Opinions vary, but a safe bet says that more than 80% of startups fail. The question then is: Can product management help improve startup success rate?

The answer is yes, provided the role of product management in the startup is well aligned with the startup’s team composition, type of product, and stage of company evolution. That means: provided the founders and the product manager invest, wisely and early, in what’s needed to make product management successful. Let’s explore these conditions with an eye on benefits and pitfalls of product management and formulate some food for thought and advice for startup founders, executives, and the product manager.

All startups are not alike

Startups are founded for a very wide range of reasons. Some reasons have to do with market changes, some with science breakthroughs and some with people’s ambitions and dreams. Of course, the number one reason is the hope or expectation of substantial financial gain for investors, founders, and the entire startup team. For our purposes here, the main reasons can be reduced to three categories: a new market opportunity, a technology invention, or a strong founding team.

If a startup is founded due to a recognized market opportunity, technical innovation is usually not a key to success. However, time to market is. As the founding team raises funds for the startup, the main argument offered by the founders would usually be: Here’s a well defined and validated market opportunity, without much competition yet. And, by the way, here’s a kind of product that would fit the need, and sure, we can get there fast.

Naturally, for this type of startup, the founders’ strength would typically be in the knowledge of the market, but perhaps less so in technology and product development.

Truly game-changing inventions do happen, but they are few and far between. Nevertheless, technology inventions addressing niche problems in existing solutions are frequent and can be sufficiently promising to warrant starting a company to deliver a product incorporating these inventions. These inventions are typically formulated by highly specialized technical experts. As a result, such entrepreneurs will typically argue that their startup should be funded because they know best how to solve difficult technical problems. As a matter of fact, they already have a recipe – the “secret sauce” that nobody else has, the famous intellectual property. Less forcefully, they will also point to some validation of market opportunity, often referring to second-hand generic market research. And the discipline of building a quality product on time may not necessarily be their avocation.

As with big-time inventions, truly strong startup founding teams are rare. But, statistically, startups led by “serial entrepreneurs” have succeeded more often than those led by first-time founders. So, often enough to matter, startups are funded based primarily on the reputation of the founding team, rather than on the strength of a well defined market opportunity and a matching product concept. “These guys are good, they will figure it out as they go” are often the closing remarks when the funding is signed off. Sometimes this comes true. But it happens only when someone actually does the disciplined work of market analysis and drives, at each level, product definition, development and delivery. Sometimes it’s the founders. Too often, founders prefer to debate their vision with their peers, “decision makers” and friends, and it’s up to someone else to do the hard detailed work.

Startup Types – Defined by Investment Justification

In each of these three startup types the founders’ strengths are sufficient to fund the company. But, they are not necessarily sufficient for the company to succeed. Yes, the investors will insist that the executive team be “rounded” to fill out the gaps in expertise and focus of the founders. However, in practice, the founders’ “nature” will usually dominate and establish the “nature” of the company. Product management can be successful in these environments only if it’s well aligned. Read: when it fills the gaps, without stepping on toes or egos. So, how does the product manager fit in with the founders and executives in a startup?

Founders, executives and product managers

Let’s put one thing away at the start. Unless you are the founder of the company yourself, you can’t, as product manager, win an argument with a founder who does not agree with what you propose. If you put up a fight, you’ll lose. If you butt heads too much, you’ll lose your job. So, let’s not even discuss that option. Nobody I know would choose to pursue it. Some will leave the company, but most would try to find a way to keep the job and be productive. The same applies to executives.

Soon after the startup gets going, there are more executives in it than just the founders, but few startups would have a VP of product management early on. Some may not even have a product manager for a while. When they do, it’s usually not an executive. Why? The usual answer is: There shouldn’t be too many executives in a startup. But the reality is different: Nobody wants to admit that the company was really founded without a clear and solid definition of its target market and a fitting product.

So, the bottom line is that either there is no dedicated product manager in a startup or the product manager is a “middle” manager, a “third rank” after the founders and the executives. If there’s no product manager, it’s up to the founders or the executives to do product management work, as required. If there is one, it’s up to all – the founders, executives and the product manager – to find a most productive way to work together. How? It depends on the type of the company. Let’s explore.

Startups founded on market opportunity

It’s a good type of a startup, with strategy driven by a recognized market need. The best thing about this kind of startup: the market target is well known! The founders detected, defined and validated this target. That’s good to keep in mind when you work in this startup.

