Welcome leaders,
Product managers running internal products face headwinds that typical PMs managing commercial products just don’t.
And that, my friends, is an opportunity for you.
Sure, managing internal products can be challenging, but by learning a specific set of strategies you can excel at it.
So let’s dive into the key differences, big challenges and ultimately how to solve for them.
Cheers,
The Pain is Real
I’ve managed both internal and externally-facing products and internal PM was by far much more difficult and challenging — until I learned how to master it.
If you’ve run internal products in the past then most likely you’ve come across at least some of the following issues:
There was no product development process
Stakeholders didn’t know what Product Management even meant
Engineering barely existed — “IT” (i.e. laptop maintenance) is how folks in the company thought of engineering
Internal users were always upset (rightfully) because the software didn’t do what they wanted or needed
Looking under-the-hood at the product revealed enough tech debt to last a lifetime
Your peers & internal customers had to be cajoled & nagged to do their part in developing the product, and when they did, they acted like they were doing you a favor
And possibly the most annoying: although the internal products were vital to the operations of the company they played second fiddle to just about every other department
Sound familiar?
I’m sure many product & technology executives reading this have gone through similar experiences at some point in their careers.
If you haven’t yet, its probably coming up on the horizon since internal PM is something you usually can’t avoid as you rise through the ranks and own a larger & larger portfolio.
So, here’s the secret 😮💨 of why most execs fail at internal PM:
Most executives fail at managing internal products because they come from a background of running commercial products and they assume both are managed the same way.
Don’t be one of these executives!
Light at the End of the Tunnel
The good news is that it IS possible to succeed in running internal products.
But there’s a big set of “IF’s”:
You must understand the key differences vs. managing commercial products
You must establish a new mindset based on this understanding
You develop a new set of skills that aren’t easy to master, but once you nail them down you’ll be unstoppable
You have to be open to changing your thinking though.
I’ve talked to way too many product leaders who say, “Oh, internal and external product management is the same because you’re still just serving a customer.”
This is exactly the wrong thinking.
Yes, at a superficial level in both cases you’re building products for customers, but the customers couldn’t be more different from each other.
In fact, almost everything important between internal and external product management is not at all the same. Not better or worse, just not the same.
So, let’s take a look at some of the key differences.
Top 5 Differences b/w Internal & External PM
Here are the top 5 reasons why internal product management can sometimes be so different (and difficult) vs. external PM.
The following are the most important reasons in my experience. But, I’ve also written up a number of additional important contributing factors at the end of this list.
1. Lack of Boundaries Between Product & Customer
When managing internal products the typical boundaries between the product team & the customer don’t exist because both groups are part of the same company.
This greatly muddies the waters.
With commercial products the customer knows how to interact with product management and those interactions are usually fairly limited to making payments, doing discovery calls or maybe being part of a customer advisor board.
With internal products the customer is sitting right next to you. They might a lot to say about what “their” product should look like. In fact, they might spend a LOT of time with product management giving them continuous input (often contradictory).
The other issue that comes from being under one roof is the two groups are often competing for the same resources. Product & the internal customer (for example, the operations or support department) might be fighting for the exact same dollars/budget.
Additionally, both groups will be trying to influence & create visibility with the same leadership team (ELT). Internal customers might see things one way and product management might see things in another. Both will be competing to get their priorities are adopted by the ELT.
Lastly, building a strong relationship with an outside customer is more straight forward since a clear delineation is involved. With internal customers creating strong collaborative relationships is challenging since boundaries can be much more blurred.
I know it sounds scary 👻 but these examples are really just the tip of the iceberg in terms of what makes internal product management so complex.
2. Family Dynamics Come into Play
With internal products you’re forever dealing with what basically amounts to family dynamics, and as we all know these are not easy to manage!
As with family, you can’t really walk away from your internal customers since you’re both part of the same organization.
Internal customers & users will see all your dirty laundry and “how the sausage is made.” So, you will typically receive a lot more in-person criticism 😠 when building internal products than with an external customer.
These family dynamics can lead to a lot more arguments and conflict than with a commercial product customer base — and you have to be ready for that as a leader.
Internal customers, like family, also tend to feel like they have a lot of influence or “say” in what, when, and how you build products, so you’ll have to handle that as well.
External customers on the other hand have a much greater separation from your product team and will likely have much less behind the scenes access & influence (positive or negative).
3. No Money Changes Hands with Internal Products
With internal products you’re not selling your software, so no money is changing hands.
When money transacts (as with commercial products) many responsibilities, expectations and structures are automatically put in place for all parties.
Each group “owes” something to the other, whether it’s the product team delivering a product or customers paying for it and making the commitment to use the product.
Since a transaction of this kind is rarely involved with internal products the typical responsibilities, expectations and structures are also not put in place.
Instead, those must be created on purpose & with great care & effort by the product leader (and their team) working together with internal stakeholders.
Of course sometimes the internal stakeholders will not understand the structure & expectations being put in place, so a great deal of educating is necessary.
You see a lot of one step forward, two steps back kind of scenarios on this issue. But once you get the right leaders in place who understand their responsibilities in the relationships, then the situation can become incredibly healthy and successful.
4. Internal Stakeholders are Expected to Help Build the Product
You’re rarely going to expect an external customer to help build your product.
