2. Define success metrics
Value realization is a critical aspect of product management. Proper value realization mechanisms do not only demonstrate positive return on investment and the achievement of the product's intended business outcomes. They also guide the iterative evolution of the product throughout its lifecycle, and they justify requests for further investments when needed.
Designing, planning, and implementing proper value-realization mechanisms isn't easy. It requires thoughtful deliberation involving all the product stakeholders to identify the key value drivers and ensure these drivers are quantifiable and measurable. Identifying the value drivers and success metrics at an early stage of the product-development process helps the product team to integrate the design of the value-realization mechanisms into the product itself, leading to more effective measurement and reporting of the success metrics throughout the product lifecycle.
A collaborative approach to defining the product's success metrics is a great opportunity for all stakeholders to contribute their views. This group effort leads to a more robust set of success metrics and better alignment on the intended goals for these metrics. The team can use the OKR method to facilitate this activity, taking the primary objectives that were identified during the vision-formulation stage and working together to define specific, measurable and effective metrics (referred to as key results in the OKR framework). This ensures that the defined metrics are properly aligned with the overall business benefits, outcomes, and objectives that are driving the product initiative.
The product team must take an iterative approach to defining success metrics. As the planning evolves and more information becomes available, some metrics might need to be revised or challenged if they prove to be difficult or excessively costly to measure and report. Additionally, better metrics might emerge that were not evident in earlier stages. This iterative approach facilitates the assessment of different product design choices and tradeoffs, and it keeps the focused on the customer and business value throughout the product-development process.
The product team must ensure that the defined success metrics align with the target business outcomes for the product. As an example, a new product is expected to generate new incremental revenues through improved response to marketing campaigns. To measure success, success metrics should measure the conversion rates with appropriate attribution to ensure that the realized revenue is a direct contribution of the new product.
When defining the product's success metrics, the team is encouraged to think beyond the obvious measures. By expanding the scope of the value-realization mechanism, they can maximize the product's intended impact. One useful approach is to ask the team to propose at least three success metrics in a collaborative workshop. For each defined metric, the team should identify how the metric will be calculated and estimate an initial target that should be achieved within a certain expected time frame. A 3–5 year time frame is usually long enough to include the product's adoption and growth. This metrics exercise will stimulate value discovery, and it will further strengthen the product's business case.
