economics for product managers - it's not just for professors and bankers
DESCRIPTION
The role of business strategy is to drive the highest economic value out of your company’s resources. From your product strategy to the outbound marketing plan, economics should drive your strategic decisions. This presentation explains how simple economics models can help rationalize your complex product management decisions.TRANSCRIPT
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Economics for Product Managers: It’s Not Just for Professors and BankersMike Boudreaux
Product Manager
Emerson Process Management
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“The question isn't what are we going to do. The question is what aren't we going to do." – Ferris Bueller
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3http://www.flickr.com/photos/livenature/4034863015/
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4http://en.wikipedia.org/wiki/Microeconomics
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5http://en.wikipedia.org/wiki/Home_economics
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7http://www.flickr.com/photos/francesco_veronesi/3566479837
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“A strategy is a plan of action designed to achieve a particular goal.” – Wikipedia
http://www.flickr.com/photos/ollesvensson/4252196844
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a
Market Conditions
Technology
Resource scarcity
Objectives ConstraintsPlan to
optimize results
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“Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do." – Michael Porter
http://en.wikipedia.org/wiki/File:Southwest_Airlines_Cabin.jpg
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11http://www.flickr.com/photos/robie06/4394748067
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12http://www.flickr.com/photos/fotoosvanrobin/2545857883
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Quality
Time
Cost
Size
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Secure
Usable Cheap
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15
Use
r E
xper
ienc
e
Number of Features
Flexibility
Ease of Use
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http://www.flickr.com/photos/pauldcocker/3003668632
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17http://www.flickr.com/photos/ableman/534155207
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“It would appear, Hopkins, that your gut feel was only indigestion.”
Source: Product Manager’s Desk Reference, Artist Timo Elliot
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19http://www.flickr.com/photos/acaben/541334636/
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23http://www.flickr.com/photos/adstream/1495683304
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Effort
Va
lue
24
Keep the lights on
High value enhancement
Breakthroughproduct
Waste ofeffort
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Cost (C)
CustomerSurplus(B – P)
Profit(P – C)
Benefit (B)
Price(P)
Cost(C)
Value(B – C)
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Benefit (B)
Price(P)
Cost(C)
Product A Product B Product C
Consumer Surplus (B - P)
Profit (P - C)
Cost (C)
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Effort
Va
lue
27
20%
60% 20%
0%
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Effort
Va
lue
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Effort Value
Poor fitUtility / main-tenanceNew productEnhancement
29
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Effort
Va
lue
30
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Effort
Va
lue
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Effort Value
Poor fitUtility / main-tenanceNew productEnhancement
32
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Effort Value
Poor fitUtility / main-tenanceNew productEnhancement
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Project 1 Project 2 Project 3 Project 4 Project 5 PriorityMeet standards/specsImprove User experienceImprove Ease of useImprove Speed of useImprove reliability
EffortValue
Priority RatingRank 1 2 3 3 5
34
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Project 1 Project 2 Project 3 Project 4 Project 5 PriorityMeet standards/specsImprove User experienceImprove Ease of useImprove Speed of useImprove reliability
EffortValue
Priority RatingRank 3 4 2 1 4
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Project 1 Project 2 Project 3 Project 4 Project 5 PriorityMeet standards/specsImprove User experienceImprove Ease of useImprove Speed of useImprove reliability
EffortValue
Priority RatingRank 3 2 4 4 1
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Project 1 Project 2 Project 3 Project 4 Project 5Meet standards/specsImprove User experienceImprove Ease of useImprove Speed of useImprove reliability
Effort
BalancedUsabilityReliability
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Price
Mee
t spe
cs
Suppo
rt
Reliab
le
Prove
n te
chno
logy
Easy t
o lea
rn
Easy t
o us
e
Flexibl
e
New te
chno
logy
0123456789
10
Price Buyer
Visionary
Conservative
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Industry
Application
BuyerType
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Industry
Application
BuyerType
40
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Industry
Application
BuyerType
41
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Industry
Application
BuyerType
42
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Industry
Application
BuyerType
43
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http://www.npd-solutions.com/serverppm.html
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45Used with permission from http://www.pragmaticmarketing.com/
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47http://www.flickr.com/photos/uggboy/4593866108
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49http://en.wikipedia.org/wiki/Ideal_firm_size
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50Used with permission from http://www.pragmaticmarketing.com/