State Of Product Leadership Survey 2018

The State of Product Leadership Insights from 300 Technology Product Management Executives and Managers

A Pendo and Product Collective Study

Table of Contents Introduction.....................................................................3 Survey Methodology......................................................4 The Product Leader Profile........................................... 5 Roles and Responsibilities............................................. 7 Feedback and Measurement....................................... 11 Reporting Relationships............................................... 14 Job Satisfaction and Progression................................ 16 Recommendations....................................................... 18

The State of Product Leadership A Pendo and Product Collective Study

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Introduction

The elusive product leader. Who are they? What do they do? What makes them effective? Large, seminal studies have been done across various corporate leadership roles, but product management leadership remains a role with much less examination. As software products have moved to the cloud, and product expectations have been shaped by the elegant and intuitive experiences of consumer and mobile apps, great product leadership is at a premium. To get a better understanding of the state of product leadership, we ventured out into the wild to study product leaders in their natural habitat. We surveyed 300, predominantly B2B, product leaders who own or lead teams focused on software products. We asked about their responsibilities, effectiveness, organizational structure, career path, and satisfaction. We found some surprising things: • Contrary to popular belief, most software product leaders don’t have a technical background. • Product leaders have a wide range of responsibilities that extend far beyond the product roadmap - all the way out to things like go-to-market execution, and revenue marketing. • Most companies don’t have a dedicated product division or chief product officer, and product management most often reports into the marketing organization. • Despite the rapid growth in new tools and methodologies, product teams still rely on traditional customer feedback and product development approaches. To be fair, we also found some expected things. For example, product revenue is the most common success metric used by product teams. This ebook walks through the key findings from our research, outlines a profile of today’s product leaders, and aims to shine some light on what to this point has been an under-studied role.

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Survey Methodology

Survey Methodology We focused our research on software companies based in North America. In November of 2017 we surveyed product leaders from a wide range of technology companies looking to understand the key roles, responsibilities, background, career path, and overall job satisfaction of product leaders today.

Companies Surveyed Nearly 50% of the responses came from companies focused on Software as a Service, while another 30% focus primarily on on-premise offerings. Other companies have hybrid offerings - with both cloud and on-premise applications, while 10% of respondents own digital products within enterprises whose primary business is outside of software. Almost all respondents - 90% - have products that serve the business to business (B2B) space, with the remainder having consumer-facing products or a mix of both consumer and business products, such as banking or other financial services applications.

Company size

21%

Company size was evenly distributed with companies varying in size from less than $25 million in revenue to more than $1 billion.

21% 17.3% 15.3%

15.3% 10%

<$25 million

The State of Product Leadership A Pendo and Product Collective Study

$25-50 million

$51-100 million

$101-500 million

$501-1 billion

>$1 billion

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The Product Leader Profile

The Product Leader Profile The survey helped to illuminate an interesting view of the average software product leader including their seniority, background, and current role.

Years of Product Management Experience Unlike a lot of careers in the technology industry such as engineering, UX, support, or sales, product managers typically do not start in that role directly out of college. They spend some time in other roles before transitioning into product. Among our respondents, over half of them have a tenure of 6 - 10 years in product management, while another 30% have been in product management roles for 11 - 20 years.

Current Role Respondents were evenly split across across executive, management and individual contributor roles. Respondents with the longest tenures in the product management role were likely to either be executives or individual contributors - indicating that product managers are split between career paths that grow towards a senior leadership role, or remain an individual contributor.

The State of Product Leadership A Pendo and Product Collective Study

33.3% Executive

37.7% Management

(I manage managers)

(I manage individual contributors)

29.0% Individual Contributor

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The Product Leader Profile

Career Path Split - Executives and Individual Contributors Have the Longest Tenure Another key question that we were interested in exploring was: how do people get into product management? In the software industry there’s often an assumption or expectation (often job requirement as well) that product managers have a technical background, and have perhaps done a stint in development prior to making the switch to product management. Interestingly, our respondents told a different story.

Academic or Professional Background Prior to Product Management Although 40% of product leaders in our survey do have a technical background the majority do not. Nearly 60% of respondents have a business rather than technical background. The implication? Companies that are looking for product management talent, may want to look beyond the engineering department to find their next great product leader.

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Roles and Responsibilities

Roles and Responsibilities “What would you say you do here?” The answer, according to our survey, is “a lot.” Product leaders have a very wide range of responsibilities, and own an array of functions.

