Risk is one of the most overlooked aspects of product management. Despite this, risks are real, and they are part of all the products that you will develop and manage. They are potential problems that could compromise the success of a product. Failure to identify and mitigate risks that face your products could jeopardize your operations altogether.
As a product manager, you are also involved in the risk management business. You always seek to achieve desirable results with your products. However, you can only achieve these results if you take risks. All the investment decisions that you’ll make represent a risk, and therefore, you should get apprised with what risk management entails, and how you can use it in your capacity as a product manager.
Risk Management in Product Management
Generally, risk management entails risk containment and mitigation. When it comes to product management, you should always be ready to act whenever a risk arises. In the realm of product management, risk can be defined as the possibility of the project suffering loss.
The overall exposure of your project to risk significantly accounts for the possibility and size of the probable loss. Here’s a breakdown of steps you can take to integrate risk management into product management:
Identify Your Risks
The first step to manage risk is identifying threats to your product’s success. The risks that you might encounter include:
- Customer Risk: Are there real customer pain points?
- Solution Risk: Can your product help your customers to achieve what they want? Does it add value to them?
- Competitor Risk: Is your product superior to the alternatives that customers have at their disposal? Is it adequately differentiated to compete favorably in the market?
If these risks go the wrong way, they could completely tank your product. Therefore, you should be explicit when it comes to identifying and addressing them. It’s easier for you to reduce product risks if you take a human-centered approach to risk management. This means understanding the needs of your target market and the needs that your product intends to meet. This can help you avoid common risks such as product cancellations, recalls, or even poor sales.
Pursue a Range of Product Bets
You can balance impact with risk by pursuing a range of products rather than one product. Within this portfolio, you should combine low-risk and high-risk products. This way, you will be able to absorb some failure in case the high-risk products fail to pan out. Your low-risk products will help cushion you from total financial loss.
Ideally, you should take the portfolio approach at all times. Even if you don’t have adequate resources to offer both low-risk and high-risk products simultaneously, you can still do it over time. For instance, you can start by offering high-risk products first, then low-risk products thereafter, and vice versa. Over time, you’ll gain momentum and still stay in business in case the high-risk products don’t pan out.
Look at Risk Management as a Continuous Process
Risk management isn’t a destination but a journey. Every member of the product team, from development to sales, should be on board. Make it known to everyone that whatever you’re pursuing has risk, but you intend to learn from them. If you talk about your products this way, no one will be surprised if you encounter failure.
You should keep in mind that with every new product you develop or launch, you’ll be taking a risk. In this regard, ask yourself whether there any best practices that you can leverage to balance product risk and impact. This will go a long way in helping you to mitigate the risks that you’ll encounter along the way.
Develop a Risk Management Plan
Everything that you do to prevent risks that lead to product failure should be guided by a risk management plan. After cataloging and ranking all possible risks that you might encounter, you should create a risk management plan that outlines the response that you’ll take if the risks materialize. Your risk management plan should rank your risks according to their potential impact and outline a response to each risk.
Risk management isn’t a one-off activity. As long as your project is running, you should be on the lookout to mitigate risks that materialize. Monitoring could include:
- Publishing project status reports and including risk management issues
- Revising risk plans according to any significant changes
- Reviewing and reprioritizing risks, and eliminating those that have the lowest probability
- Brainstorming on potentially new risks after making changes to your project scope or schedule
With every decision that you make as a product manager, risk is involved. You will always encounter setbacks and failure, but how you ride the storm depends on the risk management strategy you have in place. Integrating risk management into product management can help you to mitigate risk and absorb failure without affecting your product’s success.
About the Author
Jordan MacAvoy is the Vice President of Marketing at Reciprocity Labs and manages the company’s go to market strategy and execution. Prior to joining Reciprocity, MacAvoy served in executive roles at Fundbox, a Forbes Next Billion Dollar Company, and Intuit, via their acquisition of the SaaS marketing and communications solution, Demandforce.