Navigating the second product problem – with Greg Coticchia

To listen to the interview, search for Product Mastery Now on your favorite podcast player.

To survive, your company must sell multiple products

Watch on YouTube

https://youtu.be/nRDXLW1fY1w

TLDR

In this episode, I’m interviewing Greg Coticchia, an experienced CEO and product management expert. The discussion focuses on the challenges and strategies involved in expanding from a single product to multiple products. Key points include:

• Why companies have to expand to multiple products to survive
• The importance of portfolio management in product development
• Cultural challenges in product expansion
• Strategies for building influence as a product manager
• Lessons from successful companies like Apple and Netflix
• Practical tips for navigating the Second Product Problem

The episode provides valuable insights for product managers looking to navigate the complexities of product diversification and enhance their leadership skills.

Introduction

Your organization’s survival depends on its ability to successfully expand from a single product to multiple products. This episode features an in-depth conversation with Greg Coticchia, CEO of SE Healthcare and product management expert. Greg shares his extensive experience and insights on the challenges and strategies involved in product portfolio management and business growth strategies.

The Importance of Portfolio Management

As product managers advance in their careers, understanding portfolio management becomes increasingly crucial. Greg explains that while senior product leaders recognize the necessity of portfolio management, product managers often question its relevance to their role. The key takeaway is that understanding how projects are selected is essential for gaining support for new ideas and initiatives.

The Challenge of Expanding from One Product to Multiple Products

Greg introduces the concept of the Second Product Problem, highlighting the difficulties organizations face when transitioning from a single product to multiple offerings. He emphasizes several key points:

• The rarity of creating a commercially successful product
• The tendency for companies to equate their identity with their first successful product
• The need for multiple products to ensure long-term business sustainability

Greg points out that it’s extremely rare for a software product to reach $100 million in revenue. This reality underscores the importance of diversifying a company’s product portfolio to achieve significant growth and longevity.

Cultural Challenges in Product Expansion

One of the most significant obstacles in product diversification is the cultural shift required within the organization. Greg identifies several challenges:

• Company-product identity issue: Organizations often struggle to separate their identity from their initial successful product.
• Resource allocation challenges: Deciding how to distribute resources between existing and new products can be contentious.
• Risk perception and management: The fear of cannibalizing existing product success can hinder innovation.

Greg explains that these cultural challenges often lead to resistance when introducing new products. Employees who have been with the company for a long time may find it difficult to adapt to new directions, especially if they’ve been successful with the original product.

Strategies for Successful Product Expansion

To overcome these challenges, Greg suggests several strategies:

Creating Autonomous Teams

Following the example of Apple’s Macintosh development, physically separating new product teams can foster innovation. Greg shares the story of how Steve Jobs moved the Macintosh team to a separate building and raised a pirate flag, symbolizing their independence from the rest of Apple.

Addressing Cultural Issues

Recognizing the importance of having the right people and dealing with resistance to change is crucial. Greg emphasizes that sometimes, clearing the decks and letting go of team members who aren’t aligned with the new direction is necessary for success.

Clear Corporate Management Focus

Shifting from a product-centric to a company-centric approach and delegating product responsibilities effectively is essential. This change requires executives to focus on overall company strategy rather than getting involved in specific product decisions.

StrategyDescriptionBenefitsAutonomous TeamsPhysically separate new product development teamsFosters innovation, reduces interference from existing product teamsCultural AlignmentEnsure team members are aligned with new product visionReduces resistance to change, improves collaborationCorporate Focus ShiftMove from product-centric to company-centric managementEnables better resource allocation and strategic decision-making

Structural Approaches to Product Expansion

Greg discusses various structural approaches to product expansion:

The Skunk Works Team Approach

Creating a separate, autonomous team for new product development can help foster innovation and avoid interference from existing product teams.

Physical Separation of New Product Teams

This approach can help reduce interference from existing product teams and foster a unique culture. Greg shares an example from his consulting work with Vertex, a tax software company. Vertex successfully expanded its product line by physically separating its new SaaS cloud solution team from the main organization.

Lessons from Successful Companies

Vertex Tax Software

Greg explains how Vertex allowed its new product team to establish everything from pricing to terms and conditions independently. This separation continued until the new product reached $5-10 million in revenue before being reintegrated into the main organization.

Apple’s Transition from iPod to iPhone

Greg discusses how Apple was willing to cannibalize its successful iPod product line by introducing the iPhone. This move demonstrates the importance of innovation and risk-taking in maintaining market leadership.

