Mapping internal product metrics to business metrics
Amplifying business value: the crucial role of internal product metrics
What do products like Amazon Web Services (AWS), Slack, Gmail, React, and Basecamp have in common? They all started as internal products that initially delivered operational excellence for the organization’s employees and business units.
A significant number product managers lead and manage internal products. From analytics dashboards, infra platforms to developer tools and test automation frameworks, these solutions are critical in the decision-making process, streamlining workflows, and ensuring the seamless execution of business strategies. Mirroring the lifecycle of external products, they cater to specific user needs, address unique challenges, and evolve through dedicated roadmaps and feedback.
Here are a few examples of internal products:
Test automation systems: streamlining the testing process, enhancing product quality, and accelerating time to market.
Developer tools: improving development efficiency, reducing bugs, and fostering innovation.
User feedback managers: capturing and analyzing user feedback to guide product development and improve user satisfaction.
Platform as a service products: true to their name, these products offer an infrastructure layer to higher level products and applications. This includes microservices, orchestration, instrumentation, security and compliance platforms.
Each of these products plays a pivotal role in the internal ecosystem, driving efficiencies and providing insights that help shape strategic decisions.
Why it’s important to map internal product metrics to business outcomes
Regardless of its potential for an externally monetized offering, it’s crucial for product managers to quantify and communicate the business value of their internal products. The real challenge lies in mapping the output metrics of these products, such as the number of employees engaging with the dashboard, to critical business metrics, such as decisions influenced or enabled by insights from these tools. This mapping is not just a task; it's a strategic necessity for ensuring the success and longevity of these products.
Mapping output metrics to business outcomes is vital for several reasons:
Securing continued funding: Demonstrating the business value of internal products is key to securing ongoing investment. It justifies the resources allocated to these tools and supports the case for future funding.
Energizing your team: When teams see the direct impact of their work on the company's success, it boosts morale and motivation. It transforms their perspective from working on 'just another tool' to contributing to strategic business outcomes.
Prioritizing the roadmap: Understanding the business impact helps in making informed decisions about feature prioritization and resource allocation, ensuring that development efforts are aligned with business goals.
Facilitating PM's career growth: For product managers, articulating the business value of their products is crucial for career advancement. It showcases their ability to drive products that contribute significantly to the organization's success.
How to map output metrics to business metrics
The transition from focusing on output metrics, such as user engagement and feature adoption, to emphasizing the business impact is a strategic move. Business metrics like revenue growth, cost reduction, and customer satisfaction directly reflect the success of an organization. The challenge lies in connecting the dots between the insights provided by internal tools and these overarching business achievements.
Here are a few mapping strategies that help bridge the gap:
Identify key business objectives: Start with a comprehensive understanding of the business objectives your product supports. Whether it's enhancing product quality through test automation or streamlining development processes with developer tools, identify how these objectives align with business goals.
Engage stakeholders: Discuss with business leaders to understand how your product influences their product decisions and impacts their product outcomes. This partnership is pivotal for contextualizing your product within the broader business ecosystem.
Define impactful actions: Clearly delineate how insights or efficiencies gained from your product translate into measurable business outcomes. For instance, illustrate how user feedback management leads to product enhancements that drive user satisfaction and retention.
Establish direct correlations: Develop methodologies to link product usage directly with business outcomes, showing a clear cause-and-effect relationship between tool utilization and business success. An annual cohort analysis is an effective strategy to validate the correlation, which you can use to prioritize your product roadmap and ask for additional funding.
Use case studies: Presenting tangible examples where your product has significantly contributed to business achievements is a powerful way to demonstrate its value.
When to do the mapping exercise
To maximize the impact and ensure the relevance of internal product metrics to business outcomes, consider the following timings for conducting the mapping exercise:
At the planning stage: Before rolling out new features or updates, align your metrics with expected business outcomes to set clear goals.
During product reviews: Regularly assess the alignment of product metrics with business objectives to gauge ongoing relevance and impact.
After major milestones: Post-launch or after significant updates, reevaluate your metrics to confirm they still serve the intended business goals.
In response to business shifts: When your organization's priorities or strategies change, revisit and adjust your metrics to stay aligned with new business objectives.
By strategically timing these assessments, product managers can ensure their internal products continually contribute to meaningful business outcomes, fostering sustained growth and innovation within the organization.
Measuring success and communicating value
Going beyond traditional analytics, implement targeted experiments to quantify the business impact of your product. Communication with stakeholders about this impact is key. Utilize impact reports, visual stories, and testimonials to reinforce the strategic importance of your product.
Conclusion
Navigating the challenge of demonstrating the business value of internal products requires a strategic approach to metrics alignment. For product managers, this alignment is not just about proving the worth of their products but about securing their future, motivating their teams, and advancing their careers. By effectively mapping output metrics to business outcomes, internal products can be transformed from supportive tools into strategic assets, underscoring their indispensable role in achieving business success.
Thanks Yogesh for putting on paper a topic which is not spoken of much in PM circles. At least I have not seen much spoken or written about it in my 14 years in PM. What I have seen at tech companies I worked at is that these so-called internal products or services are, more often than not, treated as second class citizens when compared with their external facing or revenue generating counterparts. I am sure most PMs reading your article will identify with this theme and it will resonate with them. I agree it is important to clearly communicate the value delivered by internal products. However, is mapping output metrics for internal products to business metrics the only way to quantify and communicate the business value of internal products? I’m not sure. Here are reasons why I think that approach may not always be the best fit to achieve the above goal :
Correlating internal product metrics with business metrics can be tricky. For e.g number of employees engaging with the analytics dashboard may or may not correlate with a business metric like increased customer engagement or retention. Even if and when it does correlate it may be tough to prove that it is causation and not just correlation.
Such a mapping exercise between internal product metrics and business metrics has the potential to be seen as self-selection or a forced exercise to tie product metrics to business outcomes
Internal products sometimes have their own goals that may be independent of business metrics, or in some cases even independent of business outcomes. For e.g a product meant to serve or augment a company’s CSR initiatives.
I think another approach to highlighting and communicating the value of internal products could be to show a direct tie between the outputs from internal products and the company mission or quarterly OKRs or the top 5 senior leadership goals. In other words tie the product’s output to high level objectives that the company uses to communicate the company’s north star and goals to employees. The litmus test for the value delivered by the internal product would then be to check whether the output ladders up to one of the company goals or OKRs. In case of the example in # 3 above the objective might be something like “Demonstrate leadership and be a steward in Corporate citizenship”. A supporting metric for that might then be something like won CSR award or ranked # 2 in CSR survey.
Thanks Yogesh for your content and your work on PM Nirvana. I think it inspires deepening of best practices in Product Management and fosters collaboration and growth in the PM community.