507: Navigating the second product problem – with Greg Coticchia
Description
To survive, your company must sell multiple products
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TLDR
In this episode, I’m interviewing Greg Coticchia, an experienced CEO and product management expert. The discussion focuses on the challenges and strategies involved in expanding from a single product to multiple products. Key points include:
- Why companies have to expand to multiple products to survive
- The importance of portfolio management in product development
- Cultural challenges in product expansion
- Strategies for building influence as a product manager
- Lessons from successful companies like Apple and Netflix
- Practical tips for navigating the Second Product Problem
The episode provides valuable insights for product managers looking to navigate the complexities of product diversification and enhance their leadership skills.
Introduction
Your organization’s survival depends on its ability to successfully expand from a single product to multiple products. This episode features an in-depth conversation with Greg Coticchia, CEO of SE Healthcare and product management expert. Greg shares his extensive experience and insights on the challenges and strategies involved in product portfolio management and business growth strategies.
The Importance of Portfolio Management
As product managers advance in their careers, understanding portfolio management becomes increasingly crucial. Greg explains that while senior product leaders recognize the necessity of portfolio management, product managers often question its relevance to their role. The key takeaway is that understanding how projects are selected is essential for gaining support for new ideas and initiatives.
The Challenge of Expanding from One Product to Multiple Products
Greg introduces the concept of the Second Product Problem, highlighting the difficulties organizations face when transitioning from a single product to multiple offerings. He emphasizes several key points:
- The rarity of creating a commercially successful product
- The tendency for companies to equate their identity with their first successful product
- The need for multiple products to ensure long-term business sustainability
Greg points out that it’s extremely rare for a software product to reach $100 million in revenue. This reality underscores the importance of diversifying a company’s product portfolio to achieve significant growth and longevity.
Cultural Challenges in Product Expansion
One of the most significant obstacles in product diversification is the cultural shift required within the organization. Greg identifies several challenges:
- Company-product identity issue: Organizations often struggle to separate their identity from their initial successful product.
- Resource allocation challenges: Deciding how to distribute resources between existing and new products can be contentious.
- Risk perception and management: The fear of cannibalizing existing product success can hinder innovation.
Greg explains that these cultural challenges often lead to resistance when introducing new products. Employees who have been with the company for a long time may find it difficult to adapt to new directions, especially if they’ve been successful with the original product.
Strategies for Successful Product Expansion
To overcome these challenges, Greg suggests several strategies:
Creating Autonomous Teams
Following the example of Apple’s Macintosh development, physically separating new product teams can foster innovation. Greg shares the story of how Steve Jobs moved the Macintosh team to a separate building and raised a pirate flag, symbolizing their independence from the rest of Apple.
Addressing Cultural Issues
Recognizing the importance of having the right people and dealing with resistance to change is crucial. Greg emphasizes that sometimes, clearing the decks and letting go of team members who aren’t aligned with the new direction is necessary for success.
Clear Corporate Management Focus
Shifting from a product-centric to a company-centric approach and delegating product responsibilities effectively is essential. This change requires executives to focus on overall company strategy rather than getting involved in specific product decisions.
| Strategy | Description | Benefits |
|---|---|---|
| Autonomous Teams | Physically separate new product development teams | Fosters innovation, reduces interference from existing product teams |
| Cultural Alignment | Ensure team members are aligned with new product vision | Reduces resistance to change, improves collaboration |
| Corporate Focus Shift | Move from product-centric to company-centric management | Enables better resource allocation and strategic decision-making |
Structural Approaches to Product Expansion
Greg discusses various structural approaches to product expansion:
The Skunk Works Approach
Creating a separate, autonomous team for new product development can help foster innovation and avoid interference from existing product teams.
Physical Separation of New Product Teams
This approach can help reduce interference from existing product teams and foster a unique culture. Greg shares an example from his consulting work with Vertex, a tax software company. Vertex successfully expanded its product line by physically separating its new SaaS cloud solution team from the main organization.
Lessons from Successful Companies
Vertex Tax Software
Greg explains how Vertex allowed its new product team to establish everything from pricing to terms and conditions independently. This separation continued until the new product reached $5-10 million in revenue before being reintegrated into the main organization.
Apple’s Transition from iPod to iPhone
Greg discusses how Apple was willing to cannibalize its successful iPod product line by introducing the iPhone. This move demonstrates the importance of innovation and risk-taking in maintaining market leadership.
Netflix’s Pivot from DVD Rentals to Streaming
This example showcases the value of anticipating market changes and adapting business models accordingly. Netflix made the bold decision to shift its focus from DVD rentals to streaming, effectively disrupting its own successful business model.
Dealing with Unsuccessful Product Expansions
Greg acknowledges that not all product expansions are successful. Possible steps toward handling these situations include:
- Recognizing cultural resistance and potential sabotage
- The need to let go of team members who aren’t aligned with the new direction
- Identifying when individuals are no longer a fit for the organization’s evolving needs
Greg emphasizes that these decisions, while difficult, are necessary for the long-term success of the company. He stresses the importance of putting the company’s needs first when making these tough choices.
Building Influence as a Product Manager
A significant portion of the discussion focuses on how product managers can build influence without formal authority. Greg introduces the concept of the “trust bank account” and identifies three key constituents whose trust product managers must earn:
- Development team and VP
- Sales team
- Executive management
| Constituent | Trust-Building Strategy |
|---|
