Product Management Skills - On managing risks
Risk management is a key skillset of Product Management.
As a product manager, you have to be able to articulate, separate, and define your risks - the potential negative effects of whatever you are trying to do. Articulating them helps you frame and compare them appropriately - ignoring low risks and mitigating higher ones.
These are the levers you use and the plates you balance as a product manager to create and deliver value.
Understanding the risks
There are many, many ways to break down risks. You can start with some of the obvious risks:
Value risk is that your solution doesn’t create value for anyone.
Fitness risk is that your solution doesn’t actually solve the user’s problem.
Cost risk is that your solution costs more than expected.
Impact risk is that your solution doesn’t have the expected impact.
Adoption risk is that your solution isn’t used by users
Evaluating risks
Evaluation of risks is an exercise in methodology and tradeoffs.
In short:
How probable is this risk?
How damaging are the effects of this risk?
Should you reduce this risk?
Are you leveraging the right tool to address that risk?
How probable is this risk?
There’s a chance a meteor will hit your office building tomorrow. That doesn’t mean you should put resources into an extremely detailed meteor contingency plan.
Some risks are low probability “black swan” events. If you have limited resources, chances are you shouldn’t invest heavily in avoiding them. Sure, you should think about the probability and have a general backup plan, but unless it’s a business critical event it might be worthwhile to keep that in the land of theory.
How damaging are the effects of this risk?
If the negative impact of a risk is extremely low, then it might not be worth putting in the bandwidth or resources to mitigate it ahead of time. In these cases, it’s better to deal with the negative effect if it happens, and move on.
If a risk has extremely high negative impact, but you can take actions to reduce the negative impact or make the negative impact more recoverable, then you can still change your risk profile without mitigating a risk entirely.
Should you reduce this risk?
Fun fact - product managers shouldn’t be trying to mitigate or control for every single risk. To do so would lead to a standstill in decision-making and a tremendous amount of effort for rapidly diminishing returns.
Instead, you want to take appropriate risks, balancing probability and negative impact with the expected value.
It’s all about risk management and balancing the risks and tradeoffs to achieve an appropriate risk profile.
Are you leveraging the right tool to address that risk?
This is a common problem I see a lot of product managers make when they over-index on a particular form of risk.
Risks have different ways of being addressed. Depending on the problem you are expected to encountering, you may have a different approach available to you than directly addressing that risk. In fact, you may not want to address that risk specifically, but rather target another risk that has a tangential, secondary effect on the risk you originally wanted to address.
Imagine a product manager who, fearful of experiencing adoption risk, continues adding more and more scope before they release. Their attempt to reduce adoption risk (the risk that users don’t use the product) actually increases the cost risk.
Mitigating risks
When evaluating, you must know which risk you are attempting to address. Each has a different strategy and relationship with other risks. For example, for the above risks mentioned earlier:
Impact risk
Understand your metrics hierarchy, outcomes, and drivers
Be realistic about sizing and adoption
Value risk
Be sure you can follow the cause-effect chain back to the user’s intent or problem
Understand what the user is actually trying to do, with or without your tool
Cost risk
Reduce the scope to reduce cost
Do deeper feasibility assessments and spikes
Avoid over-investing without incremental validation
Adoption risk
Ensure your users know it exists
Make sure it’s usable
Instrument it
Impact risk
Avoid one-way doors
Release to a small subset of users
Make the negative effects reversible
A/B test to measure impact
Be ready to roll it back
These aren’t the only risks, nor are they the only mitigations you can apply.
Your risk framework needs ROI
You need to treat your risks like a product. You can’t spend weeks managing risks if the cost can be measured in minutes. Your risk framework and process needs to be aligned with the potential negative impact. There’s a cost vs. value calculation even to risk management.
Avoid analysis paralysis and ensure you don’t become a bottleneck - a lot of product managers get this wrong, over-indexing on all potential negative cases - it’s OK to be wrong sometimes. Product management is about managing a portfolio of bets - some are not going to work out.