Why? Because therein hides a potential, and frequently real, problem: Among other things, the fact that “founders defined market target” also means there will be no opportunity to debate this targeting, at least until imminent failure signs are flashing bright. A product manager trying to question the market target will be told, if perhaps indirectly: “you are wasting our time and money, try to do something useful, or else…”

And indeed, there is an important area where a product manager can help in this startup. It’s product definition. Usually, founders of this type paint only a broad-brush concept of the product to raise the funds. If they are not technical, they will need a lot of help after the company gets going, to reduce this broad-brush picture to practice. That help can be provided by a technically-savvy product manager. The founders will make a wise decision if they use this help and if they support, from early on, the product manager’s influence in the company within this area. Similarly, it will be smart for a product manager in such company to focus on product definition, in all details.

But even this opportunity for a product manager can be problematic. That will happen if the founders are technical, at least at a level where they can argue details of the product directly with development managers. One always prefers to negotiate with decision makers. Thus in this case, developers will prefer to resolve issues with the founders and vice-versa, leaving the product manager on the side. The product manager’s role will end up being a meticulous note-taker. If you’re just starting as a product manager, this may be a good opportunity to learn. If you are an experienced one, looking for a peer-level role on the team, you may face frustration.

Bottom line: In a startup founded on defined market target, the best opportunity for meaningful contribution from a product manager lies usually in product definition. Both the founders and the product manager would make a good decision if they focus on this opportunity and drive to make the best of it.

Startups founded on technology invention

Whether it’s a breakthrough invention or a less earth-shaking one, the market need for it is often not well known and sometimes even not knowable. The market for products based on this invention may not exist yet at all. Moreover, it’s also sometimes not even known if the invention concept is really feasible technically and economically.

So, this type of company often proceeds in stages, with the first one being a proof of concept stage. In this stage, a “prototype” of a product is developed and made available for testing by early adopters. As a result, both the technical feasibility of the product and its general fit to the market are validated. That’s all good. But, therein can lurk a big problem related to product management.

At some point, the final target market and the real product must be precisely defined. That’s when product manager’s help is badly needed. However, unless the company does it right, no real product management work is done during the proof of concept stage. Then, the “prototype” and “early adopters” are used as defining framework for the product and the market target, by default, without any serious analysis.

Once the proof of concept is validated, the rush to revenue follows immediately. If the target market and the product are not defined well, for example if they are only focused on what early adopters want and accept, the revenue may spike early and then quickly fall off. How to avoid falling into this trap?

Well, engaging in serious product management work early, during the proof of concept stage, may greatly help. The focus should be on both market targeting and the matching product definition. This work should proceed in parallel, and independently from the proof of concept work. It’s a great opportunity for an experienced product manager to make a strong contribution, with a caveat.

By nature, a technical founder will be usually less opinionated about the market target than about product definition. That may suggest that the opportunity for product manager is limited to market targeting. But that shouldn’t be so. To succeed, the company needs both the right market target and the product that’s right for this target. Therefore, the biggest value for such company that a product manager can create is a clear feature revenue map, identifying which features of the product can bring the most revenue. Incidentally, without it you can’t hope to argue product features with an inventor-type founder.

• Good focus: market targeting, feature/revenue-driven product definition
• Bad focus : technology aspects of product definition

In short: In a startup founded on an invention, the best opportunity for meaningful contribution from a product manager lies usually in a combination of market targeting and product definition. The important thing is to start working on this early, well before completing the proof of concept phase.

Does an invention-founded startup offer opportunities for an experienced or an inexperienced product manager? I’d say the experienced one only. A beginner will not have much opportunity to learn and would have no standing in arguments that are bound to happen.

Startups founded by serial entrepreneurs

The company has been founded on the strength of its founders’ reputation. Usually, a topview review of their preliminary vision of target market and the product was presented to the investors. Both are good starting points. But there’s a lot of work to be done. And, quite possibly, this vision may change as a result of deeper analysis of both the market and technology. Is there a problem there that a product manager could help solve?

Yes there is. It’s called finalized market targeting and product definition – the essence of product management. Jump right in?

On the surface, it looks like a great opportunity for a product manager to contribute. The founders have charted the course and they can use help in substantial fine-tuning of their vision and converting it into actionable market targeting and product requirements. Moreover, when things get difficult, the experienced founders can really help the product manager. Looks like a dream job for the product manager. Let’s double check this.

What can go wrong? Let’s see. How about if, upon closer inspection, the original vision proves to be non-ideal? It happens, doesn’t it? Yes it does, hopefully early enough, before a lot of work and money is spent. What then?

