Should a product manager have responsibility for profitability?

I’m asked questions about product management from time to time. Here’s one I’ve answered recently:

Hi Jock,

Should the product manager have some level or perhaps a great deal of responsibility for the profitability of the product? Should they understand things like the unit economics, that sort of thing?

Thanks,

R

Read on for my reply!

Hi R,

The short answer is, yes I think they should, because that’s part and parcel of making a commercially viable product.

There’s a good example from one of the places I worked at early on. It was a document storage company, so literally boxes of papers in warehouses and that kind of thing. For that reason there were very few software product managers because they had very little software to work with.

They were building a product that did digital storage. At the time they were calculating their costs based on the cost of storage in terms of disk space. They put together a model that meant that for every customer that was storing this amount of data, they would make this amount of marginal profit. The problem was that they were calculating the model based on compressing the data before they stored it to disk — something they never actually got around to implementing.

And so what happened was the stored data was taking up far more disk space than they were planning, which meant that for every customer they brought on they made a marginal loss instead.

So I think it’s really important to be on top of the profitability and the financial model for your particular product, but also to understand the implications of the technology choices you make that may have a knock-on effect on how profitable or not your your particular product is.

So yes I would absolutely say that having a good sense of the financials of your product is important as a product manager :-)

Cheers,

Jock