Business Outcomes vs. Product Outcomes
The importance of outcome-based management is almost unquestionable in a modern product development culture. After all, it allows us to take a results-oriented approach, having the autonomy to figure out what we should build that ensure user and business need instead of delivering simple outputs.
In a marketplace company — instead of focusing on the delivery of a specific feature, such as saving your favorite deals, you look at expected results, such as an increase in the conversion rate to completed orders, regardless of the final solution.
Differences between Business Outcomes and Product Outcomes
As product teams, we are constantly talking about them. But can you describe the difference between Business Outcomes and Product Outcomes?
Business Outcomes
These are the metrics that move the business forward; normally, they are the objectives that companies define as their goals.
Very likely, the business outcomes are in one of these categories:
- Increase revenue or market share
- Protect revenue or market share
- Reduce costs or improve margin
- Avoid costs
Who never saw any news like this one?
Product Outcomes
On the other hand, these are the metrics that help us understand if the product is moving the business forward. In other words, if the product is generating value for the company.
Usually, they fall into one of these categories:
- Acquisition
- Activation;
- Retention;
- Revenue;
- Referral.
If you are unfamiliar, these are the Pirate Metrics, user-behavior metrics that product-led growth businesses should be tracking.
User Value and Business Value
“What about the user value?” you may ask.
Supposing that a marketplace company wants to increase revenue, an increase in user acquisition can help with that, right? More users generate more transactions; more transactions generate more fees collected, and more fees equal more revenue.
It always depends on the business model, but generally, there is a direct relationship between business and product outcomes.
Frequently — when we generate user value by understanding their needs and context and offering a great experience, we generate business value.
Notice the “frequently”; it doesn’t mean always. But this is a topic for another article.
Conclusion
By understanding that the objective of all areas of a company is to generate value for the company, we better visualize the direct relationship between business and product outcomes — the product must contribute to the company, helping it to achieve its goals.
Management focused not on deliveries but on the impact that these deliveries cause is the key to creating products that generate value for the user and the company. By adopting this approach, the team gains autonomy to understand what should be created to meet the needs of the user and the company. Once teams and leaders understand the connection between the two, they can work together to deliver meaningful results.
Do you work with outcome-based management? Let’s chat about it and share our experiences.