Roots of product management

In a modern business environment, it’s become very common to discuss brand and marketing management. Since recently, product management can be found in that mix as well. Even though the 3 areas are similar, they are not the same.

Since we should understand product management a bit better, let’s rewind and review how it all started.

The year 1931. is considered to be a time when modern product management has started when Neil H. McElroy, as a junior manager from Proctor & Gamble, in charge of Camay soap campaign wrote his famous 3-page memo. In this memo, he has set the foundation for the modern brand management. Initially, he wrote a memo to justify hiring additional people, but later it became a basis for modern brand management thinking, and subsequently for product management as well.

In this memo, McElroy says that companies should assign a special marketing team to each individual product brand as if it were an individual company.

McElroy describes a man of the brand (“Brand Man”) as the sole responsible for the entire brand – from sales tracking, managing a product, advertisement, and promotion.

What he specifically pointed out was the way how this should be achieved, through detailed field testing and customer interaction.

He managed to get 2 additional people for his team and for the entire organization to restructure into a brand-oriented company.

The result of this move was an introduction to product management in major consumer companies of that time.

McElroy has progressed fast through the ranks and soon has become president of P&G. His success in the business world has brought him to become an advisor at Stanford where he was a major influence at 2 young entrepreneurs, Bill Hewlett and David Packard.

Their interpretation of “Brand Man” has led them to put the decision making as close as possible to the customers so they can make a manager of the product an internal voice of the customer. In the influential book “The Hewlett-Packard Way”, this setup was presented as the main reason why HP had a constant yearly growth of 20% for 50 years, from 1943. to 1993.

Other than just introducing the product manager role, they were the first once to split the company so that each division is an independent product team responsible for the development, production and marketing of their products.

In parallel with these changes, in after-war Japan, just-in-time production was being developed. Due to the material shortages and liquidity issues, Taiichi Ohno and Eiji Toyoda developed the Toyota manufacturing system in order to focus on eliminating waste in the production process. They also wanted to improve their overall process with 2 Japanese philosophies:

  • Kaizen – continuous business improvement always pushing towards innovation and evolution
  • Genchi Genbutsu – drain directly from the source all the facts so you can make the right decisions.

One of the first western companies that recognized the value of Toyota’s manufacturing principles was HP. They introduced a new and improved version of thinking about product development – customer-oriented, focused on brand and “lean” manufacturing. Very quickly all the companies in Silicon Valley, that was blooming at the time, have seen the benefits of this approach and started using it.

The original (P&G) product managers have been part of marketing. They have taken care of customer needs and how to satisfy them using marketing mix (McCarthy’s 4Ps)Product, Place, Price, and Promotion.

Developing and manufacturing new products has become a very long and expensive process (imagine developing new and innovative hair shampoo). Any type of change in this process would only increase costs and lengthen the whole process. With simply eliminating Product from 4Ps, consumer product managers have limited their action on 3 out of 4 elements: Place, Price, and Promotion. So their main focus has become brand management while product development was left to others.

As this role was moving towards technology-driven companies, this separation of marketing, product development and manufacturing became impossible. Most companies in the tech world couldn’t rely only on packaging and price to succeed. They were inventing, not just new products, but new industries as well. It was necessary to understand not just the needs of customers and users, but also to keep improving and adjusting products continuously. This brought product development back in the center of Product Management.

And then came Scrum and XP, Agile and Lean Startup and disruption of many different markets and industries. Join me in the next article to see what happened to product management after all these unexpected turns of events.

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