When creating products, we often focus on the tools and applications that serve external customers. However, a crucial yet frequently overlooked aspect of product management is creating and optimizing internal products—digital solutions designed to enhance the efficiency and effectiveness of an organization's workforce. This practice, known as internal product management, is becoming increasingly common, especially in large enterprise organizations.

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Internal product management encompasses the development, implementation, and continuous improvement of digital tools and platforms used by employees within an organization. These products can range from custom-built software applications to tailored implementations of third-party solutions, all aimed at streamlining workflows, improving communication, and boosting overall productivity.

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The rise of internal product management reflects a growing recognition that employees, much like external customers, benefit from well-designed, user-centric digital experiences. These products support day-to-day operations and play a crucial role in driving innovation, facilitating knowledge sharing, and enabling data-informed decision-making across all company levels.

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This essay will explore its unique challenges and opportunities, examine best practices for success, and consider how this emerging field reshapes how organizations approach their digital transformation efforts.

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Let’s dive in…

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Understanding the Scope

Unlike external products with a clearly defined target market, internal products serve a diverse array of employees, each with its own unique needs and challenges. This complexity requires a nuanced approach to product development and management.

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Identifying internal customers is the first crucial step in defining the scope of your internal product. As Vanathy Lakshmi highlighted in her talk at INDUSTRY: The Product Conference, internal customers can span from frontline workers to C-suite executives, each requiring tailored solutions. For example, Walmart's internal product team serves merchants who make decisions for thousands of stores across the United States. These merchants have varied needs based on their specific roles, whether dealing with food, consumables, or general merchandise. This diversity of users within a single organization underscores the importance of thorough customer research and segmentation in internal product management.

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Dealing with complexity and scale is often a significant challenge, especially in large organizations. When working with a vast and diverse customer base, looking for patterns and commonalities is essential to avoid building separate tools for each business unit. This approach helps manage the scope and ensures scalable and efficient solutions. For instance, Lakshmi's team at Walmart discovered unexpected correlations in shopping patterns across different departments, which allowed them to develop more unified solutions.

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One innovative way to handle this complexity is using goal-based personas. Unlike traditional user personas that focus on demographic information, goal-based personas center around the objectives and tasks that different groups of employees need to accomplish. Lakshmi shared how her team developed personas like "Malcolm" (representing predictable, replenishable products) and "Dilbert" (representing unpredictable, reactive products) to help categorize and address diverse needs across the organization.

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These goal-based personas serve multiple purposes:

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1. They help product teams understand and prioritize the needs of different internal customer groups.
2. They provide a framework for developing solutions that can be applied across various departments or roles with similar goals.
3. They facilitate stakeholder communication by offering a common language to discuss product features and priorities.

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By using this approach, internal product managers can more effectively scope their products, ensuring they address the core needs of their diverse internal customer base while managing the complexity inherent in large-scale organizations.

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Another aspect of understanding the scope of internal product management is recognizing the unique challenges of building products for employees. As Hannah Berger mentioned in her talk at the New York Product Conference, internal products often need to address specific pain points in employee workflows, such as onboarding processes. Internal product managers can create solutions that significantly impact employee productivity and satisfaction by focusing on these critical touchpoints.

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The scope of internal product management extends beyond just creating tools. It also involves fostering a product mindset within traditionally non-product areas of the organization. This might mean working closely with HR, IT, and other departments to help them approach their challenges from a product perspective. By doing so, internal product managers can drive innovation and efficiency across the organization.

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Understanding the scope also involves recognizing the potential impact of internal products on the organization's bottom line. Well-designed internal tools can lead to significant cost savings through improved employee productivity and reduced turnover. For instance, a streamlined onboarding process can save millions of dollars in recruiting and retention costs, especially for large organizations.

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It's important to note that the scope of internal product management is dynamic. As organizations evolve and new technologies emerge, the needs of internal customers will change. Successful internal product managers must remain adaptable, continuously reassessing the scope of their products and the needs of their users.

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Key Differences Between External and Internal Product Management

While external and internal product management share many core principles, significant differences set them apart. Understanding these distinctions is crucial for product managers transitioning to internal products or organizations looking to optimize their internal tools.

Customer Focus: Employees vs. External Users

The most apparent difference lies in the customer base. External product managers typically cater to a broad market of potential users, while internal product managers focus exclusively on employees within their organization. This shift in focus brings unique challenges and opportunities.

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Internal customers often have more complex and diverse needs within a single organization. This complexity requires a deep understanding of different roles and workflows within the company. Internal users also often need more choice in the tools they use. Unlike external customers who can switch to a competitor's product, employees are typically required to use the internal tools provided. This captive audience dynamic places a greater responsibility on internal product managers to ensure their products meet user needs and enhance productivity.

Alignment with Business Objectives

Internal product management is tightly coupled with overall business objectives. While external products aim to generate revenue directly, internal products focus on improving operational efficiency, reducing costs, and supporting the company's strategic goals.

