Solving Complex Problems and Driving Business Growth: Lessons from SmartNews and FreeMarkets

Solving Complex Problems and Driving Business Growth: Lessons from SmartNews and FreeMarkets

Introduction:
Problem-solving is a crucial aspect of any business, and successful product managers understand the importance of defining and addressing the right problems. In this article, we will explore the insights shared by SmartNews and FreeMarkets, two companies that highlight the significance of problem definition and its impact on business growth. We will delve into the responsibilities of product managers, the value of correctly defining problems, and the role of hypothesis testing in driving success. Additionally, we will discuss the missed opportunities of FreeMarkets and the implications it had on Ariba.

Defining the Right Problems:
SmartNews believes in solving one significant problem that can have a meaningful impact on business growth rather than attempting to solve multiple easy problems. The responsibility of product managers lies in defining the problems that, when solved, will drive business growth. By accurately defining problems and creating an environment where the team believes in the value of solving them, a positive spiral of progress can be initiated.

Hypothesis Testing and Problem Definition:
An effective method employed by SmartNews is hypothesis testing. By looking at the advertising industry in 2008 and hypothesizing how it would change in three months, the company tests its assumptions and adapts its strategies accordingly. This approach helps product managers gain insights into the evolving market landscape, enabling them to define problems more accurately and make informed decisions.

Communicating the Why, How, and What:
When conveying information, SmartNews emphasizes the importance of following the order of "Why, How, and What" in communication. By clearly articulating the purpose behind a problem, explaining the approach to solving it, and then discussing the solution itself, product managers can ensure effective communication and alignment within the team. This approach fosters a shared understanding and commitment to solving the defined problems.

The FreeMarkets Legacy and Missed Opportunities:
FreeMarkets, initially positioned as a B2B/Internet play for Wall Street, experienced success by optimizing offline sourcing processes and introducing competitive reverse auctions online. However, the company failed to transform its success into a sustainable enterprise software or SaaS business model. Despite its real demand in the market, FreeMarkets' sourcing platform accounted for less than 10% of its revenues. This missed opportunity allowed Ariba to acquire FreeMarkets at a relatively low cost, benefiting from its shared-services center and customer-facing executives.

Actionable Advice:

1. Focus on solving one significant problem: Rather than attempting to solve multiple easy problems, concentrate on defining and addressing one problem that can have a substantial impact on business growth. Prioritize and allocate resources accordingly.

2. Embrace hypothesis testing: Continuously monitor the market landscape and develop hypotheses about how it will evolve. Test these assumptions and adapt strategies accordingly to ensure the accurate definition of problems.

3. Communicate effectively: When conveying information, follow the order of "Why, How, and What." Clearly articulate the purpose behind a problem, explain the approach to solving it, and then discuss the solution itself. Foster a shared understanding and commitment within the team.

Conclusion:
SmartNews and FreeMarkets provide valuable insights into problem-solving and its impact on business growth. By correctly defining problems, product managers can drive progress and effectively allocate resources. Hypothesis testing and effective communication further enhance problem-solving capabilities. However, FreeMarkets' missed opportunity highlights the importance of transforming success into sustainable business models. By incorporating these lessons and taking actionable steps, product managers can navigate complex problems and drive meaningful growth in their organizations.