But with internal customers & stakeholders the situation is quite different.
Internal customers might drive a LOT of the requirements. They might sit side-by-side with product management and ideate on what their needs are.
Internal customers don’t have any more experience in developing products vs. commercial customers, but they are usually much more involved anyway (at least on the requirements side).
Besides the lack of product design/development expertise, the challenge with internal customers partnering with PM is that the internal stakeholder has to do their day-job AND help build the product.
This is incredibly time consuming and difficult for the internal stakeholders especially if they are in customer support (for example) where its one fire-drill after another.
So, Support has to do their day job and help Product understand their requirements to build the right software. And most of the time no one in Support is getting paid extra for this 😃
So, because Support doesn’t have much time or experience doing this kind of work (defining requirements), they aren’t naturally very good at it, which frustrates Product.
5. The Motivations & Incentives Are Quite Different
In typical external PM product builds something, Sales sells it and then everyone pats themselves on the back for a job well done.
There’s a clear win and that win is sales. And usually the more sales the more the company’s headcount grows.
But what is the win with internal products if its not sales?
Perhaps its increased efficiency of an internal department. That is a win for sure, but it is typically not very motivating to most commercially-oriented product managers.
Of course, you can reframe internal efficiencies as profit margin, which is sexier. And since that has to do with money perhaps it’s more motivating. But again, PMs generally don’t spend a ton of time thinking about things like 1% margin improvement.
The other factor here is that internal customers aren’t sacrificing much to get the product vs. outside customers who are giving you cold, hard cash. That means external customers are incentivized to like the product, adopt it and sing its praises (most of the time).
But internal customers have a much higher threshold of satisfaction. Since they are not giving up much to get the product for them the product better be perfect.
This is very counterintuitive.
In a sense, the product has been “forced” on them. After all, they never asked PM to build it! They may have even wanted to purchase a product from an outside vendor!
To overcome this the right incentives-based performance management system must be established for all parties.
This could be bonuses tied to efficiency achievements, for example.
Again, the key is to create structure where there is none.
Additional Factors
Here are additional contributing factors to the challenges of managing internal products:
Often, companies who need internal products are services businesses just getting started in investing in Product, so the foundations of PM have to be put in place
Budget is sometimes harder to come by with internal products because unlike with external products there often isn’t a direct tie-in to revenue or growth
Internal politics can play a significant role depending on the culture and state of the business
Internal customers usually have a constant flow of new requests and ideas that are harder to create a buffer around, so managing them can be quite different
The person with authority over both internal stakeholders and PM is usually the CEO and they may become a bottleneck when everyone goes to them for mediation
Internal customers are typically used to throwing requirements over the wall to “IT”, which is a bad habit generally and has to be undone by the product leader
Internal products don’t typically compete with other products, so the push to innovate may be lower than with external products
Technologically, internal products often have long lifecycles, so you frequently see a significant amount of technical debt
Solving the Challenges
Transforming into a rockstar internal product leader certainly doesn’t happen overnight.
In fact, you’re going to have more failures versus successes in the early days.
I’ve prepared a list of key skills you’re going to have to master to become a success in the long-term.
Keep in mind that like any other skill you have to practice these repeatedly to get better.
Let’s review them at a high level and in the next article we’ll dive into more details.
Patience - this is the most critical skill. If you don’t have it, DON’T TAKE THE JOB of an internal PM. Trust me 😃
Educator - you have to be a masterful educator if you want to teach internal stakeholders how to work with you to create a product that delivers on the business goals.
Success Metrics - design & promote the right success metrics that have nothing to do with revenue growth & everything to do with efficiencies & margins.
Trust Building - remember, you can’t fire internal customers. So your trust building and communication skills need to be on point.
Thick Skin - internal stakeholders are going to know all your dirty laundry & soft spots, so you have to develop a really thick skin to survive & be good at arguing your points!
Track Success - external customers will tell you if your product succeeded by paying you. With internal customers YOU have to track success, NOT the internal customer! Strange but true. 🤷🏽
Customer Success Department - with internal customers you are your own customer success department, so adoption is going to be largely up to you to drive forward.
Change Management - also up to you to drive forward, sorry!
Managing Upwards - better do it well, or the internal stakeholders will do it for you and offer your CEO and ELT a set of narratives all on their terms.
Workflow Optimization - are you good at this in the context of product design? A lot of internal PM is improving the product design to hit efficiency targets by optimizing workflows.
Product Strategy - a lot of commercially oriented product leaders live to develop growth-oriented product strategy; in internal PM strategy takes on a completely different approach because there’s no GTM component
Closing Thoughts
Hopefully this was helpful, especially if you’re managing an internal product now and struggling or thinking about taking on that kind of role.
Although there are lots of challenges to internal PM it CAN be done and done well. In my experience it just calls for a radical shift in mindset for most product execs.
Forget most of what you learned about mitigating challenges with commercial products and understand a new set of challenges that you’ll face (15 of which I outlined above).
Then switch your mindset to a patient “educator” who will chip away at the situation. Careful, step-by-step change management is the only way to be successful here.
And of course, make sure you’re ready to take on the job, because the family dynamic aspect of internal PM cannot be overstated — and not everyone is built for that.
In a subsequent article I will write up more details on the solutions (10 are noted above) that you can leverage to be successful in the role.