0:00There's a misconception in many companies that product wouldn't be a business role. It is a business role.
0:05The stuff we're doing has to solve problems for customers. This is where the money comes from, right? I say I'm not saying discovery is not important, right? That discovery is at the core of how revenue gets created. But without thinking about does this thing that we're solving for our customers actually translate into a viable business, we're just doing half of our job. Hello and welcome to one night in product. The show where I chat to some of the brightest minds in around product from across the globe to help you see product management in a whole new light. If that sounds up your street, don't forget to
0:34dive into the back catalog on your favorite podcast app or on YouTube. And of course, follow, share, or drop me a comment or review. And if you are a founder, executive, or product leader who'd like help with product strategy, leadership, or capability building in your organization, I work with product companies around the world as a fractional leader, consultant, coach, or trainer. My email's in the show notes and I'd love to chat about how I can help you. On this episode, I'm speaking to Simonetta Batiga. Simetta is a product leadership coach, trainer, and keynote speaker and also the co-organizer of Product Tank Cologne.
1:04She started her career in shoe wholesale, but these days she's more interested in putting the boot into poor product practices. And as an accomplished tango dancer, I'm sure she'll do it with considerably more poison grace than most of us could manage. She's here today to talk all about why product managers need to get much better at understanding money, business impact, and those pesky financials that everyone on the leadership team seems to care about so much and is presumably going to do her best to make sure we're all seen as assets and not liabilities in our jobs.
1:28Sima, thanks for coming and welcome to the show.
1:31Nice to be here, Jason. Looking forward to this.
1:35It's going to be financially entertaining. I hope at least. I hope. starting off with this prejudice that finance can't be fun, right? And the numbers are boring.
1:47I I don't think I said that, but if you want to take that from the uh from the depths of my introduction, that's absolutely fine. I'm sure that hold it against you. I actually I started my career doing accounting work, being a controller, being a director of finance, and I intentionally left this behind because I found it boring. I wanted to be where the fun is where the business gets created in sales and product um more close to the customers and here I am back uh with talking about
2:17numbers well you know what goes around comes around right and that was actually going to be one of my questions so I guess let's dig into that a little bit so yeah because it's not necessarily a natural thing for a product person either to come from that place in the first place or to kind of start in product and go back to that place or whatever you know these these kind of seem to be almost to the earlier point around boring that almost seems to be kind of two separate worlds to some extent and you know how
2:46much either of those really get involved in the other. So you said that you started off kind of in financial controlling was that really the kind of the genesis of your financial education?
2:56Like did you train in sort of accounting or bookkeeping or something like that?
3:00Did you train in financial controlling and that was your gateway in or was it something you kind of picked up along the way? like how did you how did that journey start?
3:08Well, it kind of started accidentally because my very first job in this shoe wholesale company that you alluded to was a business apprenticeship and I um worked in this organization and they kind of shuffled me through different departments and uh two of them were actually hardcore accounting departments. So I did get like an education in this. It actually got accompanied by a schooling program that went quite deep into accounting. And then afterwards I went and studied
3:38business and all the way through business school I supported myself by doing accounting work and controlling work for a small IT company in a sheffenborg where I was studying. Um and I just always kind of like did this kind of work to support myself. And when I started my first job after university, again, an accounting job, I didn't really want to stay in that field necessarily, but it just like was so strong on my resume that I kept getting jobs in that field.
4:03Yeah. And then uh I got lucky, I guess, doing uh getting hired in a company that wanted to have a director of finance that could uh do like techreated accounting work. And um that's where I then made some crazy career shifts from finance into sales, from sales into product.
4:24And uh here we are. Um but the good thing about starting my career in this financial and accounting world is that I learned early on that when you're preparing the numbers, you actually have a lot of power in understanding and steering the business. um budgets make big big big decisions about where priorities lie and then meeting that budget or not meeting it drives decisions from an executive point of
4:52view. Um, and just having this knowledge and knowing how to speak about these numbers and knowing how executives think about them has helped me tremendously and later on making a budget when I was asked to or understanding how the work that we do in product relates to the numbers and how you can craft an argument saying that what you're doing here is having a positive impact on revenue or is helping you save cost and therefore drives down um, uh, cost or
5:20drives up revenue. and helps you improve profitability. And those are all the numbers that executives care about, that shareholders care about, that um investors care about, that boards care about. And this is where the big powerful decisions are being made. And so you have a lot of influence if you can speak about things in those terms.
5:40And without doing it intentionally, I just could always do that, right?
5:44Because that's where I came from. It came natural to me. And as a result, I got teams funded. I got um initiatives advanced. I got teams staffed. I got all kinds of decisions made in my favor because I could frame the decision in financial terms. And that's really what I want to get people to um understand and be capable of doing. And that's why I picked up this topic. Um it actually got picked up because I was in rally at
6:15Um and someone stood on stage and said, "You know what is the problem with people in product is you're being seen as cost centers, not as revenue drivers."
6:24And for me, just like 15 things clicked into place with that simple sentence. I was like, "Yeah, of course we're seen as cost centers, right? Like we cost so much money. Oftentimes when we're submitting budgets, we're not submitting the revenue impact of our work. We're just submitting what our teams cost and the licenses we want to have funded and the servers that our teams are requiring and all these kind of cost related things and not so much um the impact
6:52that this investment has for the business. And we're honestly also not being asked to speak about this or we haven't been asked to speak about this for many many years because lots of companies just grew. Um yeah, money was so cheap that it wasn't asked of people in product to have P&L responsibility or to even think about the commercial impact of things because things just grew on their own. That has stopped. Interest rates have gone up.
7:20people are required to justify whatever the team spend is and and come up with ways to show how their AI stuff is is uh having a positive ROI and people are struggling because they have never been asked to think this way. They've never been asked to submit their budgets this way. Um yeah, here we are.
7:42Here we are. And uh before we have a much more important discussion about that, I'm very curious given all of the different financial places that you worked in like the biggest calculator that you that you had in Mon like back in the old days when we used to have the big ones with the red buttons and the blue buttons, the switches. Come on. How big did you get?
