Lost In Translation

Language is a complex beast… According to the Linguistic Society of America, in 2009, there were just over 6900 distinct languages globally. The diversity in language whilst has many cultural benefits, throws up numerous challenges as we interact and transact across global borders. Even within the one language, the misunderstanding or misinterpretation of words can throw up numerous issues.

One such challenge is that faced by Product Management when communicating with their Finance teams. It’s no secret that the Product Manager often feels stymied by the Finance team and what seems to be archaic processes’ protecting the company’s purse strings. Justification for new product ideas is lengthy and is often more complicated than it needs to be.

Sometimes the frustration felt may be as simple as a translation issue. Finance may ask for certain information and Product may interpret the request slightly differently. As Product Managers struggle to make their point, the effects in the long run hurts the product and ultimately the company’s bottom line.

As an experiment, Adrienne Tan (Product Manager) and Stephane Chatonsky (Financier) thought it might be worthwhile writing a list of common words and the interpretation of the words by each group. Read on and tell us what you think. It was amusing that both the Product Manager and the Financier seemed to appreciate the concept of MVP.

When Financiers Ask… Product Managers Understand… What Financiers Really Mean
Business Model “What is the business model” The way in which the product delivers value to the market. The way the product is making money
Revenue “What is the top line?” The income that the product currently generates. How much revenue can we expect to be generated over time?
Profit “How much money will this product make?” How much money the product will generate after costs? In most cases, financiers mean the profits (revenue-costs) that the product will generate post the start-up phase.
Investment “How much should we invest?” How much resources are required to deliver the product before it starts to generate a positive return? How much capital is required before we are cash flow positive?
Business Case “Why should we do this?” Why should the business invest in this idea over other ideas? Financiers implicitly refer to the NPV (net present value) of the project which is a financial metrics that measure what is the equivalent VALUE today of the project given its revenue, costs, capital expenses, timing and risks. This is THE fundamental measure of a project for a financier.
Cash Flow “When will we be cash flow positive?” The time it takes for the product to generate more income than it cost to produce the product. The time that will be required before the product is generating a profit.
Return “What will be our return?” A specific point in time when the product starts to pay back the investment that was spent developing and launching the product. Financiers are typically interested in the IRR (Internal Rate of Return) which is a measure of the financial performance of the product taking into account all revenue, costs, capital expenses over time. This IRR needs to be assessed against the risk of the particular project.
Forecasts “Show me your forecasts?” Demonstrate the revenue predictions and cost predictions of your product over time. Month by month expectations of revenue, costs, capital expenses.
Performance “How is the product doing?” The current performance of the product in terms of sales, revenue, customer satisfaction, trends. Month by month comparison of actual revenue and profits versus what was expected (forecasts)
When Product Managers say… Financiers understand… What Product Managers Really Mean
Agile Development “How do we become more Agile?” Hmmmm? I don’t understand what you mean. Sorry. I want to ship the right product to market quickly before the competitors
Business Case “I can’t complete the Business Case accurately” This is not ready to be invested into then I can?t pin down my costs because I am iteratively developing my product.
AB Testing “I want to run a couple of experiments” Why is that? Is it going to cost more money? I want to know which value proposition resonates with the market.
Minimum Viable Product “What’s the minimum number of features I can release that customers will ‘pay’ for?” I like the way you are thinking. What is the minimum amount of resource we can use to generate the highest return in a product release.

If you would like to increase your financial literacy to be more effective in your role, Brainmates’ 2-Day Financial Fundamentals for Product Managers course improves Product professionals’ ability to understand and explain the key financial terms that underpin the product’s performance.

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