Mastering the Language of Money: A Product Manager's Guide to Executive Conversations

The Importance of Speaking the Language of Money

As product managers, we often find ourselves in a unique position within our organizations. We're tasked with building great products that solve user problems, but we also need to ensure that these products contribute to the company's bottom line. However, many product managers struggle to effectively communicate the value of their work to executives and other stakeholders who are primarily focused on financial outcomes.

Rich Mironov, a seasoned product management expert, shares his insights on how product managers can bridge this gap by learning to speak the language of money. By framing product decisions and priorities in terms of their financial impact, product managers can gain more influence and drive better outcomes for their organizations.

Understanding Executive Priorities

One of the key challenges product managers face is aligning their work with the priorities of company executives. Mironov observes:

"I observe that essentially no one on the executive team are at all interested in how we do our jobs. They're interested in how it creates money for them and how it brings in sales for the company. Anything I say in the executive suite that's not denominated with a currency symbol, they can't hear and they're not interested in until I say this road map will generate 10 to 20 million more next quarter than your suggested road map."

This insight highlights the need for product managers to shift their focus from the intricacies of product development to the financial outcomes that executives care about most. By doing so, product managers can more effectively advocate for their priorities and secure the resources they need to build successful products.

Four Types of Money Stories

To help product managers communicate more effectively with executives, Mironov outlines four types of "money stories" that can be used to frame product decisions:

1. Internal cost-saving stories
2. Upselling customers
3. Opening up new market segments
4. Improving customer satisfaction or Net Promoter Score (NPS)

Let's explore each of these in more detail:

Internal Cost-Saving Stories

These stories focus on how product improvements can reduce operational costs within the company. For example, a product manager might propose design improvements that could reduce support calls by 40%, leading to significant cost savings for the customer support team.

Upselling Customers

Upselling stories demonstrate how new features or product enhancements can drive additional revenue from existing customers. This might involve adding premium features that encourage users to upgrade to a higher-tier subscription plan.

Opening Up New Market Segments

These stories highlight opportunities to expand the product's reach into new customer segments or industries. While potentially more risky than other strategies, successfully entering new markets can lead to substantial revenue growth.

Improving Customer Satisfaction or NPS

While customer satisfaction metrics like NPS may seem qualitative, they can have a significant impact on renewals and long-term revenue. Product managers should be prepared to explain how improvements in customer satisfaction can translate to financial benefits for the company.

Strategies for Effective Communication

To successfully use these money stories in executive conversations, Mironov offers several key strategies:

Simplify Your Numbers

When presenting financial projections, keep things simple. Mironov advises using no more than three numbers and sticking to basic multiplication. For example:

"We need three numbers. We need the size of our silver installed base cuz that's who's going to upsell. The amount of dollars or euros or yens or pounds that we think we're going to get for an upsell. And a wild guess, a wild ass guess for whether it's a 1% upsell or a 5% upsell or a 40% upsell. And we can multiply those together and say, gosh, I believe that this feature is important enough that multiply, multiply, multiply. We think it could deliver between 2 and 10 million next year."

Focus on Order of Magnitude

Rather than getting bogged down in precise figures, focus on communicating the general scale of potential financial impact. Mironov suggests categorizing initiatives as five-digit (tens of thousands), seven-digit (millions), or nine-digit (hundreds of millions) opportunities.

Build Coalitions

Product managers should work to build support for their initiatives across different departments. By understanding the motivations and concerns of other executives, product managers can create more compelling arguments for their priorities.

"If I can take the CFO aside a few times and explain how building a one-off for JP Morgan Chase is going to torpedo our whole road map and that's going to leave 20 million in revenue on the floor for the 1 million for the deal. Then I can bring the CFO to my side."

Be Prepared to Make Educated Guesses

While product managers may be uncomfortable with making financial projections, it's important to recognize that other departments often rely on educated guesses as well. Mironov encourages product managers to be brave enough to make reasonable estimates, even if they're not 100% certain.

"As product folks the first thing we have to do is we have to be brave enough to say I'm going to take a guess at something and it's going to be about this big and yes there's an order there's a factor of five I'm going to get within 3x or 4x of the right number and that's good enough."

Balancing Short-Term and Long-Term Priorities

One of the challenges product managers face is balancing short-term revenue opportunities with long-term product strategy. Mironov cautions against sacrificing the overall product vision for quick wins:

"If we can figure out what the top 10 or 12 things might be, um that's good enough to then do some more work on those 10 or 12. The idea that we're going to size or or forecast a 100 items, complete waste of time, right?"

By focusing on the most impactful initiatives and communicating their potential financial outcomes, product managers can better align their roadmaps with company goals while still maintaining a strategic long-term vision.

Understanding Company Context

Mironov emphasizes the importance of understanding the broader context in which a company operates. This includes factors such as:

• Ownership structure (e.g., venture capital vs. private equity)
• Investment time horizons
• Company growth stage
• Industry dynamics

By considering these factors, product managers can better tailor their approach and expectations:

"If you're a VC firm with a 5 to seven-year time frame, then you actually need to build healthy products that are going to grow and and sustain and and win for 5 to seven years. And you care about tech debt and you care about great engineering and you care about user joy, right? because you can't build it for five years and ship crap for the most part."

Embracing Realism and Adaptability

While it's important for product managers to advocate for best practices and long-term product health, Mironov also stresses the need for realism and adaptability. Not every company will have a mature product culture or be receptive to certain product management approaches.

In these situations, product managers should focus on:

1. Understanding the company's priorities and constraints
2. Finding ways to add value within the existing framework
3. Building relationships and credibility over time
4. Picking their battles and focusing on the most impactful changes

Conclusion: Bridging the Gap Between Product and Finance

By learning to speak the language of money, product managers can significantly increase their influence and effectiveness within their organizations. This doesn't mean abandoning product management principles or user-centric design. Instead, it's about translating those principles into terms that resonate with executives and other stakeholders.

Mironov's advice serves as a valuable guide for product managers looking to level up their communication skills and drive better outcomes for their products and companies. By mastering the art of financial storytelling, product managers can ensure that their voices are heard and their priorities are understood in the executive suite.

Remember, the goal is not to become financial experts, but to develop enough financial acumen to effectively advocate for product decisions that drive both user satisfaction and business success. With practice and persistence, product managers can become more influential leaders within their organizations, capable of navigating the complex landscape of product strategy and business objectives.

Article created from: https://www.youtube.com/watch?v=jtXq7jrOSfc