7:59H it's kind of like this big. It was like one of these like desk machines that you like instead of a mouse you had the calculator machine there. I remember typing up like huge lists of invoices for all these like bills from shoe makers that were submitted to this company where I was working like stacks of paper like this that you had to add up with this machine submit for some other company to key them in and then you got a batch back
8:26with that you had to compare to your typed up tallies. It was well boring work. Glad I don't have to do this anymore. No, now now it's all product stuff and there's no there's no boring stuff in product, but let's sort of go deep into some of the stuff, some of which you've kind of already mentioned, but you know, maybe sort of tease into some of the specifics. So, obviously, you've got great financial knowledge from your own background. You've you've worked in and around a bunch of different teams and you've you've kind
8:55of, as you say, you've almost been able to kind of get buy in and get people to to kind of come along with you because of some of the stuff that you've been able to take or bring to the table. But it's fair to say that the vast majority of PMs, at least as the cliche goes, don't really seem to have great understanding of the sort those sorts of things, like the sorts of numbers that end up kind of making the CFO excited and being able to get some of that buy in. And then, you know, I've personally worked with some that didn't even really seem to have much of an idea about how
9:24their product cost, how much it cost, or how it even made any money or what money it made. So there is an obvious sort of starting question here which is and you've kind of alluded to it, but like why are product managers in general somewhat not great at sort of talking about or thinking about this stuff?
9:41Well, honestly, I think it's just a massive blind spot for a lot of people.
9:46Um, two years ago or three years ago, I did a survey with product leaders because I was interested in how do you advance your career in product? Like where did you come from? What did you do before you got into product? And just a bunch of developers, right?
10:00Yeah. Just listening. No, I mean not just a bunch of developers, honestly.
10:04It's from all over the place. Like people came into product from architecture, from medicine, from business, from engineering, from design, from all kinds of disciplines. In many of these disciplines, when you went to university for whatever you studied, accounting and bookkeeping and reading a P&L and reading a balance sheet and or ever actually having your hands on preparing the numbers is not what you do. Not even when you're in business
10:33school, right? Like you in theory, you learn about what a P&L is, what a balance sheet is, how this all works, what ROI is, how to do calculations, how to calculate a business case. you kind of learn that and still you don't know necessarily how this works in a real company and then fast forward to these like I already mentioned it like all these years where tech just boomed you know it's like that wasn't what was asked of people so you you never built
11:00the skill and you look at what product education is teaching you look at something like a scrum product owner training the financials don't appear right? Like you you're being asked to own the road map um and suggest what should be on it and lots of lots of uh product people are deeply frustrated that they don't actually own this because someone else pushes something on their road map. Why do they do it?
11:27Because they're following their goals. A sales leader that pushes something on your road map is trying to make a sales quota happen which helps them get the revenue that the company needs that they put into the budget which is tied to their compensation. And they're not like malicious people. They're following their agenda, right?
11:45And you're fired if they don't hit it, right?
11:47Yeah. And if an executive pushes something on your road map, usually they do it because they either feel like this is a a strategic um priority that needs to be advanced or maybe this customer will land them a new market or this customer will help them get this much bigger deal done. And often times they don't even explain to you the rationale for why they push for this so hard. But very often there's actually a commercial consideration behind this. And when you can ask them questions about this and
12:16compare what the sales deal does versus your big revamp of your onboarding experience and you can put numbers to it, it makes it much easier for an executive to decide for the thing that has the biggest business impact. And it's just something that product people can learn. It's not rocket science, right? I teach this stuff and few hours uh to people and it's not hard to learn or grasp. It's just something that many people have never had to think about, never picked up. They're intimidated
12:45when they hear words like a budget or P&L. They don't know what that is. They feel stupid talking about it, hence they don't seek a conversation about it.
12:52They're even scared to go ask their CFO basic questions like, "Can you explain our numbers to me? What size business case matters in this company? Is it more important to have topline revenue or bottom line profits here? What are we optimizing for? Um, those aren't hard things to ask, but if you feel like you don't grasp the concepts around it, it might be feeling intimidating and then you don't do it and then you never get started and that's a shame.
13:20Do you think that in some companies based on your experience and obviously you're talking to people that are learning about this so maybe you kind of get the kind of the before and after from some of these people if you stay in touch that it almost ends up with kind of product people almost not being taken as seriously as they could be because they are seen as just almost I think as sort of described with design guests before almost like just playing in the corner with their toys versus actually having a solid strong business conversation. with the non-product
13:50people within the organization.
13:52Yeah, I I actually have a personal story about this. Um, two jobs ago when I was still working full-time, I was working for a company in Boston that made software for CFOs to run their financials to um do global bookkeeping to do global expense reporting, payroll, all these kind of things. They actually hired me because I could do product and finance. So, there you go.
14:16Kind of came together well.
14:19Yeah, I'm hired there and I'm I'm staffed in their headquarters in Boston and just down the hallway from me sits our CFO, Lynette. Um, I had met her in the kitchen already so she knew who I was and it was like early days in this new company and I was trying to understand what is this business doing?
14:36How big is this business? What matters here? So, I just walked into her office one day and I asked her these questions and she stopped in her tracks and she was very surprised and she said, "Well, you know what, Sumonetta? I wish your boss, the head of product, had ever asked me these kind of questions before.
14:52Um they he didn't seem to care or he didn't need seem to know that it would be important to ask these kind of questions. It was a huge trust builder and immediately like shifted this person's perception of how I am thinking and operating in my product role and I I do have the commercial impact of what we're doing at heart.
15:16Eventually, they promoted me into my boss's job. And I I'm crediting this only to this one conversation. But, you know, it it meant that this person and other people in the sea level team who I had conversations with understood that I understand the business and I care about the business and I want to make good things happen for the business with the stuff we do in product. I I think there's a misconception in many companies that product wouldn't be a business role. It
15:46Y the stuff we're doing has to solve problems for customers. This is where the money comes from, right? I say I'm not saying discovery is not important, right? Discovery is at the core of how revenue gets created. But um without thinking about does this thing that we're solving for our customers actually translate into a viable business, we're just doing half of our job.
