My friend and co-worker, Milind Pandit, is a wicked smart guy who can teach anyone a thing or two about lots of different topics. One of his areas of professional interest and knowledge is product management. The other day Milind presented a webinar focused on product management and dealing with risk, return on investment and real-world options. True to form, he eventually breaks it all down into a nice, clean metaphorical world that anyone can understand. Milind has a way of explaining things and keeping them simple (for which I am eternally grateful, heh).

Check out this webinar by clicking here.

We present a methodology for planning and tracking a product development effort. The primary tool for the methodology is a simple, one-page spreadsheet capturing actual and predicted expenses and revenues, from which IRR or NPV can be derived. Furthermore, the spreadsheet models uncertainty of predictions. By constructing the spreadsheet for a product development effort, real options are exposed. By maintaining the spreadsheet on an ongoing basis, the exercise of real options is tracked and the likelihood of product success or failure is clarified.

The simplicity of the methodology ensures that

  • a product manager can independently stay up to date on the progress of a product development effort
  • anyone from line workers to corporate board members can easily understand the state of a product development effort
  • multiple product development efforts in various stages can be compared or aggregated into a portfolio
  • investment and divestment decisions can be made rationally and with complete information

To demonstrate this methodology, we will construct and modify a spreadsheet for a commonly-understood project: the purchase, improvement, and sale of a home.