Netflix’s Pivot from DVD Rentals to Streaming

This example showcases the value of anticipating market changes and adapting business models accordingly. Netflix made the bold decision to shift its focus from DVD rentals to streaming, effectively disrupting its own successful business model.

Dealing with Unsuccessful Product Expansions

Greg acknowledges that not all product expansions are successful. Possible steps toward handling these situations include:

• Recognizing cultural resistance and potential sabotage
• The need to let go of team members who aren’t aligned with the new direction
• Identifying when individuals are no longer a fit for the organization’s evolving needs

Greg emphasizes that these decisions, while difficult, are necessary for the long-term success of the company. He stresses the importance of putting the company’s needs first when making these tough choices.

Building Influence as a Product Manager

A significant portion of the discussion focuses on how product managers can build influence without formal authority. Greg introduces the concept of the “trust bank account” and identifies three key constituents whose trust product managers must earn:

1. Development team and VP
2. Sales team
3. Executive management

ConstituentTrust-Building StrategyDevelopment TeamDemonstrate how your input will make their work more valuable and impactfulSales TeamShow how the product will help them reach their financial and career goalsExecutive ManagementProve that your decisions satisfy the needs of the business

Greg explains that building trust with these groups is essential for product managers to gain the influence needed to drive product success.

Practical Tips for Product Managers

Understanding Stakeholder Motivations

Tailor your approach to each group’s specific needs and goals. For example, developers are often more risk-averse and need to see how your input will make their work more valuable.

Selling to Salespeople

Recognize that salespeople have flexibility in what they sell and focus on making your product attractive to them. Greg emphasizes the importance of understanding the sales cycle and demonstrating how your product can help salespeople meet their financial goals.

The “Poison a Few” Strategy

Instead of trying to win over the entire sales force, focus on a few key individuals who can become champions for your product. Greg shares advice from a former colleague who suggested targeting specific salespeople in different regions to create early success stories.

Conclusion

The strategies and experiences shared by Greg Coticchia provide a roadmap for navigating the complex landscape of product portfolio management and business growth strategies. Successful product portfolio management is not just about creating new products; it’s about fostering a culture of innovation, building trust with key stakeholders, and continuously adapting to market changes. By applying these principles, product managers can drive their organizations towards sustainable growth and long-term success in today’s competitive business environment.

Useful links:

• Learn more about SE Heathcare
• Check out Greg’s page at CEO Coaching International

Innovation Quote

“Kill your cash cows rather than trying to milk them dry.” – Greg Coticchia

Application Questions

1. How can your organization create a culture that supports the development of new products while maintaining focus on existing successful offerings?
2. What strategies can you implement to build trust and influence with development teams, sales teams, and executive management in your current role?
3. How might you apply the “poison a few” strategy to gain support for a new product or initiative within your organization?
4. In what ways can you anticipate and prepare for potential cultural resistance when expanding your product portfolio?
5. How can you balance the need to evolve and innovate with the pressure to maintain and grow existing successful products?

Bio

Greg Coticchia is a seasoned, award-winning entrepreneur, CEO, business leader, professor, and author with over thirty years of experience in technology products and services. Currently, he serves as the CEO of SE Healthcare, a leading company in digital therapeutics focused on nurse burnout, and as a coach for CEO Coaching International.

Previously, Greg was the CEO and a Board Member of Sopheon (LON: SPE), a leader in enterprise innovation and product management software and services, where he successfully led the company to a private equity exit. He also established and launched Carnegie Mellon University’s Master’s Program in Product Management (MSPM), the world’s first product management degree, serving as its founding executive director.

Earlier in his career, Greg was a prolific entrepreneur, participating in fourteen startups (founding four) and holding executive roles in organizations ranging from startups to billion-dollar enterprises. He has raised over $73 million in venture capital and has been actively involved in more than seventeen mergers and acquisitions. Greg has held titles including CEO (six times), President, and COO, and has been responsible for the launch of over 100 products and solutions across various companies.

He has served on numerous boards, both profit and nonprofit. Greg holds a degree in Industrial Engineering and an MBA from the University of Pittsburgh, where he also teaches courses in B2B marketing at the Katz School of Business. He has certificates in Entrepreneurial Management from Carnegie Mellon University and Professional Coaching from Duquesne University. Greg was a three-time finalist for the Ernst and Young Entrepreneur of the Year Award and for the Tech 50 CEO of the Year. Additionally, he was named a Distinguished Graduate of the University of Pittsburgh’s Katz School of Business in 2006 and the Swanson School of Engineering in 2023. His book, Start Your Startup Right, is available on Amazon.

To listen to the interview, search for Product Mastery Now on your favorite podcast player.