt.
Ok, I like the attempt to break out of the Matrix. Something revenue-ish (churn) to meet leadership where they are. But churn is not a great metric because it’s laggy. It’s about business health, not product focus.
I’ve seen it before - PMs just throwing up their hands and saying “no good metric”. It’s really, really hard to connect a product team’s work clearly to a top-level outcome (like revenue).
So, let’s make the metric complicated and hope people don’t notice it doesn’t correlate to revenue generation / preservation?
LOL. So much LOL!
OK, stop LOL-ing. Leadership is a hard job. Sometimes you’re painted in a corner with constraints the team can’t see / understand. The center of the onion is very pungent - not everyone can see / smell it without crying…
narrator: it doesn’t
when in doubt, try to change the rules of the puzzle…
ever been in a roadmap review where the team insists that what they’re doing matters and leadership is like what on earth are you talking about?
yes, do what you know vs solve the puzzle ¯\_(ツ)_/¯
does it though? translate to revenue I mean…?
change the business model! that’s definitely the answer - leadership will love that - and I’m sure totally do-able in 1 quarter…
and now we’re name calling…
there you go, someone finally just said it: “revenue”…I don’t like it, but it is a valid answer to the puzzle…
I have the advantage of having solved this puzzle before - in total honestly, everything everyone said I tried when I was peeling the onion myself - it’s much easier in hindsight / on Twitter
credit where credit is due, I wasn’t the only one with the “right” answer (it’s only “right” for right now)
and yes, deal with the constraints you have, but work towards a better model - that’s the job of a PM
As always, I’d also love to hear from readers about their attempts to peel product onions - please chime in via comments👇. And if you enjoyed this post, please consider subscribing.
further reading / references
ISVs (Independent Software Vendors) and SIs (System Integrators) are common players in developer product ecosystems
some more thoughts on how teams get tagged with South Star Metrics and the Metrics Malfunction behind this organizational anti-pattern
if you like poking fun at execs / environments that push product teams into short-term revenue-oriented thinking vs long-term product-leverage, you might enjoy this satirical essay: The Effective Executive
childish drawing / interpretation
Really like this format. I feel like I learned a ton by thinking through your reactions to these statements. I had to twist my brain a bit on a couple to see your perspetive, which was fun, because I've never been a VP or a GM! :)
If I had to answer, I would say time from first API call to first revenue, assuming there is some trial period to work with the service and data. Changes in this metric are typically proxy for the perceived value of this service. If the value prop is compelling, people will buy. The more crisp it becomes, the sooner they buy.
Wait, I said "service"... If this is just a data broker, then nothing my team does adds value after the conversion. I would tell leadership to go talk to marketing (and spend the bulk of my time figuring out how to convey this message effectively). We're already serving the data. If they want to optimize for developer efficiency, then we need to change our pricing model from 2 year flat rate.
thank you Ibrahim. Case studies are always valuable!