Commercial vs Internal Products
Internal Products Are Hard; Commercial Products Are Harder
We have spent a lot of time trying to convince product people and especially product leaders of the importance of internal products.
We’re talking about services or solutions that are used by our own employees to take care of our customers (e.g. customer-enabling tools and services), or to help our employees do their jobs (e.g. productivity tools), or back-end or lower-level services that power much of the business (e.g. internal platform services).1
While it’s true that the direct user of these types of services is not normally a paying customer, our argument has always been that these all contribute to the products and services that we offer our paying customers, and there is more to be gained by treating these as true products, than to treat them as some form of second-class efforts.
We emphasize that there are all the same risks: value, usability, feasibility and viability, but we do acknowledge that the bar is typically lower than with commercial products.
For example, value is easier as the user does not have the choice of using something from a competitor; the usability bar is lower because we can often get away with some training or documentation for our users; feasibility is typically easier because scale and performance demands are usually minor compared to external products; and viability is usually simpler because the tool or service generally operates in a narrow part of the business, largely insulated from the external world.
This is not to suggest that these tools or services are easy; it’s just to acknowledge that the bar is usually lower than a commercial product.
Most people seem to understand this. However, what’s far less understood is just how much more difficult it usually is to discover a winning commercial product.
So in this article we want to call out the essential differences between commercial products and internal services, and talk about why product discovery is so critical for commercial products.
Most importantly, with an internal product, the user really can’t choose a different product. 2 The company is literally paying them to use these products.
Yet with a commercial product, this dynamic is reversed. We have to compete and win against other competitors (and with AI, these competitors are emerging faster than ever). The product needs to be so good that our customers will pay us for the value.
With an internal product, what matters is that your product is able to successfully solve the problem (i.e. complete the job-to-be-done).
Yet with a commercial product, it’s normally not enough to solve the problem; the product must be so much better than the alternatives (at least for a segment of customers), that they will be willing to switch from whatever solution they use today to your product.
With an internal product, the product manager does need to understand the domain and the relevant business constraints, but the idea of that person being “the ceo of the product” makes little sense to people, and just sounds tone-deaf and arrogant.
Yet with a commercial product, battling every day to win in an increasingly competitive marketplace, the product manager must be personally and deeply immersed with the marketing, sales, funding, monetization, legal, compliance and more, and the role of the product manager starts to be seen in a very different light.
While we often talk about the importance of various product discovery techniques and principles, we don’t talk enough about the nature and intensity of the battle to win.
So many people with the title “product manager” (and virtually everyone with the title “product owner”) have never been to battle in the open marketplace.
It is hard enough to take ownership of an outcome for an internal product where you control most of the variables. It is next level hard to take ownership of an outcome for a commercial product, which has to win against a rapidly growing list of competitors before it has the chance to deliver real business results.
What is increasingly clear is that for a commercial product, especially in the AI era, product discovery is usually the difference between success and failure.
Again, none of this is to say that building internal services is easy or unimportant; it’s simply to highlight that building commercial products is even more difficult, and it’s not an exaggeration to say that the success of the business depends on the success of these commercial products.
While I still believe that there is much to be gained by treating internal tools and services as products, I think we need to do a much better job of discussing the unique and substantial challenges of building commercial products that need to survive and thrive in the open marketplace.
If you are a product manager of a commercial product, it’s critical that you realize that it’s not enough to solve the problem; in order to generate the necessary outcome you’ll need to win in the marketplace. And to do that, you will need to use all of your product discovery skills.
- What this typically does not include is Traditional IT. ↩︎
- Increasingly, internal users are free to vibe-code their own internal tools, so this is a form of competition. But in-house solutions “competing” against various forms of low-code or no-code solutions has been common for many years. Moreover, ideally this frees up more people to focus on the company’s commercial products.
↩︎