The Key to a Successful Product: A Well-Defined Product Scorecard

May 2, 2011

How does your company ensure that your product team is focusing its design and development efforts on key product and functionality development? Does your company have an organization management system in place that aligns the interests of your product team with the company’s corporate strategy? If not, the executive management team is setting its products up for failure. If your company does have a system in-place, is it effectively focusing your team? If not, then your company should probably consider designing a product scorecard to align the incentives of its product team with the company’s corporate strategy or re-work its current product scorecard to make sure it is effectively focusing its team.
So what is a product scorecard? A product scorecard is a formalized metric system that is used to gauge a product’s success or failure based on a small number of key performance metrics that are each directly linked to one or more key business priorities and prioritized based on importance.
If successfully implemented, the product scorecard will improve the focus of the product organization and help your team eliminate unneeded product functionality from the product backlog, which will ultimately increase product release time forecast accuracy and speed up the go-to-market process. However, the product scorecard will only be successful if it is properly designed and implemented. The following 5-points will help ensure that you properly design and implement your company’s product scorecard:

  1. Tie part or all of the product organization team’s bonuses to the product scorecard. 
  2. Limit the number of prioritized key performance metrics to 5 or 6. (This is not to say that you can only track 5 or 6 metrics, rather you should only have 5 or 6 prioritized objectives.)
  3. Design a scorecard that can evolve over time to shift with corporate strategy.
  4. Establish a regular interval to review performance.

Make sure that all related business priorities are covered by the selected metrics. Due to the fact that product scorecards are customized to drive team behavior, product scorecard metrics differ considerably between different companies and product lines within a company. Oft times some combination of the following key performance indicators (KPIs) will be used in the product scorecard:

  1. Acquisition 
  2. Activation
  3. User Activity Level
  4. Revenue
  5. Referral 
  6. Retention
  7. Net Promoter Score

When selecting key performance metrics, be careful not to fall into the “Vanity KPI Trap,” where you select metrics that look good, but don’t actually help your company achieve its prioritized objectives. For example, Myspace made this mistake when it selected page views as one of its key prioritized metrics, which incentivized its product team into creating a website layout with too much ad space that required more clicking through to get to pages and this ultimately scared off users and led to the site’s downfall. Thus, make sure to select relevant metrics and be sure that they cover all of the business priorities.
Implementing a well defined product scorecard will improve your company’s product management process. If you are interested in learning more about the product management process and organization management design, I highly recommend reading Inspired by Marty Cagan or reading his company’s blog.

Marketing Manager, Pricing Strategy

<strong>Brandon Hickie</strong> is Marketing Manager, Pricing Strategy at <a href="https://www.linkedin.com/">LinkedIn</a>. He previously worked at OpenView as Marketing Insights Manager. Prior to OpenView Brandon was an Associate in the competition practice at Charles River Associates where he focused on merger strategy, merger regulatory review, and antitrust litigation.