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For example, Hannah Berger's talk at the New York Product Conference highlighted how improving the onboarding experience through internal tools can significantly impact employee retention and productivity. At Walmart, they found that 20% of employee turnover occurs within the first 90 days. By creating a pre-boarding site to address new hire anxieties and questions, they were able to improve retention and save millions in recruiting and training costs. (More on this later in this essay!)

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This alignment with business objectives often requires internal product managers to work closely with various departments and stakeholders. They need to understand user needs and how these needs relate to broader organizational goals and metrics.

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Internal product managers face several challenges that are less common in external product management:

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1. Limited Resources: Internal products often compete for resources with revenue-generating external products. This can lead to budget, development resources, and executive attention constraints.

2. Stakeholder Management: Internal product managers must navigate complex organizational structures and politics. They must balance end-users' needs with the demands of executives and other stakeholders, who may have conflicting priorities.

3. Measuring Success: Defining and measuring success for internal products can be more challenging. While external products often have clear metrics like revenue or user growth, internal products may require more nuanced success criteria

4. Feature Sprawl: Nat Brown of Pendo contends that internal products are particularly susceptible to feature sprawl. Over time, as business needs change and new requests come in, internal tools can become bloated with underused features. Internal product managers need to be vigilant in monitoring feature usage and be willing to sunset or improve underperforming features.

5. Adoption Challenges: Encouraging the adoption of new internal tools can be difficult, especially in large organizations with established workflows. Internal product managers need to focus on change management and user education alongside product development.

6. Security and Compliance: Internal products often deal with sensitive company data, requiring strict adherence to security protocols and compliance standards. This can add complexity to the development and deployment process.

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Despite these challenges, internal product management offers unique opportunities for impact. By improving internal processes and tools, product managers can improve efficiency and employee satisfaction across the entire organization.

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For instance, JLL, as mentioned by Nat Brown, used analytics to identify underused features in their internal MarketSphere app. By updating and sunsetting certain features based on usage data, they were able to improve the app experience and saw a 30-point increase in NPS score.

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While internal product management shares foundational principles with its external counterpart, it requires a distinct approach. Success in this field demands a deep understanding of organizational dynamics, a focus on operational efficiency, and navigating complex stakeholder relationships.

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Building a Culture for Internal Product Management

Creating a thriving internal product management culture is crucial for organizations looking to maximize the value of their internal tools and processes. This culture shift involves more than just implementing new technologies; it requires a fundamental change in how teams think about and approach their work.

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One of the key aspects of building an effective internal product management culture is structuring teams in a way that promotes collaboration and innovation. Vanathy Lakshmi emphasized the importance of having both "I-shaped" and "T-shaped" product managers on the team. I-shaped product managers are specialists who go deep into specific problem areas, while T-shaped product managers have a broader understanding of the entire product lifecycle. By combining these two types of expertise, teams can ensure both depth in solving complex problems and breadth in understanding how different components of the internal product ecosystem interact.

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Lakshmi described how her team at Walmart included a distinguished product manager, Tina, who focused on aligning the vision across different product areas. This T-shaped role helped ensure that individual product initiatives fit the organization's broader strategic goals. This approach to team structure facilitates a more holistic view of internal product management, enabling teams to tackle complex challenges while maintaining a clear vision of the overall product strategy.

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Internal product management requires close collaboration with various departments across the organization. Unlike external products, which a more isolated team might develop, internal tools often need input and buy-in from multiple stakeholders. Hannah Berger's experience at Walmart illustrates this point well. When creating their pre-boarding site for new hires, Berger's team had to work closely with HR, IT, and various business units to ensure the tool met the needs of all parties involved. This cross-functional collaboration was vital to creating a solution that improved the onboarding experience.

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To foster this collaboration, internal product managers should establish regular cross-functional meetings to align goals and priorities, create shared documentation and communication channels for easy information exchange, and encourage job shadowing or rotations to help team members understand different perspectives. These practices help break down silos and promote a more integrated approach to internal product development.

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One of the unique challenges – and opportunities – in internal product management is encouraging a product mindset in areas of the organization that may not traditionally think in these terms. This might include HR, finance, or operations teams. Nat Brown touches on this concept when discussing the importance of tracking metrics like workflow productivity. Organizations can drive efficiency and innovation across the board by introducing these product management concepts to other departments.

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For instance, an HR team might start thinking about their processes regarding user journeys, or a finance department might begin using data analytics to optimize their internal reporting tools. This shift in mindset can significantly improve how these departments operate and interact with the rest of the organization. To encourage this product mindset, organizations can offer training sessions on basic product management concepts to non-product teams, invite members of other departments to product planning and review sessions, and showcase successful internal product initiatives to demonstrate the value of this approach.

