Decision-Making for Product Managers

Every day we face hundreds of decisions: what to wear, what to eat, and what music to play. Most of our decisions are of little consequence, such as wearing the red shirt instead of the blue one. Our small daily decisions of food and exercise can add up overtime to a more healthy, longer life span or one with health struggles. Many such small decisions are made automatically, based on our personal values or habits. (Read a short post on Routines for Innovation Teams here.)

As product and innovation managers, our decisions can have significant impacts on the happiness and satisfaction of our customers. The small, daily decisions to perform maintenance at a factory impacts the long-term quality of products, just as our daily choices to eat well and exercise impact our longevity. Other decisions are more clearly influential in whether new technologies are tested or implemented and whether or not an investment is made in a given product or process. These larger decisions have both short-term and long-range impacts on external customers alongside internal finances and operations. Such decisions should be approached with the rigor of the scientific method.

A Decision-Making Process

While not every decision merits analysis via the scientific method, it is important to recognize the typical steps through which individuals and teams make decisions. For decisions involving high-risk or trouble-shooting customer situations in which little is known, the decision-making model is especially helpful. Other times, steps are skipped or combined.

Note that we show the decision-making process as a cycle. Every decision we make as product managers cascades to future decisions regarding customers, technologies, and products. The follow-up (Step 6) of each decision results in a new set of questions and problems to ensure customer satisfaction.

Step 1: Identify the Problem

For many troubled-shooting situations, like a poor quality or off-specification product, identifying the problem is often the most challenging step in the decision-making process. Product engineers and quality management specialists are very good at solving problems, but we must be careful in defining the correct problem to solve. Moreover, management may be making a decision regarding which of many investments to make in the product portfolio, so the problem is more than a binary decision. In this case, product innovation decisions involve trade-offs, resource and schedule constraints as well as financial investment and customer satisfaction measures.

It is not unusual for product development teams to revisit the problem statement during subsequent steps in the decision-making process. As data is gathered and hypotheses are tested, the problem statement is refined and re-characterized. Remember that problem statements must be in the terms of the customer (benefits) rather than applying internal technology attributes to products. Sometimes a symptom, such as off-spec product, is really a sign of a deeper problem, such as poor-quality materials or inefficient factory processes. Such issues can impact customer satisfaction and profitability. Product managers must give attention to both external (customer) and internal (operations) elements for a balanced view of innovation.

Step 2: Define Objectives

Once the customer’s problem has been clearly defined, the new product development team must assess their goals in making the decision. If you only need a “band-aid” to keep the product profitable for a short time until a replacement product is marketed, your decisions will be different than if a new product is being developed. New products often require new technologies and new factory construction, even with an anticipate product life cycle of several years. (Read more about the product life cycle here.)

Other product development decisions evaluate the trade-offs among scope, schedule, and budget for the development project by emphasizing one element more than the others. Senior management often recognizes the value of all projects but can only invest in a few projects due to resource constraints. Again, these decisions focus on the entire product portfolio, including existing products and new product development.

Step 3: Propose a Hypothesis

Sometimes this step is called “Make a Pre-Decision”. At this phase of the decision-making process, you are determining how to make the decision. Will a special team be assigned to assess customer feedback data? Will the decision be made by through normal operating and functional management meetings? How will customer concept and prototype testing occur? Will existing or new customers be tested?

At the conclusion of this phase of work in the decision-making process, the new product development team will have formulated a specific plan to advance the objectives of the decision. This will be unique to each product decision.

Step 4: Generate Alternatives

There is never one right answer. Even as product development and innovation professionals with strong opinions and deep customer knowledge, we know that there are different approaches to solving customer problems. To generate profitable new products, we may choose to adjust factory conditions or marketing collateral. There are consequences to each decision that may involve raw material costs, labor expenses, or reputation in the marketplace. Ultimately, new product decisions must lead to customer benefits and company profits.

At this stage of the decision-making process, risks and consequences of each alternative are also discussed. Risk management is an ideal process to help with product development decisions such as forecasting costs and benefits. Alternate strategies for a product portfolio use comparisons such as SWOT (strengths, weaknesses, opportunities, and threats) to generate alternatives for project investment decisions. (Read about SWOT and other strategic product management tools here.)

Step 5: Evaluate Alternatives

As different alternate solutions to customer problems are generated, they must be evaluated. This is the phase of decision-making process in which product development professionals use our special skills and expertise. We gather and analyze data to test hypotheses and to support alternate choices in features or attributes. We interact extensively with customers at this phase. Collecting and analyzing quantitative data according to scientific principles yields measurable comparisons. Qualitative data further serves to support customer feelings and attitudes regarding new product features and marketing approaches.

Step 6: Make a Choice

In quality control situations, the product manager may be responsible for making a choice among alternatives based on cost and customer satisfaction. In other situations, the entire new product development team may serve as internal consultants to management or project clients who will be making final product launch decisions. Product innovation professionals must present all relevant data and information accurately and honestly so that whoever is making the decision can do so objectively. Product managers, in particular, are responsible for making recommendations regarding profit and loss for a brand product line or new product. These choices have impact on finances, manufacturing, and market share.

Step 7: Implement the Choice

Once a decision is made, the decision is implemented. In many cases, new product development teams will simply transmit instructions to modify a known product to the factory (e.g., a derivative product). In other cases, a financial decision may lead to a months-long or years-long development project involving dozens of new product development professionals, engineers, IT, and various contractors. For many technical professionals, the “hands-on” implementation of the decision can be the most enjoyable part of working because they see a design come to life!

Step 8: Follow-Up

This step is often overlooked in the decision-making process but is arguably the most important. It is critical for both individual learning and for product development improvement to understand the impact of an innovation decision. Also, if the outcomes of the decision did not deliver the expected results, another alternative may need to be implemented or customer problems investigated to a further degree. If the outcome of the decision met the objectives of the new product development project, then the process may be documented as a best practice. Follow-up is the essence of the product post-launch review. (Read more about post-launch reviews here.)

Decision-Making for Product Development

While not every decision needs a heavy, methodological approach, many decisions we make as product managers and innovation professionals do indeed require a systematic thought process. The steps outlined here validate that you correctly identify the customer’s problem and define objectives in the decision-making process. You also want to ensure that you define potential solutions and evaluate alternatives objectively. Follow-up after a product decision is made verifies customer satisfaction and profitability.

New product development team leaders can use the decision-making steps to help a team gather relevant information at the right point in the process. Further, as product innovation professionals deploy the scientific method in making product decisions, the skills for technology and marketing spread across a broad spectrum of decisions for new product development. Good decisions lead to improved product development processes and outcomes.

Do you need to make better and faster product development decisions? To help you implement effective product decisions, please join our best practices Master Class on Leadership for Project Managers starting 18 August. Register here.

A Division of Global NP Solutions, LLC

Study. Learn. Earn. Simple.