As product managers and leaders balancing limited resources, we're constantly faced with tough decisions about what features and upgrades to prioritize. 

Let's imagine you have two capabilities to choose between.

First up, there's a dashboard upgrade. This isn't something that's going to win you new business or help you expand into new territory. However, it will help increase customer adoption and likely prevent some churn.

Then, there's a new enterprise integration. You've heard from everyone in sales that they're losing deals because you don't have this integration. Building this is going to help you expand into new markets.

Visualizing the core product dilemma: choosing between a dashboard upgrade for retention and a new enterprise integration for market expansion.

So, you need to decide: which one are you going to build? Resources are limited, so for now, you can only do one. Which one would you choose?

Let's say you choose Feature A – the dashboard upgrade. Great choice! Or is it? 

In this article, we’ll explore how to make smarter product decisions by applying a financial framework. We’ll break down how to prioritize features not just based on intuition or executive pressure, but with a clear understanding of the financial viability and impact on your company’s growth. 

You'll learn how to evaluate features using a product investment scorecard, understand the importance of market opportunity, and make data-driven decisions that align with your broader business goals.

Let’s dive in.

The flaw in how we typically make product decisions

All too often, product decisions are based on the following factors:

  • Intuition: Someone influential on your team might be led by their gut feeling.
  • Executive pressure: Your CEO might be in love with a certain integration because they chatted to somebody about it at a party. Now you have to have that integration – it's going to be great, right? 🫠
  • Customer feedback: Clients might be saying, "Well, if that doesn't happen, that's the end of this partnership; I'm moving on."
Illustrates common pitfalls in product decision-making, including reliance on intuition, executive pressure, and customer feedback over financial viability.

Our responsibility as product managers is to build products customers love, but they also need to be financially viable. Ultimately, we're building products to make money. While customers only buy what they love, financial viability is paramount – it's a business game at the end of the day.

A framework for making smarter product bets

So, how do you ensure your product decisions are financially viable? 

Imagine you don't just have two features, but maybe thirty, fifty, or even hundreds of different ideas, and now you need to decide which ones to pursue. Do you calculate TAM, SAM, and revenue projections for all of them? How do you understand which of those fifty ideas you want to dive deeper into?

At my company, we typically look at five different areas when deciding which capabilities to work on:

  1. Product investment scorecard: A great tool for evaluating investments.
  2. Market validation: Understand the size of your reachable market.
  3. Revenue projections: How much money could you make?
  4. Cost and pricing: Analyze costs for smarter pricing decisions.
  5. ROI and payback: Is this worth doing or not?
A structured funnel diagram outlining five key steps for smarter product bets: Scorecard, Market Validation, Revenue Projections, Cost & Pricing, ROI & Payback.

Now, let’s take a closer look at each element of this framework.

The product investment scorecard

Below, you can see the scorecard we use to assess competition and innovation. You need to understand if a capability will truly make a difference – how much will it change your competitive landscape if you pursue it?

In B2B enterprise software with active sales teams, it's also crucial to understand its impact on your win rate. This can even apply to product-led growth (PLG) models. Most customers expect to quickly realize value from your product, so understanding your "time to value" – how fast someone can get up and running – is key.

Beyond these, we also consider factors specific to our domain, like the volume of orders and transactions on our platform, as well as gross retention rates and potential new revenue streams. And, of course, we always factor in the implementation effort.

A detailed product investment scorecard table with various metrics, weightings, and example capabilities for prioritizing product investments.

The most important aspect of this framework is its collaborative nature. It's not just an internal product management tool; it's designed for company-wide use. 

You'll see different departments listed at the top of the scorecard, along with their weighting scores. This allows you to adapt the framework by adjusting weights based on your current strategic KPIs – whether you're focused on improving win rates, addressing slow time-to-value, or responding to competitive shifts.