©TOLPAGORNIproductmanagement Certified Product Manager ISPMA Foundation Level EU2.2 Business Aspects www.tolpagorni.com1 ©TOLPAGORNIproductmanagement EU2.2 Content 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing www.tolpagorni.com2 ©TOLPAGORNIproductmanagement EU2.2 Educational Objectives EO2.2.1 Understand the business aspects and their interdependences. EO2.2.2 Understand the business model concept and the business model canvas. EO2.2.3 Understand business cases. www.tolpagorni.com3 ©TOLPAGORNIproductmanagement Strategic Management Product Strategy Product Planning DevelopmentMarketingSales and Distribution Service and Support Positioning and definition Delivery model Service Strategy Sourcing Business Case and Costing Pricing Ecosystem Management Legal and IPR Management Performance and Risk Management Corporate Strategy Portfolio Management Innovation Management Resource Management Market Analysis Product Analysis Product Life Cycle Management Roadmapping Release planning Product Requirements Engineering Engineering Management Project Management Project Requirements Engineering User Experience Design Quality Management Marketing Planning Customer Analysis Opportunity Management Marketing Mix Optimization Product Launches Operational Marketing Sales Planning Channel Preparation CRM Operational Sales Operational Distribution Service Planning and Preparation Service Provisioning Technical Support Marketing Support Sales Support ParticipationCoreOrchestration EU2.2 Business aspects www.tolpagorni.com4 ©TOLPAGORNIproductmanagement Business ModelCanvas Customer segments Who are our users and who are our paying customers?Channels How do our customers find, buy and use the product? Customer relationships How do we interact with our customers? Value Proposition What problems needto be solved? What product does it best? Key Partners Who are our suppliers and service providers? Resources What goods, services, and infrastructure do we use? Activities What do we do with our resources? Cost structures What is the total cost of production? Revenue models Where does revenue come from? www.tolpagorni.com5 ©TOLPAGORNIproductmanagement©TOLPAGORNIproductmanagementwww.tolpagorni.com6 ©TOLPAGORNIproductmanagement©TOLPAGORNIproductmanagementwww.tolpagorni.com7 ©TOLPAGORNIproductmanagement Cab Group Customer segments Channels Customer relationships Value Proposition Key Partners Resources Activities Cost structuresRevenue models www.tolpagorni.com8 ©TOLPAGORNIproductmanagement 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing Business Aspects www.tolpagorni.com9 ©TOLPAGORNIproductmanagement How do you measure the success of your product? Business measures www.tolpagorni.com10 ©TOLPAGORNIproductmanagement Business measures Measurementcandidates: Profit Revenue Market share No of active customers No of installed licenses Conversion rates Cost/Budget Customer satisfaction Customer perceived value Competitor gap Innovativeness www.tolpagorni.com11 ©TOLPAGORNIproductmanagement 0 50 100 150 200 250 201020112012201320142015 Revenue Prod A No sold units A Business measures -Revenue per product www.tolpagorni.com12 ©TOLPAGORNIproductmanagement Profit ? Production cost Sales Price Business measures -Product profit margin www.tolpagorni.com13 ©TOLPAGORNIproductmanagement Profit ? Business measures Production cost Development cost Maintenance cost Marketing & Sales Admin Sales Price www.tolpagorni.com14 ©TOLPAGORNIproductmanagement Business Aspects 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing www.tolpagorni.com15 ©TOLPAGORNIproductmanagement Strategic goals Success factors Key numbers Customers Products & Services Processes Financial Partner relations Performance management -Score card www.tolpagorni.com16 ©TOLPAGORNIproductmanagement Performance management –Market perspective How do you avoid losing customers to competitors providing a similar product/service? www.tolpagorni.com17 ©TOLPAGORNIproductmanagement Performance management –Market perspective How do you avoid losing customers to competitors providing a similar product/service? One way to avoid churnis to use mass marketing to persuade your customers that your offer is somehow better (differentiation). www.tolpagorni.com18 ©TOLPAGORNIproductmanagement Performance management –Market perspective How do you avoid losing customers to competitors providing a similar product/service? One way to avoid churnis to use mass marketing to persuade your customers that your offer is somehow better (differentiation). Churn is expensive! You lose the invested acquisition cost and the revenue that customer would have provided you. Conversion rate is measured in churn �������������������������= ������������������+�����������������−������������������ #����������������������ℎ��������� www.tolpagorni.com19 ©TOLPAGORNIproductmanagement •Profit •Revenue •Market share •No of active customers •No of installed licenses •Conversion rates •Cost/budget •Customer satisfaction •Customer perceived value •Competitor gap •Innovativeness •… Performance management -Possible measures www.tolpagorni.com20 ©TOLPAGORNIproductmanagement Business Aspects 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing www.tolpagorni.com21 ©TOLPAGORNIproductmanagement Risk management -Identify risks If you know the risk you can find a way to minimize or avoid it! Examples of risks -Project risks -Financial risks -Business risks -Production/Delivery risks -Contractual risks -… www.tolpagorni.com22 ©TOLPAGORNIproductmanagement 500.000 100.000 50.000 10.000 RareUnlikelyPossibleLikelyFrequent Probability Impact Risk management -Risk Evaluation tool www.tolpagorni.com23 ©TOLPAGORNIproductmanagement “Thenon-inferiorityorsuperiorityof something” Wikipedia Risk management -What is quality? www.tolpagorni.com24 ©TOLPAGORNIproductmanagement “Thenon-inferiorityorsuperiorityof something” Wikipedia Relative to what? Usability?Safety? Performance? Competition? Risk management -What is quality? www.tolpagorni.com25 ©TOLPAGORNIproductmanagement EU2.2 Business aspects Strategic Management Product Strategy Product Planning DevelopmentMarketingSales and Distribution Service and Support Positioning and definition Delivery model Service Strategy Sourcing Business Case and Costing Pricing Ecosystem Management Legal and IPR Management Performance and Risk Management Corporate Strategy Portfolio Management Innovation Management Resource Management Market Analysis Product Analysis Product Life Cycle Management Roadmapping Release planning Product Requirements Engineering Engineering Management Project Management Project Requirements Engineering User Experience Design Quality Management Marketing Planning Customer Analysis Opportunity Management Marketing Mix Optimization Product Launches Operational Marketing Sales Planning Channel Preparation CRM Operational Sales Operational Distribution Service Planning and Preparation Service Provisioning Technical Support Marketing Support Sales Support ParticipationCoreOrchestration www.tolpagorni.com26 ©TOLPAGORNIproductmanagement Business Aspects 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing www.tolpagorni.com27 ©TOLPAGORNIproductmanagement Business planning Definition: Forecasting the selected and relevant measuresover the strategic timeframe. -Sales funnel -Marketing campaigns -Installation capacity -Trend in #downloads -Production capacity -… www.tolpagorni.com28 ©TOLPAGORNIproductmanagement Business planning Definition: Forecasting the selected and relevant measures over the strategic timeframe. Cornerstones in business planning •Budget •Resources •Cash flow www.tolpagorni.com29 ©TOLPAGORNIproductmanagement DEVELOPMENTINTRODUCTION GROWTHMATURITY DECLINE •Faster IntroductionStart making money quicker and taking position •Higher Acceptance Faster growth and volume •Increased Sales Revitalized products Business planning www.tolpagorni.com30 ©TOLPAGORNIproductmanagement Business planning –Portfolio perspective www.tolpagorni.com32 Old vs new customers? ©TOLPAGORNIproductmanagement Business Aspects 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing www.tolpagorni.com33 ©TOLPAGORNIproductmanagement Costing planning methods •Estimation methods •Target costing www.tolpagorni.com34 ©TOLPAGORNIproductmanagement Costing Estimation methods: •Analogous Estimation •Resource Cost Rates Estimation •Bottom-upEstimation Planning poker www.tolpagorni.com35 ©TOLPAGORNIproductmanagement Costing -Planning Poker Also called Scrum poker •consensus-based technique for estimating •mostly used to estimate effort or relative size of user stories A variation of theWideband Delphimethod. It is most commonly used inagile software development. www.tolpagorni.com36 ©TOLPAGORNIproductmanagement A target cost is the maximum amount of cost that can be incurred on a product. Costing -Target costing www.tolpagorni.com37 ©TOLPAGORNIproductmanagement A target cost is the maximum amount of cost that can be incurred on a product. With this cost level the firm can still earn the requiredprofit margin. −Based on the assumption that the product can be sold at a particular selling price Costing -Target costing www.tolpagorni.com38 ©TOLPAGORNIproductmanagement Business Case 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing www.tolpagorni.com39 ©TOLPAGORNIproductmanagement Business Case -The Egyptiantravel ”Psst, -Special