16:07Yep. So I I'm helping people like getting the second part of their job understood and uh easier and demystified I guess.
16:18Um it's not so they can take their boss's jobs is what we're saying cuz you're not going to get any you're not going to get any corporate L & D out of this if if their managers that are signing off think that they're going to take the job. So like we need to maybe we need to have the bosses on the course as well so that they can stay one step ahead.
16:36Yeah. You know, I mean, lots of like accomplished product leaders eventually actually understand this, right? You don't become a CPO without understanding the commercial implications of what your product or doing. You have to then make a budget. You have to then justify the spend of your team in terms of like what is this bringing to the company as results, right? This is part of the job description of being a CPO. Um, and lots of people who get to this like VP level or CP level, they are only then starting
17:06to grapple with what does this mean? How do I make a budget? How do I um think about the numbers? How do I speak about the numbers? How do I not sound stupid speaking about these things? Um, and if you were to be promoted in that kind of role and you have nothing to say about these things, guess what happens? It's like once a month everyone no every once once a month everyone in that executive team is reviewing the numbers right they're looking at here's
17:34our budget here is what the P&L of this month actually says are we ahead of budget are we below budget let's say we're like midway through the year and we're lacking behind budget but we made promises to investors we made promises to um shareholders to the board about how this year is going to go lagging 15% behind And guess what? People are going to make decisions, right? Either they're going to cut costs, aka let people go.
18:00Or they're going to come up with like new priorities, a reshift of the strategy to push for something that they hope will make up this gap in the remainder of the year. And they're they're going to turn to product people and say, "Find me something that's a quick fix that will start making money in two months because we're in August.
18:20It needs to start making money ideally now like I'll give you 60 six weeks but then let's go right otherwise this year is done and we have nothing to show for it.
18:33This is what happens in companies and whether people like this or not like it's some people may think oh this is a political game oh this is a dirty game uh the commercials are somehow the dark side is stuff I've heard before. Um, but it's not a dark topic necessarily. It's like how do you actually make a good business out of the cool ideas that you're building for your customers and clients. That's the job in product.
19:00But that is an interesting point about the dark side as well though because I think it is fair to say that many product people and frankly a lot of product influencers will be sitting and you know people writing books and courses and videos and podcasts. It's like there's almost this exactly as you put it kind of this concept of like well you know we're the product team you know yes we're here to to kind of you know drive value for the business but at the same time we're also here to advocate for the users and for the uh you know
19:29for the tech side of things and you know the other two parts of the ven diagram and therefore almost someone needs to advocate for those parts that maybe would be underserved by a company that was fully and entirely optimizing just for revenue because you can kind of make money doing just about anything if you try. Right? So on the one hand you've got the argument that well of course product people need to be more commercially aware and they need to understand the context of their business and the kind of the constraints and the
19:58opportunities and all of the you know the good business stuff but there's also some element of like but who speak like the lawsax you know who speaks for the users right should the product people be careful that they're not being dragged too far in one direction or or is it always going to be a kind of a balancing I think it is the job is this balancing act right and also I don't think there is a contradiction between speaking up for users and creating revenue because
20:27revenue gets created by building stuff that users will buy right all of your revenue comes from someone making the choice that your product is worthwhile their money is solving some sort of progress desire for you right like the whole job to be done thinking is the machine that drives revenue So of course you have to think about the user of course you have to also relate a storytelling about what kind of user impact is actually valuable to solve for
20:56right when we now speak about judgment in in the AI world right like judgment and taste understanding what is worthwhile building right is it's tapping into exactly this understanding and identifying well what kind of problem to solve for users is worthwhile solving and how do you solve it in a viable business fashion so that you also make money with this, right?
21:19What I see a lot of product teams do these days is they are being mandated to go AI first. Um, yep.
21:26And the they're being told like whatever you do, it's got to be with AI and then at the same time product leaders turn around and they come together in these conferences and they're all looking at each other and it's like and where is the ROI on this?
21:40Have you found it? Have you figured out a way to make money with AI? there's new kind of commercial considerations to understand and they actually I think require even engineers to have a basic understanding of how the money stuff works because when you build an AI product experience and part of your experience is requiring you to keep on spending tokens to enable part of this experience you have introduced a new margin risk to your product with more usage there's
22:08more cost tied to this new feature um and so you have to start tracking stuff by user, by workflow, by interaction pattern. Um, and that starts in the code quite frankly. And it's really, really important that people start thinking about this these days because otherwise you just build up this giant cost machine. And what happens at the end of the year is kind of brutal, right? Like the P&L doesn't care how you spend the
22:36money and what kind of great thinking some manager put against this token maxing idea. It's just tallying up whatever the spend was. And if there is not enough revenue against that spend, the profitability takes a hit and shareholders, investors, the executive team will turn around back to you and be like, "How come you spend all this extra money?" Right? Like how come you took Jensen Huang's words of every engineer
23:05should spend the equivalent of their pay in tokens at Facebook?
23:08Why would he say that?
23:10And yeah, of course I mean selling more GPUs, right? It makes complete commercial sense for him to spin that tail. Um he he gets the financials 100%.
23:19And I'm not saying it's a bad idea necessarily, right? If you have a business case and it used to take you two months to build this thing, now you could maybe speed things up, do it in one month. You spend the same amount of money, right? Like whatever your team costs, you now also spent in tokens, but you did it in half the time. You pulled this the earning potentials forward. So you start earning money with this thing sooner or you start saving money with this thing sooner. So it might actually be a really smart investment if there is
23:48a theory around how this time invest of the team and the token invest is going to translate into an even bigger cost savings and or even bigger revenue opportunity. And it comes back to the basics. the revenue comes from you find something really cool that customers really want and this new AI enabled thing is solving something so fantastic for clients that they are willing to pay extra for the AI feature in your premium tier right if you find these kind of
24:18things brilliant go for it right but if you have no theory around how this AI thing is going to make your customers happier therefore them willing to pay more money to you and you're just starting to spend more money, that calculation doesn't compute at the end of the year. And someone in the finance team will just look at the numbers and be like, hm, now we have double the spend, but where is the extra money? Where is the cost
24:47savings that justifies this? And I think we're still in the experiment stage this year. Maybe um it's not going to last.