Product Team Responsibilities Product leaders in our survey reported some expected responsibilities like product strategy, and design, or roadmap prioritization. But product teams also reported some unexpected responsibilities such as owning product development, go-tomarket strategy, and sales enablement initiatives. We also asked product managers about the functional areas of the business that fall under their management. Again, there were some expected results - such as UX and design, but also a wide range of other functions. Over 50% of product teams reported owning development functions, while nearly 50% owned some marketing function, and another 40% also owned market research functions.

Functions Owned by the Product Team The range of product management functions and responsibility definitely varies by company. As company size increases the breadth of responsibility decreases. Product managers at companies with more than $100 million in revenue are much less likely to have responsibility for marketing, design, and customer success functions, suggesting a narrowing of role specialization in larger companies.

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Roles and Responsibilities

Product Management Responsibilities by Company Size Although the remit for product teams was higher than we had expected, there are still many instances where product leaders must lead by influence - whether it’s for a few extra engineering hours, or some marketing attention for a particular product. We wanted to see which departments product teams felt most aligned with for functions they don’t directly own.

Product Management Alignment with Other Functions Product leaders reported the strongest influence with marketing and customer success teams, and the weakest influence with engineering teams and sales teams. Weaker alignment with engineering may represent resource constraints, or frustration with the pace of delivery. In either case it’s an interesting finding, reflecting a relatively high level of dissonance with product management’s closest internal constituency. Product leaders should look to cultivate productive relationships with their engineering teams to maximize their effectiveness. Speaking of effectiveness - we wanted to find out where product leaders think they are effective at their jobs, and where they struggle. For a range of common tasks we asked all of the survey respondents to rate the effectiveness of their teams.

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Roles and Responsibilities

Product Team Effectiveness

Highly Effective

Product teams consider themselves largely effective at all of their core responsibilities. Areas that were rated the weakest included customer advocacy and sales enablement. Product leaders tended to rate themselves higher in the more visionary aspects of their jobs such as product vision and go-to-market strategy, and lower in more execution oriented functions like development and roadmap prioritization. This disparity is interesting since product leaders generally describe themselves as more tactical than visionary. It may be that they spend less time on visionary activities, and as a result, don’t clearly rate their effectiveness.

Product leaders not only considered themselves to be more tactical than visionary, but they believe that tactical skill is what is most in demand today, and will be in the future. Despite the importance of powerful product vision, product teams are still primarily focused on the nuts and bolts of shipping product. This may represent a blind spot for product leadership. As the pace of development and delivery increases in the world of software, functional differentiators are much less durable. A strong product vision and point-of-view are critical to long-term success. A more tactical orientation may lead to a reactionary approach to prioritization, and ultimately cede innovation and market leadership to competitors.

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And how do they ship product? We asked survey respondents what development methodologies they currently use. Unsurprisingly, Agile methodology is the most commonly used approach with over 80% of respondents indicating that they use it.

The State of Product Leadership A Pendo and Product Collective Study

Visionary

Tactical

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Roles and Responsibilities

Development Methodologies More surprising is how many product teams still rely on traditional waterfall methodology. More than 50% of respondents indicated that they use waterfall in some capacity. Waterfall is often regarded as insufficiently flexible to meet the demands of modern software development teams, so it’s interesting to see that it’s still in place for many teams. The question the, is whether this mor traditional approach really supports rapid iteration and product delivery. The answer is “not really”. Despite the broad adoption of Agile, and rapid growth of SaaS (heavily represented in our survey), product teams are pretty far from continuous delivery of product updates. We asked how often product teams ship new features and products.

Launch Frequency Less than a quarter of respondents reported launching features on a monthly cadence, with the rest launching either quarterly or annually. And only a very small percentage of teams ship more than one product per year. This is pretty far from the regular, continuous delivery that the shift to SaaS is expected to provide. Either Agile isn’t being fully implemented (hence the 50% who still use a waterfall approach in some capacity), or perhaps the lack of alignment between product and engineering teams that we also uncovered in the survey is leading to more “lumpy” delivery of features and functions.

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Feedback and Measurement

Feedback and Measurement Customer feedback is one of the most critical sources of insight to inform the decisions that product teams make every day, and generally product managers look to spend as much time with customers as they can.

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We can be forgiven for thinking that most product leaders would see themselves as customer-led in their approach rather than being reactive or competitor-led. Yet, when we asked survey respondents, we heard a different answer.

Roadmap Decisions: Influenced more by customers or competitors? This was one of the most surprising results--and perhaps one of the most consequential. True differentiation is one the hallmarks of successful products, yet product teams are clearly focusing on “me-too” features, perhaps leaning toward emulating their competitors rather than blazing a new trail that delivers unmatched customer value. This finding goes hand-in-hand with product teams reported more tactical (vs visionary) orientation. The power of an innovation is based both on novelty and the extent to which it solves customers’ pains. If a product team is reacting to competitive behavior then the novelty of what they’re building may approach zero. And if the product team isn’t listening to customers, the likelihood of solving a specific pain is also fairly low.

