Smart Product Bets Start with DATA

Defining your current state to support 2020 planning

Vision and strategic intents are core to product planning. You need to know where you’re going — and why. Another key element to successful planning, at any timeframe, is good data around where you are right now. Data will answer key questions, including:

Do you know the current status of your product’s topline revenue drivers?

How R+D costs impact ROI?
Are the bets you made paying off?

Product leaders have to quickly make solid decisions that can affect the bottom line. You can identify the right growth levers to pull for your company and better understand your current position by having the right set of revenue and cost metrics.

Knowing that perfect is the enemy of good, what are the necessary things you really need to understand how your resources are performing? The goal is to baseline an understanding of revenue and resources as you craft your 2020 strategy. It is key to understand the drivers of BOTH your top-line revenue and bottom-line profitability.

Top-line revenue insights

Taking a data-driven approach to top-line growth ensures you’re:

Aligning to the larger company growth strategy
Demonstrating how your initiatives have measurable impact on the top-line
Ensuring that the numbers and related story are clear and understandable

For your baseline, you’ll want to know the primary drivers of revenue, including Annual Recurring Revenue (ARR) or Annual Contract Value (ACV). We show it broken out here by new, upsell/cross-sell, downsell and churn in a revenue bridge, a visualization of detailed historical data and logical projection assumptions.

In this example, your $21.4MM ARR has a 12% churn rate. Typical data points that will indicate potential churn include usage rates, last login date and customer satisfaction. You can pair churn indicator data with qualitative feedback. Ask your support and sales teams to share customer problems/themes.

Knowing your ARR by # of accounts and by customer will surface the customer segment opportunities in 2020. You can also break out ARR by product and customer concentration by ACV and revenue. This data can guide you towards the segment that may offer the best bet for churn reduction.

Another helpful data slice is understanding sales’ win/loss numbers. Anecdotal feedback is always useful: Where did the prospect offer clues as to strengths and weaknesses in the product? Those insights may show why the product may not be resonating with a particular segment and why. Or, the win/loss feedback might give you clues that the value prop needs clarifying.

Bottom-Line Analysis

Bottom-line data will give you visibility into your R&D cost allocations and delivery trends. Take a look at this year’s R+D costs. Did the allocations support your company’s strategic intents and outcomes? Where did your bets pay off? Should you have realigned resources? Armed with a clearer view of your 2019 R+D costs, you’re now ready to apply that lens to your strategic bets for the upcoming year. As 2020 progresses, you need to understand how those bets are trending. You’ll want to monitor costs for maintenance, innovation, parity, integration, and, of course, tech debt and customer commits. Tracking your resources confirms right track, or will help inform how you will want to reallocate to align with your business goals.

Sounds great. How do I get started?

Having a clear insight into topline and bottom-line revenue is fueled by Product Operations, a buzzed-about function in the world of product right now. But what is it? Simply put, Product Operations provides the cross-functional visibility and insights needed to define winning strategies.

The first step in establishing product operations is getting that manual baseline (as we discussed at the beginning of this piece — it’s all coming full circle…!). Inputs for this baseline will come from finance, sales, customer support, data science, engineering, at the very least. Once you’ve created that full picture of topline and bottom line revenue drivers you’ll be well positioned to inform your 2020 planning.

Next week we’ll share tips for identifying key customer needs, including how to surface the best insights from your data and partnering cross-functionally to tap into your colleagues’ expertise.