Managing Internal vs. External Products
by John Mansour
The vast majority of the product management ecosystem is tied to commercial (external) products. Having trained a significant number of product managers in both environments, I thought it was time to show a little love to those who manage internal products and highlight the key similarities and differences with managing external products.
If you manage internal products or managed products in both environments, feel free to add to this list in the comments section at the bottom of the page.
Key Differences
- Terminology – Project Portfolio vs. Product Portfolio
More often than not, project portfolio management refers to the management of internal products and their corresponding IT/development projects. Product portfolio management usually refers to the management of a group of external/commercial products and their alignment to growing, declining, flat and emerging market segments.
- Cost Impact vs. Revenue Impact
Internal products are usually focused more on cost reduction and may or may not have a direct impact on revenue. External products focus much more on top line revenue growth (that’s profitable) and the organization’s market position relative to the competition.
- Efficiency Focus vs. Market Focus
Product managers for internal products usually focus more on aspects that improve internal efficiencies. Product managers for external products focus more on market related aspects such as segmentation, market sizing, revenue projections, competitive intelligence, sales channels, pricing, etc. to improve market position.
Key Similarities
- Business & User Requirements
There is no difference in how business practices should be performed when it comes to business and user requirements. In both cases, the goal is to understand the business objectives within a functional area of an organization and how those objectives impact people doing the work. Product capabilities are defined to support people doing the work in a way that meets the organization’s business objectives.
- Investment Priorities
Value to the overall goals of the business is the determining factor in both scenarios. But again, that value and the subsequent emphasis is usually directed at cost efficiencies for internal products vs. revenue and growth objectives for external products.
- Value Positioning
Communicating “why” internal business areas should adopt and be cross-charged for something (internal solution) vs. “why” an external organization should buy and pay for a business solution is no different. In fact, positioning internal solutions may actually be easier because the target customers are very well known (employee directory) and the marketing efforts required to engage them is straight forward in comparison to a market at large for external products.
Positioning may be one of the biggest areas of opportunity for internal product managers as there is often an expectation that adoption rates will be high simply because product teams and their customers are part of the same corporate family. Unfortunately, it’s not true in most cases!
In my opinion, the most important part of managing a product portfolio, regardless of internal or external products, is a single overarching strategy that consistently creates the strongest possible alignment between the organization’s goals and product solutions most conducive to meeting those goals. Resource constraints should guarantee that only the most important initiatives make the cut, and that constant focus on the highest value initiatives should dramatically improve execution at all levels.
Have you managed both types of products? What’s your take? Submit comments below.
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- Guest Post: Managing Channel Conflict through a Derivative Strategy
- Why Disruption is Driving the Need for Elegant Products
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Unfortunately, a reality is that internal products often get fewer resources devoted to them as they are considered “plumbing” projects instead of revenue generators. Thus, there is an incredible need to demonstrate the value of the product to get the appropriate attention–unless, of course, your business is awash with resources. (If it is, I have a resume that would look great in your inbox.)