7 Questions & 3 Steps — Master Any New Business As A Product Manager
Product managers need to understand business to deliver a better product. As a PM, you may work in different companies and industries. You might already become an expert in your previous job but become a rookie in the new one. One of the biggest challenges for PMs during career transition is how to leverage the prior experience into a brand new one with which you are not familiar. In other words, how to dive into a new company/business/industry and get a quick win?
An abstract mindset of business
What is a business? I made my interpretation in one of my previous articles.
A business is an isolated unit, which can create and deliver business value on its own.
Based on this definition, a business consumes the inputs in various ways and generates different outputs in several other ways. So, understanding a business means understanding your inputs and outputs, how they are obtained, and what happened exactly in your Business-Black-Box.
For example, investing money becomes more money in return. A sales lead becomes a client. A free user becomes a paid user. Take Medium as an example. My articles and I are their input. Part of their business is to encourage more creators like me to generate more valuable content for the platform. (So, business value does not always mean money. It can be more creators and more content.)
7 Questions to master any business
1. What is your income model or business model?
This is the fundamental question you have to answer correctly and thoroughly to grasp any new business. I summarized four typical business models and their income formulas in one of my previous articles.
2. Do you have multiple channels to obtain inputs?
As mentioned previously, inputs can refer to acquiring new users, getting new leads, or even better content.
Then multiple channels may include Ads, SEO, growth hacking, inbound sales, KA negotiations, phone call leads, online marketing, open tenders, campaigns, etc. These are mostly taken care of by the marketing and sales teams, sometimes in a growth team.
3. Are your products non-standard and decision-oriented products?
B2C products are primarily standard with fast decisions. You see it, try it, pay for it or delete it. The whole process can happen in one day.
However, most B2B products are non-standard and heavily dependent on decision-makers. Therefore, sales negotiation and the decision period are usually longer than individual decisions. Sometimes you need to consider preparing demos, a trial period, free to use to convince your clients.
4. Do your products require customer lifetime management?
When your business is not a one-time deal, your business mainly relies on customer retention. Therefore, you would need a CRM system to manage all the customer relationships. One classical framework for this is the RFM model.
5. Does your business have a short or long sale lifecycle?
A sale lifecycle refers to the duration when your products have values to be purchased by customers.
For example, Netflix, Udemy, Headspace, and Medium are the businesses that have relatively short sale lifecycles because they all rely on keeping updating new content or SKUs. For example, music or article from last month might already be out-of-date for most users. So companies have to keep updating new content and adding new things to the product to keep their users.
On the other hand, most B2B companies, like payments and healthcare, these businesses tend to rely on consistent and stable new user acquisitions instead of adding new things to the product constantly.
6. Does your business require any scarce resources?
This question is ordinarily worthy of consideration in some unique industries. It depends on what business it is and where you run your business. For example, if you want to create another SpaceX, maybe you need to consider whether you have a good relationship with NASA :) Most importantly, as a PM, you need to know the answer, but you also need to understand that you can’t change it. It is what it is.
7. Is your business dependent on the supply chain?
If you are selling tangible products, you have to manage your supply chains well, which might be a bottleneck for your business.
How to leverage these seven questions?
As an example, let me take fringe benefits, a unique B2B2C business in Europe. You definitely hear of employee benefits in general; however, you may not know employee benefits are a mature business in most European countries. Epassi is one of the players in this market in the Nordics.
Step 1. Answer all seven questions, and find answers by all means.
1. What is your income model or business model?
For Epassi, as a B2B2C company, there are two primary incomes, one is from the B2B side, and the other one is from the B2C side. Like most B2B or SaaS companies, we charge service fees (you may also call them subscription fees) to employers. But, on the other hand, we charge commissions from merchants as all payment companies do by helping them get more sales from benefit users.
2. Do you have multiple channels to obtain inputs?
Like all B2B2C companies, end users are mainly acquired from enterprises (One of the Bs). So in Epassi’s context, inputs are leads or any resources that can bring more leads.
3. Are your products non-standard and decision-oriented products?
Typical non-standard B2B products. And it is heavily dependent on decision-makers.
4. Do your products require customer lifetime management?
For business customers, yes, because benefits are given by calendar year.
For end-users, yes, too, because only if they use more benefits could we have more revenue from merchants.
5. Does your business have a short or long sale lifecycle?
A long sale lifecycle — so we don’t need to consider adding new content, but we need to keep our user acquisition stable.
6. Does your business require any scarce resources?
No.
7. Is your business dependent on the supply chain?
No. Unless Epassi is starting to sell physical devices to merchants.
Step 2. Reveal the Business-Black-Box
Based on the seven questions, we can develop a simplified Business-Black-Box for Epassi. Three key factors should be included in the flow.
- What are inputs?
- What are outputs?
- Key activities to connect inputs and outputs.
I come up with the chart below. If you are entering a brand new business, this is enough to start with your first 30 days.
Step 3. Adding SOPs and components that make the business run
In this context, Standard Operating Procedures (SOPs) refer to all the activities you and your coworkers will do to make things happen. For example, you need an onboarding process for employees. You need a procedure for invoices and settlements. Then the above chart will become something like this:
Congratulations! You have an overall understanding of this new business now. What should you do next?
- Updating seven questions whenever you know something new about this business
- Identify more SOPs and components that you missed or may need. These are sometimes internal or external product opportunities.
- Extend the business scope and update the chart. For example, I didn’t touch Merchant Acquisition at all in this flow. It is regarded as another input in this flow. However, the importance of merchant acquisition is not less than user acquisition.
Wrapping Up
The seven-questions framework helps PMs think in a structured way when entering a new industry or business.
Follow the three steps to leverage the seven-questions framework.
This approach helps PMs from an early stage when they know little and help them think more about business contexts when they need to jump out from the product context.