24:57Yeah. And I mean, I was going to ask about that in a bit, but I guess that's an important question around, you know, this kind of gold rush of everyone having to a I was speaking to someone client office the other day. He was saying, "Oh, yeah, we basically got like unlimited AI budget. You know, we can spend as much money on tokens as we want." And that feels like the sort of thing that at some point, you know, you talked about free money earlier on as well that eventually gets kind of the
25:26the Valve gets tightened, right? It kind of feels like at some point someone is going to sit there and say, "Well, hang on a minute." Do you feel we're anywhere near that point at the moment? Or do you feel that there's a long sort of road ahead before people start to realize, "Hang on a minute. This isn't quite delivering what we expected."
25:42Actually, the the road to that isn't all that long at all, right? Because I as I said like executive teams look at the numbers every month but they're not just looking at numbers though because this is being driven by the fear and and the FOMO and the high of course and they're almost like making it more possible to do this. They probably will look at the numbers but it kind of feels like there's a competing force now of like yeah we're going to look at the numbers but also we're being
26:11pressured. You know, I've spoken to investors, you know, people in investment firms and stuff, and they're pushing all of their organizations, you know, AI, AI, AI. And of course, they are because that's the narrative, but it feels like there could be a reckoning for some of these companies.
26:26I I think it's, you know, investors want to make their money back eventually and they look at the earnings history over multiple years, right? They look at how did your profit develop over years?
26:41How did your balance sheet develop over the years? Did your revenue grow over the years? Did it grow ideally like a hockey stick? Right? This is the dream.
26:50That's what everyone wants, right? Like ex exponential growth, not just linear, small and flatlining growth, right? So these things haven't changed just because AI is in the game now, right?
27:02the way a company is being evaluated and also quite frankly the executive bonus packages of your leadership team of your senior senior leadership team is still tied to these kind of numbers so of course they care right they might feel the pressure in the market and I totally get that right it's like that you might not even be able to compete with with others if there's not something AI written on your website and your product experience right I totally get that part
27:32so you have to put something in to just like check the box of your customers that they want to purchase something that has AI in it.
27:40But still at the end of the year or when your funding cycle comes to you want more money from a VC or a private equity firm, the numbers have to look a certain way otherwise guess what the funding isn't coming and that's not what executives want. So I it's just you can you can just I am willing to bet money on this. It's not going to take much longer, right? Like in the coming two to three years for sure you will see more and more pressure on this questions like
28:09how does this actually pay for itself?
28:12It's a that's just the way commercials work and it's not going to stop just cuz there's AI now.
28:22Well, some people would like you to think that it might, but uh but yeah, I reckon there will be there will definitely be some tough questions, but if we just kind of take a step back and you know, we've talked a lot about the kind of the financial space that maybe uh product people aren't necessarily so comfortable in for all the reasons that you've already explained.
28:42And obviously, you know, through things like your course, you're trying to help people to get more on track with that, maybe start to have better discussions with some of these stakeholders. So, when it comes down to fundamental financial literacy, because you know, you've gone through all of your experience and, you know, working doing the financial controller stuff that you talked about, not everyone's going to do that. But when we're talking about financial literacy for product people, you know, we're supposed to be good with numbers. So, that's a good thing. like you know we should be able to calculate
29:12the number of light bulbs in Manhattan for interview questions and stuff like that. So we we should be okay with numbers you know we all look at analytics all the time. So with that head for numbers like what does financial literacy like specifically look like? What kind of specific concepts and maybe metrics or kind of KPIs are we maybe trying to persuade product people to pay more attention to?
29:34Yeah, we talked about revenue and cost, but like is it just that or are there some other concepts that you think are important for people to kind of double click on?
29:41So, I think it starts with you understanding at a very basic level what is a P&L like it lists all the money you're making versus all the money you're spending and then there's either a profit because you made more money than you spent or the other way around and there's a loss because you made less money than you spend. So, a P&L is calculating for this. A balance sheet is calculating everything a company owes versus everything they own and how does this compare? Like do you have more
30:10assets than liabilities?
30:12Um so it adds up all your cash in the bank and your houses that you might have and the server units and maybe some um intellectual property value of whatever capex thing you have built minus the money you owe to other people. and the bank and to the tax authorities or whatever. So there's like some some computation there as well. And then in some companies they look at cash flow. They're just like looking at how much money is coming in, how much is
30:41going out, how much longer can we last with the money we have in the bank. That's in a startup start startup context is really super important. Cash management is also super important in banks because it drives how expensive it is for them to refinance with the central banks. um and their whole risk profile um metrics vary with like how well their cash positions are balanced.
31:02So depending on which co company you're in, there's going to be different financial metrics that your CFO leadership team and the board review all the time. So the thing to find out as a product person is what does this look like? What is the size of your P&L? Is the entire P&L 5 million, 50 million, 5 billion?
31:24what what is the size? So you get an idea of like how much extra revenue would be a meaningful lever to move any of these things, right? If you're in a startup and your whole P&L is 1 million euros, right? Then creating something that makes 200,000 is a 20% lift. That's amazing, right? 200,000 in a company the size of a Microsoft or an SAP or a Netflix or an Amazon is such a drop in the bucket, it is laughable, right? the
31:53the average PM that is staffed in a team where let's say there's one PM, four or five engineers, a QA person, maybe a designer, the spend of this team varies by geo region. If they're in India, they're cheaper. If they're in the US, they're more expensive. But you can think like starts at 600,000, goes up to 1.5 million. If you if you have expensive AI people staffed in there, maybe even more, right? So think about like how much does my team cost and how
32:22much would be the cost of that team times five or seven as a as a minimum ambition level of I should be making at least that much money that I can gen I can genuinely say my team's a good investment because we made out of what we cost this much benefit for the business in one of the four main strategies how you impact the P&L I'm making more money I'm making more revenue I'm protecting money. So, I'm working on something like turn
32:49reductions. I'm saving cost in some way because of my I thing is doing some efficiency and some process and this is saving us 30% of something really expensive or I'm avoiding to spend money to begin with because I built something in a compliant fashion so I'm not going to face this major fine next year. Those are the four big ones and out of those CFO loves the revenue generation the most followed by the cost reduction.