Customers Competitors

More significantly, if companies across a market become too tactical and reactionary in their approach they run a risk of commoditization. And with that comes price pressures. Most product leaders should look at these findings with alarm and revisit their product roadmaps with an eye towards innovation and customer-centricity.

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Feedback and Measurement

In addition to exploring their alignment with customers, we were also curious to see how product teams go about collecting feedback from customers. We asked the survey respondents which methods they used most frequently to get and analyze customer feedback.

Feedback Methods Used Traditional methods of collecting customer insights dominated the responses. Surveys were the most common response, with over 80% of PMs indicating that they collect insights this way. They were followed by interviews and focus groups as the most popular ways to collect customer insight. Surprisingly, very few respondents reported using experiments such as A/B testing, or more advanced research methods like ethnography in their approaches. These underused methods can offer a better opportunity to gain true insight, as surveys, interviews, and especially focus groups can reflect the biases of the interviewer and result in uninteresting group-think. Adopting new research methodologies is a significant opportunity for product teams to differentiate. They help teams discover the true needs and wants not explicitly conveyed during an interview or survey. Another interesting finding: as product managers grow in seniority and responsibility, their direct connections with customers decrease.

Customer Insight Collection: By executives and individual contributors Executives are much more likely to consume summary information from surveys and NPS, but less likely to actually get on the phone and talk to a customer. This makes sense as executives are generally more time-constrained, but there is never a substitute for a good one-on-one conversation with a customer. By stripping away that primary data source, product

The State of Product Leadership A Pendo and Product Collective Study

100 Individual Contributor 75

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Interviews

Surveys

NPS

User Groups

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Feedback and Measurement

executives may be missing out on insights about the product experience, and opportunities to improve it. We were also interested to learn which measurements they thought were the most indicative of product and team success. To that end, we asked survey participants which metrics they rely on.

Product Management Success Measures Revenue and customer satisfaction metrics topped the list, whereas actual usage metrics such as product usage or feature adoption were often considered secondary measurements. Revenue is the ultimate benchmark of product success, but that poses a challenge for decision-making. Revenue is a downstream metric–a lagging indicator. By the time some element of the product experience shows up in revenue numbers it’s too late for the product team to intervene and make a change. Sentiment measures like NPS or CSAT can bridge that gap and help to shed some light on how customers perceive a product. However, in the absence of specific usage information, it can be difficult to determine exactly how the product experience is influencing customer happiness. Another key metric of product success is customer retention and churn, so it was surprising to see those measures largely ignored by product teams. Likely, since the customer success organization typically owns the renewal process, it’s seen as a CS rather than product management metric. This is a mistake. Yes, the CS team is responsible for customer renewal, but considering how much of the overall customer experience takes place in the product, the product experience is the number one driver of retention and churn. This metric has a place alongside revenue as an important product measure.

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Reporting Relationships

Reporting Relationships It goes without saying that your boss has a lot of influence over your priorities and the work that you do. The product team is no different, which is why we wanted to understand where the product team lives within an organization, and who they report to. To begin to assess this, we asked our survey respondents about the reporting structure within their organizations.

Product Management Reporting Relationships The results were somewhat surprising on two fronts. First, the largest number of respondents indicated that they report into the marketing team, while only 12% indicated that they are part of an engineering or software development team. This represents a pretty significant shift in the role of the product manager. Historically in the software industry, product management teams have been tightly aligned with engineering, in the most extreme cases, serving as a glorified project manager for development projects. Our survey shows that this has changed. This shift is also a likely reason that our survey respondents report having poor influence and alignment with their development teams. Despite the separation from engineering though, most product leaders don’t have a seat in the boardroom. Only 7% of respondents indicated that they report up to a chief product officer (CPO). Product teams are much more likely to report into a chief marketing officer (CMO) or other senior business executive. This indicates that there is still a mindset shift needed within the industry. As product experience becomes more and more critical to the success of the business, companies will need to elevate the visibility and responsibility of the product leadership function.

36.7% Business line

44.7% Marketing

(CEO, GM or equiv.)

(CMO or equiv.)

12.0% Development/ Engineering

6.7% Product (CPO or equiv.)

(CTO or equiv.)

Next, we looked at how the chain of command for product teams affects responsibilities and effectiveness. We found that product

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Reporting Relationships

teams that report into the CMO have a much wider remit than teams reporting to other roles.