Most likely, the same team re-directs to a new idea. That involves a quick re-targeting and re-definition of the product. If you, as product manager, can keep up with the rapid changes and you are included in this decision making, that’s really great. But, if not, then you’re left on the sides, waiting for clarity to come down from above. Worse, you may be asked to work out, for yesterday, a lot of details for concepts that are dropped before you even get half-way there. Repeated many times, hat can get real frustrating in a hurry. Is it productive? In truth, you may never know. But it will clearly not fell like it and will probably not be recognized as such.

There’s also one more thing to be aware of: the “halo effect” variety of founders. Yes that happens. Sometimes entrepreneurs get lucky and succeed greatly, if mostly due to chance (for example: a competitor fails or market opens up unexpectedly). Often, that success is misinterpreted by the investors and deemed sufficient grounds to fund the same founders again. This may or may not work out well. The work to be done by product manager is the same as with the really great founders, but the conditions may be drastically worse. That’s because the “halo effect” founders may suffer from the “I don’t know that I don’t know” syndrome. Very hard to argue and come to an agreement with.

• Good focus: market targeting and product definition, if founders OK
• Bad focus : anything, if founders not really OK

Foremost, this type of startup offers a bifurcated picture to a product manager. If the founders are really good, it may be great opportunity to learn from them. It may also be a great opportunity to contribute, if not necessarily lead. On the other hand, if the founders are of the “halo effect” variety the product manager’s situation may be hopeless.

Roadmap

It’s well known that product managers and product roadmaps are joined at the hip. But, what’s the roadmap for a product manager in the startup world?

In short, the map of best opportunities to contribute and learn can be defined as in the table below:

Of course, there’s more to product management than market targeting and product definition. There’s also driving and assisting in product development, manufacturing, promotion, sales and customer support. So, why did we not reflect those contribution opportunities in the roadmap above?

First, it’s because market targeting and product definition are the key factors. If you get them wrong you will not succeed no matter how hard you work and no matter how well you deal with development etc.

But, most importantly for this discussion, it’s because the opportunity to contribute in areas beyond market targeting and product definition tends to be the same in all three startup types explored here. It’s always there and it depends more on the makeup of the executive team than on the startup type. What kind of a marketing VP do we have, how about the development VP, etc. How does the product manager work with all of them?

Does the general manager support the product manager? These are all important factors, but their impact is the same in each startup type.

Who should invest?

Should financial investors pay attention to product management in startups? You bet they should. And they do, but typically less so than to founders and executives. They’ll be well served to pay real attention to product management and to invest in it, wisely. What’s the best investment?

Well, in the discussion above we pointed out the best opportunities for contribution by a product manager. The reason they are good is that, if served well by the product manager, they can bring value to the company. So, the best investment would be in assuring there is a good product manager onboard and is aligned and functioning well within the area of best opportunity. Check the roadmap above.

Is there such a thing as an investment in product management by the founders (executive team)? There can be, and there should be. Good executives and founders, no matter of what type, can increase the chances of success for their company by ensuring effective product management. That means deciding, early enough, that product management is a vital function in the company and repeatedly checking if it’s aligned well with the rest of the company and if it’s productive.

Should the product manager invest – not money but serious time and effort – in product management in a startup? This seems like a silly question. Of course, you’d say, it’s your profession so you must invest in it, right? But a better answer would be: yes, but carefully and wisely. Invest in what’s likely to turn out to be an opportunity. Don’t invest in what’s likely to be a struggle without a positive outcome. Check the roadmap!

Summary

Perhaps more than in established companies, the role of product management in startups can be at the same time critical and vague. Most of all, it strongly depends on the type of the startup and the makeup of the founding and executive team. As a result, the product manager in a startup may have a great opportunity to contribute to company success, but only if his or her role and scope of responsibility are well aligned within the company. If the right alignment is not there, frustration and problems follow, and the company as a whole may not perform as desired.

The way to avoid this problem is to carefully consider the nature of the startup, which is mostly defined by the main reasons for its funding, and then invest both time and effort to ensure that product manager’s role in the company fits, from the start, the company’s real needs. By investing in product management early and wisely, the investors, founders, executives and the product manager can truly increase the chances of their startup’s success.

Copyright © 2010 by L. Kurt Reiss, All rights reserved.

L. Kurt Reiss managed products at mutliple startups and companies large and small, such as Interactive Supercomputing, Cascade Communications and Lucent Technologies. Focusing on technology ranging from niche products to a global market-leading product family, Kurt contributed to and led product management and marketing teams through all product cycle phases. He is the author of FOR PRODUCT SUCCESS – A Partnership of Two Managers and the What and Why of It. Kurt provides product management consulting services at www.pathwayssfps.com.