33:15Now if you think about like in this neighborhood like whatever the size of your P&L is like think 10 to 20% of that moving that would be fantastic that's like good good aspiration level on the upper end of what you might want to move now you're not going to do a 20% lift on the P&L of Amazon with just one team right but somewhere between 5 to 7x what my team costs and whatever that is that's where your ambition should kind of like focus and then you look at your road map and you're looking at the Next
33:45thing that's on your road map and you're come you're trying to come up with some sort of theory. How long is this slotted for? Like you are thinking you will develop this for a month.
33:56Does it make more than what my team costs in a month?
34:01I ideally five to 7x of what my team costs in a month. Does it get me close to this big ambition level of 10 to 20% of my entire company's P&L? And what is the next thing on my road map? And how does this compare to the first thing that sits on my road map? Maybe there is a strategic consideration, right? The thing that you are doing next isn't making as much money as the the second best thing, but it's opening a new market and therefore it's like jing with company strategy in some way. Those
34:29could be like the reasons why you choose the less valuable thing first. I'm not saying that it's only about the numbers, right? But you should have some theory in mind of how your team creates value. And what I find when I talk to people is they don't know what their team costs.
34:47They have no idea. They have never looked at the P&L of their company. They think in some cases if there if if it's publicly listed, you could just look it up, right? Like it's on their website of your company. But in many scaleups, it's not publicly available and it's not necessarily communicated internally. So people feel like they don't have a right to know this because it somehow seems like secret or intransparent what that is. And often times it's actually not all that secret. It's just that a CFO gives out this information on a need to
35:16know basis. So if you go to them and you explain, I'd like to understand how our numbers compute what are the levers to our revenue. Which one can I impact with my product thing in a good way? How can I create enough impact that it's going to be meaningful here? They're more than happy to share the numbers with you if you ask these kind of questions. If you just want to kind of like dig around and they have this sense of, oh, you're just trying to find out something you're not supposed to know, then of course you're not going to be given access to things.
35:42But that's not typically the case. Like I usually tell people when they come into my course week one, like after the first week, go have this conversation with someone in your finance team. It's never happened to me that someone came back and said they didn't give me those numbers.
35:57It has happened that people were too scared to ask the question and then they never found out. But um it's not that you are being met with resistance when you ask why you need to know this information so you can make good business decisions. It actually buys you a lot of credibility if you think that way. And it's just that those are the kind of things that I want product people to be capable to do. You don't have to like you will never have to make the P&L or do the accounting work or
36:25actually make the budget on your own. You can work with your peers in finance. They usually give you a draft. You can work with them. You can discuss with them. You can say, "Hey, help me. I don't understand how this part works.
36:36They're not monsters."
36:39Not all of them. Not all of them.
36:40No. I I haven't actually found a monster in in the finance orcs of the companies I worked in. They I mean they are incentivized to make the numbers work for the company, right? That's their job, right? They they are trying to understand what happens in this business, what drives this business, what decisions would be a good way to have the business move in the commercially right direction. Um and they're making these kind of suggestions
37:09to the executive team. They're reporting about this. They're or they're reporting this to shareholders, right? If you read a quarterly earnings report from a big company is published to analysts and shareholders, they're explaining the numbers to the investment community.
37:26That's their job. Um, and if you can find ways with them to find good levers and then show that you actually move those levers, you build an incredible ally in the finance org that will help you get your budget um, requests through because they trust that you actually have the numbers in mind.
37:48So what then? Yeah, if we accept all of that and obviously that all makes sense to me and it's something that I advocate for as well, but if we think then of some of those numbers that the product teams maybe go and get and then they try and work out what to do with them to help deliver some of the stuff that you just said like what do they do with those numbers? So yeah, they they understand now the basic parameters of their business, what the goals of the financial goals of the business are, how their teams might be, you know, how much their teams have been costing, how much
38:16value they have to generate. And then you could sit there and say, well, the easier option is to just sit there and say, okay, well, whatever the thing that's got the highest ticket number on it in the prioritization queue, we just do that next. I mean, is it that simple?
38:29Or is are there other kind of considerations? like how do you kind of use the these numbers and and the insight that you've got to actually help you make good prioritization decisions and good product decisions? I think it helps to be crystal clear for example on the revenue side how your revenue computes like let's say you're a subscription business right your revenue is a multiplication of however many users times whatever your subscription
38:55price is um whatever times whatever time period right you may have a monthly and annual whatever tier so maybe you have like multiple lines of multiplications in your business maybe you have like multiple product streams then maybe one of them computes this way and another one computes a slightly different way.
39:13But there's always these factors that if you multiply them with each other that explain how much your revenue is. So understanding how this works and also from your revenue streams understanding which one is creating the most value for my company lets me understand which of these levers I might dial to create the most extra impact. And on the cost side, similarly, right? Like if you break down the cost side of your business into
39:42chunks of like what are the big things that you're spending money on and you can identify something that's like 60% of all your spending that could be optimized and maybe cut in half, right?
