“Where should Product Management report?'' is a very common question across many industries. A search for that term shows 2.8B search results (yes, that’s billion with a B). If you dig into the results, however, you’ll see that it’s full of opinions and does not address the question objectively. Let’s take a look at the facts to find out where your Product Management team belongs in your organization.
In the technology industry, this question of reporting structure is most pressing as business models have been rapidly changing over the past few years. These changes have had a dramatic impact on:
- Customer expectations
- Value propositions
- Customer engagement models
- Economic engines
- Levers of market share growth
With the business metamorphosis, the question of who Product Managers report to is a critically important one.
I have read some casual and flippant answers to that question like “Product Management should report to a Product Management executive,” but the real question to ask and answer is to whom the most senior Product Management executive should report to and what are the trends across hardware, software, and XaaS companies?
Let’s explore the options here.
The Remit of Product Management
As we begin to explore this topic of reporting relationships, let’s first start with examining the demands of the business model under which Product Management is creating and monetizing value, and the functions and relationships that are important in that context.
In as-a-service business models, the Product Management goal is designing value propositions that customers love that deepen the customer relationship over time and that result in sustainable scalable XaaS growth.
Product Management executives are responsible for strategy, offer portfolio and pricing design, product user experience, and lifecycle management. The respective personas in the broader Product Management function include the following:
Achieving the goals of sustainable recurring revenue growth, Product Management needs to actively collaborate across the organization in ways that traditional Product Management did not.
Traditionally, designing technical products that were introduced to the market via the New Product Introduction (NPI) process worked pretty well when the product was sold onward without the need to worry about adoption.
Case in point, the Product Management – Customer Success collaboration is one that never existed before. Since Customer Success is a relatively new organization that sprang up in response to the need to proactively engage with customers to ensure they are adopting these recurring revenue offers and realizing the full intended value created by Product Management.
Traditional Product Management
In the traditional technology vendor model, the value propositions naturally led to the Product Management team aligning with Engineering. This alignment has historical roots in the tech industry.
Hewlett Packard was one of the very first tech companies to recognize the need for Product Management. As explained in David Packard’s book The HP Way, the company leveraged the Product Management concept to create sustained year-on-year growth of 20% between 1943 and 1993.
The HP model was all about ensuring that their product was responsive to the market trends and the customer needs throughout the product development cycle. Anyone related to Product Management will recognize this concept, because it underpins the role of modern Product Management to this day.
Product Management in XaaS Organizations
Product Management is a proxy for the business as a whole (reference the inclusive persona roles above). The objective of the business is to create value. Then you monetize that value through a sustainable recurring revenue engine that the organization and the partner ecosystem is optimized to sell and continuously service.
Such a remit makes the case for a Product Management function reporting directly to the CEO or business unit general manager. The most senior product management executive must stand as an equal peer to the rest of the C-Suite. They should not be tucked inside the organization with a different remit and sometimes conflicting agenda.
This reporting relationship enables the function (again with the collection of persona roles) to maintain a 360 view of the business, be customer- and market-focused, and collaborate across the organization with whoever and whatever is needed to bring new solutions to market and continually iterate on their delivery motions. The collaborations include Engineering, IT/Ops, Marketing, Sales, Customer Success, Finance, Analytics, and other service functions.
The Data-Driven Answer to the Question
At TSIA, we like to separate the facts from opinions and hunches. We examine what the trend data tells us and what practices are correlated with success. In the chart below you can see the percentage of product management executives who directly report to the CEO or Business Unit GM across different sectors (Hardware (HW), software (SW), and SaaS.
This data is captured from TSIA’s annual organizational survey.
According to this survey we found the following:
- Across all sectors of hardware, software, and SaaS, it is now clearly a majority practice for the CPO to report centrally. With changed reporting structure across the industry, the chief product officer holds a seat at the executive table alongside Engineering and Marketing.
- The central CPO reporting relationship is correlated with the volume of recurring revenue with SaaS leading the way and software not too far behind. Hardware companies are a step behind the pure SW sector, but are making strides to catch up to this organizational reporting trend.
- Along with the seat at the table comes the remit for full business responsibility for revenue growth resulting from adoption, retention, cross sell, and upsell. This places the CPO’s hands on the ship's steering wheel. It also increases pressure on the CPO’s team to create and monetize value for growth and scale, and to engage across the organization to achieve that goal.