Job Responsibilities by Reporting Line Product teams that report into marketing are much more likely to have ownership over marketing-related functions such as pricing, packaging, go-to-market strategy, and go-to-market execution. This makes sense since these functions are typically owned by a marketing organization even when product reports elsewhere. Interestingly though, product teams that report into marketing are more likely to own the roadmap and prioritization than engineering-led teams. And they are more likely to have revenue responsibility than line-of-business or CPO-led teams. The differences aren’t quite as dramatic, but marketing-led teams are also more likely to judge themselves as successful at their jobs.

Perceived Effectiveness by Reporting Line Marketing-led teams perceived themselves to be more effective at setting product vision, go-to-market activities, and achieving revenue goals. It may be that product teams that report into marketing are simply closer to the market - seeing the results of sales and marketing activity for their products. However, from our survey the product teams with the broadest remit, and the greatest success are those that report into the CMO.

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Job Satisfaction and Progression

Job Satisfaction and Progression Net Promoter Score is a commonly-used methodology for assessing customer satisfaction (our survey shows 72% of product teams use it as a primary success metric). So, we decided to use the same metric to assess the job satisfaction of survey respondents. We asked them on a scale from 0 to 10 whether they’d recommend their chosen career path to a friend or colleague.

Product Team NPS An NPS score of 20 indicates that most of our respondents are satisfied with their jobs, but are not highly enthusiastic. About 25% of respondents gave a “promoter” score of 9 or 10 for the question. So if 75% aren’t highly enthusiastic about their current career path, are they planning to change careers? We asked respondents what they were planning to do for their next role.

Expected Next Job Role Despite somewhat low enthusiasm, most product team members plan to keep on keeping on. 97% of respondents expect their next job to be in the same or a similar role. Clearly most product leaders have enough job satisfaction to keep them on the same career path. We were curious to see what, specific elements of the job led to higher (and lower) levels of satisfaction.

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Job Satisfaction and Progression

Product Management NPS and Functions Owned We saw a significant variation in job satisfaction based on which functions were owned by the product team. Teams with ownership over engineering, UX, and market research functions tended to be more satisfied, while teams that owned marketing, sales, and customer success functions reported much lower satisfaction. Product teams appear to be happiest when they are focused on researching, and building products.

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Recommendations With a deep, and frankly overdue, look into the state of product leadership, we found some interesting and surprising things. On a positive note, most product leaders think they’re doing a good job, and most are reasonably satisfied with their careers. The majority are at least somewhat data-driven. However, our survey uncovered a potentially troubling lack of strategic vision and customer orientation. Product leaders reported being primarily tactically focused in their execution, and driven by their competitors rather than their customers. Clearly there some areas for improvement. Product teams that adopt these recommendations have an opportunity to differentiate themselves and the products that they deliver.

Cast a wide hiring net Our survey clearly showed that effective product leaders come from all different backgrounds. A prior career as an engineer is definitely not a prerequisite for success in the product management role - neither for leadership or individual contribution. Hiring managers should take this to heart, and look more broadly when recruiting team members. Great candidates may be getting overlooked.

Buy your engineers a beer (or whatever to jump-start the conversation) Besides sales, product teams reported the weakest levels of influence and alignment with their counterparts in engineering. This may simply be an artifact of delivery and resource constraints, but engineering is one of the most important product team constituents. Clearly product leaders have an opportunity to foster a closer relationship with their engineering friends. You may find that those prioritization/resource discussions become a bit less painful.

Get out of “copycat” mode No lasting product innovation or differentiation ever came out of copying a competitor. It was frankly somewhat disheartening to see most of the respondents indicate that they are more competitor and customer led than truly innovative. Product teams should focus on their customer needs, and developing novel ways to address them. Consider an end-to-end roadmap review. Ask your team how many items are about competitive parity vs true innovation. Then reprioritize appropriately.

Give product a seat in the boardroom Product teams have a very wide range of roles and responsibilities - they own functions from engineering, to marketing and sales. Yet, they very rarely have a defined C-level leadership role, and most likely report to other operational or marketing leadership functions. As more of the customer journey (for business software in particular) takes place within the product, the product experience becomes a driver of business outcomes. Companies should consider elevating product leadership to a more visible and responsible position within the senior leadership team.

Add product adoption and usage to your success metrics Most product teams measure themselves using product revenue and NPS, and there’s nothing wrong with that - really. However, there is opportunity to more effectively measure success. Revenue and satisfaction are downstream measurements, and aren’t terribly useful as diagnostic tools. Product teams should look to add some metrics around product adoption and usage. They can be more predictive, and when analyzed alongside satisfaction scores can help product teams understand how the product drives (or doesn’t drive) happiness. The State of Product Leadership A Pendo and Product Collective Study

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