39:56That could be a meaningful way on the cost side to do something that's good for the business. Those would be like pointers for me to understand. Okay, if I were to pick product initiatives that have the chance to have meaningful business impact, they should be driving one of these things. Um, and then I I'm also looking at the at the bigger strategic picture. So, if there is a push to go into from English-speaking countries into
40:26Spanishspeaking countries, right? And one thing on my road map would be allowing me to um do all the translation work, right? That is a mustave to have to stand any chance in the Spanish speaking world. And even though this doesn't immediately month one lift revenue enormously, it is a mustave to have any success with this new strategic priority. So I would look at what is the strategy telling me, what are the
40:54financials telling me, what are customers telling me because their progress desires drive revenue too, right? So from all these sources, you try to identify the most promising thing that moves the needle and then you make a proposal and and there I would honestly hope that people can um find it in their heart to take it less personal if decisions are being made that maybe go against their
41:23favorite pet project but make commercial sense for the whole orc. But that commercial result is an interesting one certainly in some companies because obviously there are many product organizations out there and product decisions that could almost you know very clearly you know one can drive the other you know like for example especially if it's some kind of I don't know PLG type company with premium tiers and such and you you product team does
41:51something that helps get more people in and they can immediately start or you know convert more people and you can immediately start to see the benefit of that. But if that product team is sort of stuck three stages back from the front line and there's a sort of a marketing team and a sales team in the way, not in the way, but you know, like they're the ones that are actually out there selling the product and then at the same time also maybe the pricing is such that features themselves are kind of just all bundled into the subscription. you're
42:20getting feature requests from maybe big customers that potentially aren't individually going to start to yeah you almost like drive revenue on their own but they you know as a combination they might start to drive revenue or renewal it all just starts to get a bit complicated basically. So in that sort of situation where the product manager maybe feels that the for example the realization of revenue is so much abstracted from them because you know there is a sales team out there that's actually going out and getting it and the pricing is such that they don't get
42:50to sort of attribute revenue to individual kind of features or or capabilities.
42:55Is it like what do they do? Is it just a case of best efforts or there kind of approaches that you've seen that work in that kind of environment? I feel like this is a little bit of an excuse to not even try. Um because yeah, we tried nothing and that didn't work out. So because the sad thing is at the end of the year, the P&L will be calculated.
43:20Your salary shows up as a costline item and the success of the entire org is being judged by how everyone together sales, marketing, product, engineering, customer support, finance, HR, everyone is doing against company goals, right?
43:38So I've had, for example, in B2B, you often have sales teams driving the big deals that result in the revenue, right?
43:47In my last job at IO, I was leading a business unit that had one business development team and three engineering teams together to drive growth with B2B sales. And we like very very closely linked together the the sales conversations and the engineering efforts into one combined view at things. Like once a week we would talk and I would ask my BD directors to bring
44:16in any new insights they heard from these big partnership conversations that would be meaningful for us and our road map choices and the way we could land another big partnership that would drive a lot of growth right um so sometimes you just have to need to take a combined look at things right also if you're a platform team right and you enable five other teams These five other teams may have the more direct link to revenue. You have to
44:45understand how revenue is being created in your org and where the strategic focus is of your executive leadership team to make good priority decisions that support these efforts. So I think it's lazy to then say oh because I can't directly see the link so I'm not going to even bother. Um, it it's also if you have an ambition to get promoted and be seen as a value driver, this is not going to help you, right?
45:14It's going to be much more useful if you are going around, you're doing a little bit of digging, you're really understanding how the business is working, and then you come up with a smart proposal that shows that you have thought about the business impact of what your team's doing, and that you would focus your team's energy and spend on the things that actually bring the biggest bang for the buck for your entire org. That's your job then. And yes, it's harder than if you have your fingers directly on the on the revenue
45:41related BTOC things, right? Um, but it's it's not that these commercial considerations are somehow absent just because it's more hard for you to find the link. So, um, just yeah, maybe it takes a little bit more stakeholder management, a little bit more conversations with people to understand how it all links together, but this kind of systems thinking is what you have to bring.
46:11Well, absolutely. But one interesting thing that kind of keeps kind of bugging me on this is that you're sitting there, we're sitting here saying that product managers and product people need to know more about the financials. And that's fair enough. It's something I completely agree with and it's something that I I very much am trying to push product teams to get closer to what they may refer to as the business, you know, the commercial and the financial parts of the organization because yeah,
46:38they need to be there. But these days, everyone's just talking about product managers needing to know more about AI, becoming product builders, building 10x as many products, token maxing everything as we've discussed. And obviously, we kind of touched on some of the financial considerations of that, but it from a kind of a learning pathway and expectation of product manager pathway, it kind of feels like a lot of the effort and focus is on almost getting away from the business and
47:06becoming more technical again. and yeah, let's just get product builders to build all the stuff now and etc etc etc. So from your perspective, are you seeing the current environment as making it almost harder to persuade product people that they need to be closer to the business and closer to some of these things? Cuz you know, you obviously said that almost from your perspective becomes more important because they need to understand these things. But is that what you're seeing that that people feel that they need to understand more these things or they just kind of throwing all
47:36in with the technical stuff and kind of getting further away from the rest of the business? Look, I think it's completely natural and also the right thing to do if you're in product these days to want to understand how everything AI works, how agentic setups work, how what are people speaking about when they speak about a software factory, when they're speaking about a dark factory, how do you make this um how do you use AI in a useful fashion to
48:03do whatever, right? like you cannot be like sitting on the sidelines and hoping that this AI train will somehow pass you by and you're going to have nothing to do with it. That's not realistic, right?
48:15But we've had these kind of things before. We've had the mobile wave come through. We've had the um even the internet as a thing disrupting businesses in a massive fashion creating this whole field of digital product management to begin with. Right? So I think um absolutely you have to understand the possibilities, feasibilities and also costs of
48:42everything AI to understand where does it make most sense to use this? what are um the opportunities this tech is presenting to me and what are also maybe some of the pitfalls and I think one of the biggest things that gets underestimated in terms of what we as product people need to understand about AI and building cool AI experiences is the connection of now you have a non-deterministic software
49:11solution one where you cannot completely predict every user interaction because like in the past like classic SAS deterministic software. You had whatever feature on the thing, you clicked the button, the exact same thing happens every time except you had a bug. But like for the most part, it worked the way it was designed, right? And it was predictable what should be happening.
