There are many specialties within the vast world of product management. The type of product manager that an organization is looking for will depend on a myriad of factors such as the product type (software, hardware), business model (SaaS, PaaS, IaaS), industry (fintech, healthcare, etc), or the maturity of the organization (start-up, growth, enterprise) to name a few. A lesser-known, but significant difference in product management is the difference between an internal and external product manager.
An internal product manager builds tools and services to solve problems internal to an organization and is focused on customer enablement. They are also referred to as non-revenue product managers because the products they build are typically not sold directly to the general market.
But what does this mean in terms of the roles and responsibilities? While both internal and external product managers plan and execute strategic initiatives for their organization, there are a number of key differences that might make one a better fit for your skills and interests.
Understanding the role of an Internal Product Manager
The best way to understand the role of an internal product manager is with an example.
Let’s imagine that you ordered a new bike off of Amazon.com. How did it happen? A typical flow might look something like this:
- Open the Amazon mobile app
- Search for bikes
- Filter by reviews and price
Now, if you’re curious like me, you may start asking questions like…how did Amazon decide which warehouse it should be sent from, who will package it, or when it will actually be delivered? Well, that’s where an Internal Product Manager comes in!
Amazon has internal tools that can determine which fulfillment center a certain product should be sent from (in fact, they can even predict what products will be popular in a given area and prepare appropriately), and how they will be sorted, packaged, and shipped in order to maximize productivity and revenue. There are also the tools that Amazon drivers use in order to know which package should be delivered to which customer. All of these tools and services that support the end customer experience are built and managed by the internal product team.
Internal product management isn’t limited to any specific product or service. In fact, they are everywhere. Some examples of internal products include:
- Customer Relationship Management (CRM)
- Accounting Systems
- Human Resource Information Systems
- Warehouse Management System
- Facility Management System
- Internal Messaging Tools
- Enterprise Resource Planning
- Business Intelligence
- Monitoring and Flagging Tools
- Security Tools
While it is true that most companies will choose to buy 3rd party software for their needs, depending on the industry and/or maturity of the organization, they may need something more specialized or secure. This is when companies decide to invest the time and resources to build a proprietary software that can do the job better than what is available in the market.
One common mistake people make about internal products is that it somehow operates in an isolated environment, where it is completely separated from the end-user experience. As seen in the example above, an accident in an internal product can have very real negative consequences to the end-user experience. Imagine if Amazon’s internal system decided to ship your bike from a warehouse on the other side of the country. It most likely won’t arrive on time. Alternatively, a great internal product can translate to a delightful end-user experience.
What is the difference between an internal and external product manager?
It’s important to note that the fundamentals of product management are common to both internal and external product managers. Both seek to solve the right problems, set the vision, and determine the priorities. They also both look to the customer for insight and identify the fastest and simplest way to bring value.
The differences between the two can be seen in the details of their respective worlds.
|Internal PM||External PM|
|Value||Customer-enabling||Solving customer problems|
|Users||Partners, colleagues, other department/employees||Customers to the organization|
|Metrics||Focused on savings and optimization (time saved, the value captured, etc)||Customer-driven metrics (retention, customer lifetime value, etc)|
|Resources||Typically more limited||Better funded (usually)|
One side note is that the differences above are not absolute rules, but rather observations made from personal experience. Let’s talk about each point a bit deeper.
How is the value delivered?
|Internal||Because these products are not seen by the end customer, the value is given primarily by enabling the company to successfully deliver value to the customer.|
|External||The customer is directly interacting with the product, so the value is derived from solving their problems and offering a delightful experience.|
Who are the main users?
|Internal||Other employees of your company, partners, or contractors.|
|External||The customers to the organization.|
What metrics get used?
|Internal||Internal products are not being sold to drive revenue growth, but key metrics often include reducing costs, optimizing processes, improving security, and enabling internal capabilities that result in customer/revenue growth.|
|External||Key metrics are often centered around customer satisfaction, growth or total revenue.|
How is resource funding different?
|Internal||While it shouldn’t be the case, oftentimes the user experience of internal products is less over functional requirements. Because it doesn’t have a direct customer impact, business justification for more resources is often harder to come by.|
|External||The external products are the best experience the company can provide, so more resources are put in for design, prototyping, QA, and maintenance. Business justification is easier to make since the impact can be measured more directly.|
Is Internal Product Management For Me?
It is often hard to judge what the experience would be like for a new product manager joining an internal team. Not only are the actual products often hidden, but the actual experience depends highly on the company culture, industry, and maturity. However, looking at the unique opportunities and challenges may help you determine if it is the right path for you.
Opportunities for Internal Product Manager:
- Easier access to your end users (literally a zoom call or a floor away)
- More intimate knowledge of user needs and goals
- Easier to work on patentable products and services
- Greater visibility to key internal stakeholders
Challenges of an Internal Product Manager:
- Resources are more scarce
- May need to deal with office politics
- Lack of recognition and visibility of the work
While each of these requires an entire blog post to fully describe, at the end of the day, I think the best way to decide if an internal product role is best for you is to look at the company. Is this a company whose values align with yours? Did you enjoy the people you’ve met along the way? Do the industry, products, and services they offer excite you? If the answer to these is yes, I would say go for it- and you might find that it really is a better fit for you.
The role of the internal product manager is extremely fulfilling for many and there is a great feeling in knowing that the products and services you build are helping the people you work with each day. And while there are key differences between an internal and external product manager, the fundamentals of product management do not change. If there is an opportunity you are hesitant about, look at the company first. If the values and products of the company align with yours, it just might be the place where you have your next journey.