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It's often said that a Product Owner is a mini-CEO.

Let's say we are talking about a company that is developing a large, complex product. In this case there're usually more that one Product Owner, each of which is responsible for their own area of the product - a feature of the product, an area of the product.

How can we know what profits and losses are associated with this feature? How do we know how much this feature contributes to the revenue of the whole product? I don't suppose that financial systems used by most companes are able to track revenues, operating expencies at that level.

So do Product Features (which are owned by Product Owners) have their P&Ls? How do we know whether we should continue to develop the feature or not?

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  • What is P&L? Can you edit a link or explanation into your question? – Jan Doggen Feb 7 at 16:09
  • @JanDoggen: I believe it's "Profit & Loss" – Bogdan Feb 7 at 16:29
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This is fuzzy because any argument you could make about a particular feature you could make about a whole product. With rare exceptions, Profit and Loss for one product is at least influenced by the success or failure of other products and the company as a whole. Working with correlation is a large part of understanding P&L. The best way I could recommend looking at it is like bundled products. Let's take office. At some point, Microsoft has to look at P&L for Word, Excel, etc. But they sell it all together as Office. So all sales of the product (or most at least) are actually buying all of them. That doesn't mean they can't separate them. They can look at usage and surveys to get at least a rough idea of which of how much each application is contributing to driving sales. Further, major changes to one product or another can lead to changes in user behavior which can be tracked and correlated to P&L.

So applied to feature, the same ideas work. Users are buying a package of features, but they may buy it at different times. When a feature is released, do you a change in signups? account deletions? Do a lot of users start using that feature - if so, there's customer retention value there. The big problem with this that I encounter in most companies is not that you can't measure this or even that it is difficult. The problem I usually see if that people simply don't. I've worked with dozens of companies and can thing of 2 that actually measure P&L with any rigor or use any kind of modeling in planning. The fact is, a massive percentage of companies are driven completely on gut feeling and opinions.

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  • "Driving sales, or not," is not "Profit & Loss." For this term to be meaningful, there must be an actual possibility of financial loss. Every feature has an equal contribution to that because "every feature must work." – Mike Robinson Feb 8 at 15:32
  • To your point, it may be worthwhile noting that I can only actually provide P&L on a line of revenue, and even that only when I have very clean delineations, which can be rare. So I was trying to follow the spirit of the question, which, if I'm being precise, abuses the term a bit. – Daniel Feb 8 at 23:20
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I don't have experience of any situation where you could evaluate P&L on a feature-by-feature basis. I expect it depends on the nature of the product and features but if there are costs that are product-wide it seems unlikely that you could calculate a true P&L in the accounting sense for a given feature. ROI for creating or marketing a new feature would probably be a more realistic financial metric.

If your product is software then the benefits of particular features can be identified from clickstream analysis or similar usage metrics.

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Yes. Car and airplane manufacturers do it all the time. That's how they know when to modify or sunset a product's configuration or the entire line.

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  • How do they know how much a feature contributes to the revenue of the whole product? – Daniel Feb 8 at 17:29
  • I imagine it is pretty easy to determine how many products of a certain trim were sold over other products with different trims. I don't answer these questions in a very SW-centric way so I am thinking about the manner other products are configured and sold. SW may have other issues to resolve but I don't think they cannot be solved. – David Espina Feb 8 at 18:08
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How can we know what profits and losses are associated with this feature? How do we know how much this feature contributes to the revenue of the whole product?

This can be a challenge, but it is possible.

One approach I have seen taken is to do A-B testing with feature changes. The idea being to see what the impact on a business metric is of a feature improvement.

For example, a new product feature might show a 5% increase in customer renewals in an A-B test. That way we can justify the money invested in the feature development.

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