49:32You no longer have this. Now you have to think about, okay, how do I build something trustworthy? How do I build something reliable? How do I build something safe? All of the debate we are now seeing about like the the doomsday scenarios and things like this like whatever you might think about this the cyber security parts of this are a serious concern of everyone in product building AI product experiences because
49:59prompt injections are no joke. Um package injections into git into other underlying technology that drives your AI experiences are no joke. These kind of things will result in a customer experience that you may or may not like.
50:16And if that customer experience isn't living up to people's expectations, guess what? They will cancel their subscription. They will say bad things about you on social media. They will badmouth you. They will no longer recommend your product to anyone else.
50:32And that's like death of the revenue down the line related to an untrustworthy maybe unsafe maybe harmful product experience that you never intended to build this way. Right? So all of this thinking about um considerations for um what could go horribly wrong with my product? What do these scenarios look like? And what is my course of action once I identify something like this? Do I have a roll
51:01back option? Do I have a kill switch in my product? Can I go back to the version from last week where can I roll back to a previous model because with the introduction of this new model I have introduced some sort of drift like all of the evals all of this stuff is now becoming important for product people to understand. So absolutely you have to understand this AI stuff, right?
51:25Downstream from this still is the good old computation of how many customers did this thing and gave me their money, what did it cost and how are we as a company doing financially with this. And so it's it's ever it's always there. It's kind of like one of these like foundational principles um that if you ignore will come to bite you. So it's it's not for me. It's not an either or.
51:52It's an and. And that builds extra pressure. It's not maybe not so fun to be in product these days because you have to learn a lot all at the same time. But at the same time, it's also what keeps the job interesting. So it's never boring in product and I think you have to do both. You have to understand what this new tech can do, how to how to implement it safely and trustworthy and how this relates to money and revenue and cost and
52:20profitability and or any other financial metric that your company is tracking. Like I'm working with an insurance company now. They track something that's a ratio between whatever money comes in from people paying for insurance versus all the payouts.
52:35That's a specific ratio thing that only insuranceances track. doesn't matter in a subscription business, but know what it is in your company that people care about and how these things compute and how you can contribute to the financial success of your org and how maybe with AI you can make this a stronger revenue driver, a better efficiently running company. There's so many opportunities with this. So,
53:03it's just you cannot ignore the commercial effects of your choices.
53:08I'm sure some people are trying. But it's an interesting question though. You talked about trust and obviously you and I spoke about trust when we were prepping for this as well. This idea that you know in well basically exactly everything that you've said like in in this world that we're building all of these kind of nondeterministic solutions and you know there's so many chances for it to go wrong that you've you've got to do a good job and an ethical job around and make sure you're not causing any harm. But also then kind of tying that together with the commercials like you
53:37say. But from your perspective, do you feel then that almost trust in this day and age can itself almost be a commercial lever versus just kind of a nice to have to make you feel good on the side? Like it's something that's actually going to help for example maybe provide more of a moat versus back in the old days moes could be technical for example. But you know these days it kind of feels like technical moes are starting to kind of get bridges put over them. But do you think that kind of
54:06trust and trust in your AI powered solutions could actually be an unlock for kind of commercial growth and kind of drive up some of those numbers that we've been talking about?
54:15Honestly, I feel like trust has always been a lever because if you think about it, you would have never given a company your money for something that you didn't trust would deliver what you are paying for, right? Like if you buy a vacuum cleaner and you are dishing out the money for an expensive one, you expect that this thing somehow cleans better than the cheap thing you had before,
54:43right? And if the product breaks this promise, you will never tell anyone else to buy this expensive piece of equipment. um versus you are so thrilled with your high-end vacuum cleaner and how easy and fun it is to to vacuum your living room nowadays that you might even show two or three friends and convince them to also buy this thing. Same thing with digital experiences, right? If you absolutely loved your Netflix
55:11subscription many, many years ago, right? Like you told all your friends about it. How amazing is this? You no longer have to pay the late fees. you just get the DVDs shipped to your house and you told all your friends about how amazing of a product this is. Um, and there was a lot of growth coming from it. If once this company starts breaking your trust, right, like and you can no longer watch all the movies you want on this what platform on this one platform, right? And um you start seeing that the
55:41thing you really want to see now plays on Hulu or I don't know like other streaming platform, you name them, right? It's like it's not about like bashing Netflix, but like once you the customer no longer trusts that their entertainment need is best fulfilled by this one product, they go somewhere else, right? And so if the the AI based product experience no longer lets you trust this product, this company, you also look for alternatives. And we've
56:08seen this already, right? like um even before the what happened the last two weeks with all the dooms uh day uh postings in the AI space right when remember when um Entropic pulled out of the US government contract and said not we're not building automatic weapon systems with our AI systems and open AI was like okay but we'll do it right lots and lots of people's money voted with like cancelling their open AI subscription and going to
56:37entropic now I'm not saying entropic are angels in in the way they conduct their business, right? But if people don't trust you as a business, if people don't think that your product delivers what it was advertised to do or promise to do, they will take their money away. And isn't AI isn't the only way to break people's trust, right? Like look at um lots of uh lots of people in our space are discussing what happens after bending spoon acquires a company and
57:06they're making the experience much less than it used to be.
57:11So you you used to excitedly dish out XYZ number of money for your subscription to whatever tool that then got acquired and they made the user experience less wonderful and you are paying more money for less service.
57:27Guess what? at some point you're going to take your money elsewhere, right? So this this trusting that you actually get good value for your money is the commercial driver behind any kind of revenue line. And with AI products, you just have found new ways in which you can break this trust, right? Like the thing does something unexpected, unsafe, um harmful, maybe violates your ethics, right? Those are all choices people make. I mean there's a huge backlash in
57:56the US against everything AI these days, right? And it's like people talk about this being an election topic for the next upcoming election, right? So it's I think and I'm teaching this course on ethics and AI in a school here in in Cologne. A year and a half ago when I first started teaching this, I have a monthly half day on this topic with groups. A year and a half ago, people were just coming in gung-ho. They had like never even thought about ethical concepts. It was like far off their mind. When they came into my session,
58:26they were like, "Oh, maybe I should have thought about this. Maybe I should think about the positive thing I want to design." And not just like the doomsday scenario. It's like, "What is it even that I want to see in the world? And how might I design for that?" Right?