offer to you my friend! Don’t tell anyone. This Finger was part of an old statue from the Hatshepsut temple” ”It is worth at least $2000, but you can buy it for $200” ”You get it so cheap because my mother is ill and I need the money for hospital bills, this week.” www.tolpagorni.com40 ©TOLPAGORNIproductmanagement Business Case -The Egyptiantravel ”Welcome to the local artist shop of Luxor. We have artists creating paintings and sculptures inspired by the Pharaos. ” ”The artists are all graduate students from HelwanUniversity in Cairo. Some of them will become famous. Some of the today most well known Egyptian artists have the same education.” ”The Price for this sculpture is $200 and can probably double its value in 5 years.” www.tolpagorni.com41 ©TOLPAGORNIproductmanagement Business Case -Criteriasfor a successful business case •Credibility The case can be believed. It sounds realistic. Credible information needed to base the case on. •Practical value Enables decision making and planning in confidence. It has a well defined value of interest for the investor. •Accuracy It predicts a plausible outcome that is correctly calculated and presented. •Defines success clearly What will the result be? Compare with business as usual or the alternative. www.tolpagorni.com42 ©TOLPAGORNIproductmanagement Business Case -Exercise What topics should be covered in a Business case? www.tolpagorni.com43 ©TOLPAGORNIproductmanagement 1.Introduction & Overview 2.Assumption and Methods 3.Business results 4.Sensitivity and Risk Analysis 5.Conclusions and Recommendations Business Case -Buildingblocks www.tolpagorni.com44 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 1. Introduction & Overview •Title & Subtitle •Authors & Recipients •Date •Executive summary •Disclaimers •Subject statement •Purpose •Situation Structure and order www.tolpagorni.com45 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 1. Introduction & Overview •Title & Subtitle •Authors & Recipients •Date •Executive summary •Disclaimers •Subject statement •Purpose •Situation •Proposed Actions •List of scenarios •Business objectives •Main components www.tolpagorni.com46 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 1. Introduction & Overview •Title & Subtitle •Authors & Recipients •Date •Executive summary •Disclaimers •Subject statement •Purpose •Situation •Who will use it •What decisions are needed •Decision support “I present this to you because I want you to…” www.tolpagorni.com47 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 1. Introduction & Overview •Title & Subtitle •Authors & Recipients •Date •Executive summary •Disclaimers •Subject statement •Purpose •Situation •The story •The business objectives •The rationale “I want to do this because…” www.tolpagorni.com48 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 2. Assumptionand Methods •Financial Metrics •Benefit Rationale •Assumptions •Scope and boundaries •Cost model •Data sources Scenarios And here are some models and the assumptions! www.tolpagorni.com49 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 3. Business results •Cash flow model •Analysis of results •Non Financial results What will the revenue be?! www.tolpagorni.com50 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 4.a Sensitivity •Which assumptions are important in determining results? •Which factors must be managed? Whatif? Is it worth it? 4.b Risk •How likely are the projected results? •How likely are other results? •What factors must be watched? www.tolpagorni.com51 ©TOLPAGORNIproductmanagement Business Case -Buildingblocks 5.a Conclusions •Are the proposed actions beneficial •Which scenario is to be chosen? –Why? •What results are likely to follow? What is your recommendation? 5.b Recommendations •To optimize result •To minimize risk www.tolpagorni.com52 ©TOLPAGORNIproductmanagement Business Case 1.Business measures 2.Performance management 3.Risk management 4.Business planning 5.Costing 6.Business Case 7.Pricing www.tolpagorni.com53 ©TOLPAGORNIproductmanagement Educational Objectives EO2.2.1 Understand the business aspects and their interdependences EO2.2.2 Understand the business model concept and the business model canvas EO2.2.3 Understand business cases www.tolpagorni.com54 ©TOLPAGORNIproductmanagement Business Case -Exercise, homework •You are to create a business case for your new software application! •You will present the BC next week to the Management Team for a go/no go decision! -In your BC –what subjects do you want to focus on and why? -What risks can you foresee in your project and how do you suggest to avoid them? www.tolpagorni.com55 ©TOLPAGORNIproductmanagement END www.tolpagorni.com