Risk Neutral vs Progressive Roadmaps: Here’s How To Survive a Recession.
Let’s face it. As COVID-19 continues to threaten the normalcy of our lives, there is no turning back from the recession that is hitting our economy. What does that mean for a company? As we’ve seen, recessions can create wide and long-standing performance gaps between companies. A company’s performance during and after a recession depends not just on the decisions it makes, but also on who makes them.
Product managers play an important role in steering leadership to evolve the product strategy and corresponding tactics. Companies that are neglecting to take large roadmap bets to competitively capture markets, industries, and geographies will find that this recession will make gaps insurmountable.
Most firms suffer during a recession, primarily because demand (and revenue) falls, and the roadmap remains in a fixed state as the uncertainty about the future increases. On the bright side, there are ways to mitigate the damage.
What are the two basic modes of product management?
Firstly, it’s important to identify what type of product management you are really doing. There are two basic modes of product management: "Risk-Neutral" product management and "Progressive" product management. What’s the difference between the two?
Sometimes companies are driven mostly by goals, such as sales revenue and market share advancement. These passive-focused times are motivated by extending a product's functionality to its established market(s) while maintaining the product's ability to ship new features. This is known as Risk-Neutral Product Management, which makes primarily defensive moves steadfast in the belief that, as long as they extend a product’s functionality, their sales and profits will continue to rise.
Other times companies are active-focused—concerned mainly with piloting and nailing the product-market fit from the early adopters to the majority. They strive to avoid misunderstanding the addressable market, experiencing relief if they succeed and pain if they fail. This is known as Progressive Product Management, where the company’s focus is on the growth of the product to capture the existing market by competitively launching new features and taking large bets in unproven markets, industries and geographies. Progressive product management invests in more offensive moves that provide upside benefits.
Situations have a potent influence on product management orientation; a recession, for example, can trigger a response that overrides a company's usual orientation. Let’s examine what is the best direction for your company to take during a recession in order to survive.
Avoid Risk-Neutral Product Management
During a recession, organizations that focus purely on maintaining a risk-neutral product management approach develop a culture that leads them to deny the gravity of the crisis. They are steadfast in the belief that, as long as they extend a product’s functionality, their sales and profits will continue to rise.
When customers clamour for lower prices and greater value for money, these companies add bells and whistles to their products. They simply don’t notice that the pie is shrinking and they must capture an even larger market share to keep growing. This is why a switch to progressive product management is recommended!
Invest in Progressive Product Management
The best way to survive a recession is to invest in progressive product management! Some product managers pursue these roadmapping opportunities even in the face of adversity. They use a recession as a pretext to push change through, get closer to markets, industries, and geographies that may be ignored by competitors, and make strategic investments that have long-term payoffs. These strategies are designed to garner upside benefits.
Product managers must deal with dozens of well-intentioned product requests from fellow team members. But when markets change, it’s important to always remember: intent doesn’t matter, results matter!
This is why we recommend switching on your survival mode! The objective is not to build the best product, nor to drive the most short term sales; it’s to find a scalable and repeatable business model by taking large bets in unproven markets, industries, geographies.
The CEO and stakeholders must recognize that cost-cutting is necessary to survive a recession; that active investment is equally essential to spur growth; and that they must manage both at the same time if their companies are to emerge as post-recession leaders.
The difference-maker is the contingency plans or thinking through alternative scenarios. It’s tempting to think of a recession as a time to batten down the hatches and play it safe. Companies that decide to make cuts and limp through a recession are slower to recover and could never catch up. Firms that cut costs faster and deeper than their rivals don’t necessarily flourish.
Launching new features costs less during a recession
Firms invest in progressive product management during recessions because their opportunity cost is lower. When the economy is in great shape, a company has every incentive to produce as much as it can, which is why the risk-neutral approach works best as it extends a product’s functionality to a market; if it diverts resources to invest in a more progressive approach, it may be leaving money on the table.
Downturns actually appear to encourage large bets in capturing unproven markets, industries, geographies or extending them. When fewer people are willing to buy what you’re selling, operations need not be kept humming at maximum capacity, which frees up product management to propose "progressive" initiatives without dampening sales.
For that reason, looking for a product-market fit or competitively launching new features costs less, in a sense, during a recession. The appetite for progressive product management returns to more normal levels once the labour market improves.
How to override your company's risk averse orientation?
Very few product managers have a master plan when they enter a recession. A common mentality for companies is:
"It’s easier to exhort everyone to sacrifice and share the pain than to show courage and invest for gain."
Here are 5 steps we suggest to override your company’s risk averse orientation:
- Make your CEO provide a clear vision. Talk constructively about where to go next.
- Propose an active, progressive product management roadmap. A product roadmap is the sharing of risks among risk-averse stakeholders.
- Stay closely connected to customer’s needs. This is a powerful filter through which to make roadmapping decisions.
- Detect opportunities that offer reliable returns in reasonable payback periods.
- Develop new business opportunities by making significantly greater investments in R&D and market growth.
These 5 steps can add substantially to sales and profits after the recession. This approach doesn’t just combat a downturn; it can lay the foundation for continued success once the downturn ends. From that point onward, a combination strategy should be developed: a little progressive, a little Risk-Neutral, and voilà, you’re a winner!
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Bain Public offers consistent roadmap planning processes & tools for business leaders and product managers organized around what motivates, inspires and improves growth. We offer a variety of blog posts, e-books and approaches designed to help organizations understand their digital strategies, introduce elements of roadmapping and establish product-led change amongst the senior leaders and managers. Our approach, product, expert advice and coaching helps entangle complex technology, people and roadmap dynamics. For more information, visit bainpublic.com or call 514–442–8487.
Written by Jessica Scandaliato. Thanks toPaul Ortchanian for contributing to this article as well as reading drafts and overseeing aspects of its publication. Also, if you have any feedback or criticism about this article, then shoot us an email firstname.lastname@example.org.