58:41Nowadays, people come in and they're down on the whole thing. Like I've had people thank me after the half day where they're saying, "Well, you've resort my faith in the possibility that you can actually build something good with this." You have a choice when you're building AI experiences.
58:58Do you choose to build the positive impact you want to see in the world or do you neglect to even look there and you just hope for the best and you introduce a lot of risk which will hit your commercials eventually and that is not going to be great for your career, right?
59:17You can choose to build things responsibly. You can build in good guard rails. you can build in good systems to address things that might have gone wrong. Um, and you have to expect that things go in unexpected ways with these products because they are not deterministic software anymore. So I think as a product person, it's at your own peril to ignore the topic. I
59:44also feel like some of us might be turning into cynics and feel like we have no agency and we're just overwhelmed by the speed of things and we can do nothing about all these things. I I hope that people understand we actually have a lot of choice. We have a lot of agency. We can make good choices and we can make we can build cool things that are also commercially viable. That doesn't have to be a contradiction.
1:00:12And I hope that people take heart and like go in that direction because that's where product work is fun. Again, coming back to this survey I did a few years ago, I asked product leaders, what is the most challenging thing in your work and what is it that you enjoy the most?
1:00:25And the thing that number one got mentioned so many times is what brings me joy is the positive impact my stuff has out there in the world. So go for it. Build the cool stuff. Make AI do cool stuff for you. Um, and then the money will come, right? I like I love Nazis's work on bringing delight into product. Like think about these kind of things like AI doesn't have to be all doom and gloom. It is a tool that could be used for anything. It could be used
1:00:54for building something genuinely cool.
1:00:57Yeah. Rather than just a bunch of chat bots being slapped all over our screens in products that don't need them. But, you know, that's a whole that's a whole different podcast episode. So, if you're a product person listening to this now and you're thinking, well, yeah, this all sounds good. I'm convinced, but I don't know where to start. Obviously, one way they could start is they could come and take your course, which is still going, I believe. But even before they do that, and you've kind of touched on it a little bit about, you know, going to speak to the CFO, for example, like is that the first thing they should do or is there like a smaller step that
1:01:26they can take to start to think about some of this stuff in more structured way? I would start by just like looking around your files you have access to like find your P&L, find your balance sheet, find your cash, find the deck that your com that your senior leadership team is presenting to the board. What are they talking about in the all hands meeting?
1:01:48Like get your first like piece of data from there. Then go go talk to your um your finance or as far up as you can get. If you're in a huge organization, maybe talk to someone who is a business unit lead like you will not have access to the CFO of Amazon if you work there, right? But you do have access to someone in in your sphere of influence that looks at the numbers. Go talk to this person, ask them how the numbers of your business unit what matters here, how are
1:02:17they reporting success, what are the key metrics that they're watching. Um, and then like play from there. Like make a little driver tree. Like write down how could you impact these things. Compare what's on your road map to how these drivers work. Is there is there a link?
1:02:33Can you find it? How much would your road map items move these things? Um, there's lots of blog articles on my blog that could help you get started where you can just read up something fast. Um and uh Rich Miranov also has an amazing book called money stories that goes into how do you speak about the commercial success that uh things on your road map proposed to the business. I'm seeing you look for it. I have somewhere as well.
1:03:00Um there there you go.
1:03:03Exactly this one. And it's a it's such a fast read. It's like a thin book. You can read this in 45 minutes. It's a it's I highly recommend this book. It's really good. Um, that's even has a quote from me in the cover as well.
1:03:19You know you've arrived when, huh?
1:03:22Yeah. So, that's that's how I would get started. And then I mean, you can you can go to my blog, you can download a template for making a business case. You can start playing with this. Like, find if you're not good with Excel, find someone who is like a business analyst that you have access to. Um, maybe someone in your finance or they're not monsters. they're happy to work with you to to model something. Um, those are all easy steps one can take without having to do anything. And if you do want to take the course at 3.99, it's like
1:03:52really affordable. The way you get this funded is you go to someone and say, "My team costs XYZ per sprint. This this course costs 3.99. If I just make one good choice for one sprint, it has paid for itself." So Oh, there you go. So you you know how to sell this stuff into the financial team.
1:04:10Yeah, I actually literally had uh I had a course participant pay out of pocket first and go speak to their CFO about these questions. Person was so impressed that they ended up paying for the course.
1:04:24Well, there you go. That's a great little growth story right there. Well, I'll obviously uh link all that into the show notes of your link to your course and uh obviously any other resources.
1:04:37But if people do want to come and find you specifically after this and have a chat about, I don't know, AI ethics or digging into the numbers or maybe even see if they can get a tango lesson, where can I come and find you?
1:04:48Um, LinkedIn is a very easy way to find me. Um, my website inclusiveleers.de is another great place where you can find me. You can email me at simonetainclusiveleers.de. Um, many ways to find me. Or if you are in and around Cologne, come to one of our product tank meetups. Um, there you go. I hope you do in the cathedral.
1:05:13Also a fun thing to do.
1:05:15Well, oh, okay. So, you don't do the product tanks in the cathedral. Not yet. One day. If you get the right kind of guest, maybe you can do it there. Don't know if they even It' be interesting. They have done some interesting commercial choices recently. You have uh you can pay for your candles with a credit card and make a donation.
1:05:32Um, so they have uh they see they're looking after the numbers as well. See, they they're taking your advice.
1:05:38Well, uh, I'll make sure to link, as I say, all that into the show notes and as well as like your LinkedIn and everything else. Hopefully, you get a few people doing the kamonata in your general direction, although I don't actually know anything about tango or what that is to look it up. Well, simata, obviously, it's always a pleasure to chat. Really glad to have had chance to kind of dig into the numbers a little bit and why people should be doing that. Uh, obviously a bit of AI stuff in there as well to kind of get the clicks to, but obviously you and I will stay in touch. But yeah, as
1:06:07for now, thanks for taking the time.
1:06:09Thank you, Jason. It's been fun.
