In product management circles, no phrase is more widespread than “outcomes.”
You probably often hear that outcomes are the only thing that truly matters, that you should focus on “outcomes over outputs,” and that teams and decisions should be outcome-driven.
But what is an outcome, really?
In this article, you will learn the three different types of outcomes, as well as strategies for making your outcomes achievable.
Outcomes are not built equal. There are various types of outcomes that are used for various purposes. The word outcome might even mean different things in different contexts.
However, the three main types of outcomes are:
Business outcomes are the highest-level objectives that you’re chasing. Think of these as the main priority of the company as a whole.
You launch new products and services to drive these business outcomes.
For example, the most common business outcomes include
Each relates to business as a whole, not to a specific product in the company’s portfolio. You can think of them as determining how successful you are as a business.
Product outcomes are the goals you have for current products or services.
Examples might include:
These speak to how successful your product is.
As the name suggests, user outcomes focus on the value users get from using your product.
Benefits might include:
In this case, success refers to the outcomes of your users.
Defining the right outcomes is essential.
After all, these outcomes then guide your decision-making and prioritization process. Focusing on the highest-impact outcomes results in high-impact roadmaps.
On the other hand, if you focus on the wrong outcomes, you might spend months shipping features and improvements that ultimately don’t lead you to where you want to go.
Use the following steps to define achievable outcomes:
Before you start, you need to understand what the business outcomes are and what contributes to them.
The C-suite and leadership of the company usually define the business outcomes.
From the product manager’s perspective, the critical part is to understand the business outcome formula, that is, what factors influence the outcome desired by the business.
Let’s say that the most crucial business outcome is revenue growth — defined as improving monthly recurring revenue (MRR) by 20 percent by the end of the year.
For MRR, the high-level formula would look like that:
MRR = number of customers x average revenue per paying user (ARPPU)
Then go deeper into the areas you influence. Say that you are a product manager in an area more focused on the number of customers than on the ARPPU. You should split the former into smaller pieces:
MRR = number new users x conversion rate (CVR) – churn x ARPPU
Now you could deconstruct it even further. For example, your overall CVR is usually the combination of the CVR of various touchpoints, such as onboarding, hard wall, checkout, etc.
By splitting the business outcome into a formula, you can identify a few possible product outcomes to chase, such as:
After identifying potential product outcomes, you need to choose which ones you want to prioritize.
There are numerous ways to approach this challenge. I personally use the “10 percent improvement” approach.
I look at each possible product outcome and ask myself, what would happen if we made a 10 percent improvement in that area?
In our case, it would be:
Run the math so that you can evaluate how driving each potential outcome by 10 percent would impact the business outcome.
If increasing the ARPPU by 10 percent would result in a 200,000 dollar MRR increase, but reducing the churn by 10 percent would drive MRR by 300,000 dollars, then reducing churn is a more impactful outcome to chase.
Now you need to ask another question — what needs to happen on the user side to reduce churn?
First of all, you need to understand why users churn. Apply various research methods, such as:
These will allow you to come to a high-level understanding of what drives users to churn.
It might turn out that users churn for three main reasons:
Try to quantify their answers to figure out where the most impactful areas of improvement are.
Let’s assume, in your case, people are simply dissatisfied with the product experience they are having, and your satisfaction surveys say that the average satisfaction score is 60 percent.
In this case, improving user satisfaction seems like the right direction, so you could set a goal to improve the satisfaction score from 60 percent to 80 percent.
Now, you need to develop a plan of action on how to improve user satisfaction.
I’d recommend creating an opportunity solution tree to better understand what problems users face, what opportunities it brings to use, and possible solutions to improve user satisfaction:
However, there are many other approaches to defining what specific problems to solve and what solution to ship. If you are not a fan of opportunity solution trees, just use a method that works for you best.
There are three different types of outcomes.
Business outcomes tell you where you want to go as a company. Product outcomes define where you want to take the product. User outcomes answer what changes for users you want to drive.
These are all interconnected.
Understanding different outcomes and how they relate to each other helps you better understand what you do, why you do it, and how everything connects.
Ultimately, you must understand the outcomes you’re chasing to build truly impactful product roadmaps.
Featured image source: IconScout
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