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Building a culture of internal product management has its challenges. It’s not uncommon to see resistance to change, siloed thinking, and a lack of understanding about the value of adopting a product mindset. To address these challenges, it's crucial to emphasize the benefits of internal products, start with small pilot projects to demonstrate success, and celebrate wins by highlighting successful internal product launches and their impact on the organization.

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As described by both Lakshmi and Berger, Walmart's approach exemplifies these strategies. They started with specific areas like merchant tools and onboarding, demonstrated success, and expanded their internal product management approach more broadly. This gradual, success-driven approach can help overcome resistance and build momentum for cultural change.

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To ensure that the culture shift is effective, measuring its impact is essential. This can be done in many ways – including through employee satisfaction surveys, adoption rates of new internal tools, and productivity metrics. By focusing on these areas, organizations can build a strong culture of internal product management that drives innovation, improves efficiency, and ultimately contributes to the company's overall success. As internal tools become increasingly critical to business operations, cultivating this culture will be essential for staying competitive in the modern business landscape.

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Communication Strategies for Internal Product Managers

Effective communication is crucial for internal product managers navigating complex organizational structures and diverse stakeholder needs. Unlike external product managers who often communicate with a more homogeneous audience, internal product managers must tailor their messages to a wide range of internal stakeholders, from frontline employees to C-suite executives.

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Stakeholder mapping and prioritization are critical first steps in developing a robust communication strategy. Vanathy Lakshmi shared an innovative approach to this challenge. She introduced a quadrant-based stakeholder mapping system, categorizing stakeholders into four animal-themed groups: deer, monkeys, elephants, and lions. This creative approach helps internal product managers prioritize their communication efforts and tailor their messages appropriately.

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The "deer" and "monkeys" represent lower-priority stakeholders who can be addressed through mass communication channels. These include employees whose roles are being automated or those who don't directly impact the product's development. Product managers can efficiently communicate updates by identifying these groups without wasting time and resources.

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n the other hand, "elephants" and "lions" represent high-priority stakeholders who require more personalized and frequent communication. "Elephants" might include strategic business partners and cross-functional team members directly involved in the product's development. These stakeholders often benefit from structured weekly roadmap meetings and close collaboration.

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The "lions," as Lakshmi colorfully described, are those whose "roars are the biggest" - typically senior executives and key decision-makers. While their inputs don't always dictate product direction, keeping them informed and aligned with the product vision is crucial. This might involve regular briefings, executive summaries, and strategic discussions that tie product initiatives to broader business goals.

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Tailoring communication to different audiences is about frequency, content, and format. For technical teams, detailed specifications and data-driven presentations might be appropriate. For business stakeholders, high-level overviews focusing on business impact and ROI are often more effective. Executive stakeholders prefer brief, action-oriented updates highlighting critical decisions and strategic implications.

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​Hannah Berger underscored the importance of tailored communication. When developing their pre-boarding site, Berger's team had to communicate effectively with various departments, including HR, IT, and individual business units. Each group had different concerns and priorities, requiring a nuanced communication approach to ensure buy-in and collaboration.

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Storytelling and vision sharing can be powerful tools in an internal product manager's communication arsenal. Product managers can inspire enthusiasm and drive adoption across the organization by crafting a compelling narrative around the product's purpose and potential impact. This is particularly important for internal products, where users might be resistant to change or skeptical of new tools.

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For example, when introducing a new internal tool, rather than simply listing features, an effective product manager might share a story about how the tool will transform a typical workday, making tasks more accessible and more efficient. This approach helps stakeholders visualize the benefits and can generate excitement about the upcoming changes.

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Visual aids can significantly enhance communication effectiveness. Roadmaps, wireframes, and prototypes can help stakeholders understand the product vision and planned features better. Tools like airfocus, mentioned in the provided resources, can be valuable for creating and sharing these visual representations of product strategy and progress.

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Regular updates and transparency are also critical components of a successful communication strategy. This might include weekly or bi-weekly newsletters, internal blog posts, or even a dedicated internal product dashboard where employees can track the progress of various initiatives. By maintaining open lines of communication, product managers can build trust, gather ongoing feedback, and ensure that stakeholders feel involved in the product development process.

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It's also important to create channels for two-way communication. This could involve regular feedback sessions, user testing groups, or digital suggestion boxes where employees can share ideas and concerns. By actively soliciting and responding to feedback, internal product managers can demonstrate that they value employee input and are committed to creating tools that meet user needs.

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Lastly, celebrating successes and sharing lessons learned should be an integral part of the communication strategy. When a new feature launches successfully or a product milestone is reached, communicating these wins across the organization can boost morale and reinforce the value of the internal product management function. Similarly, transparency about challenges and how they're being addressed can build credibility and trust.

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By implementing these communication strategies, internal product managers can more effectively navigate the complexities of their role. They can ensure that all stakeholders are aligned, engaged, and supportive of the product vision, ultimately leading to more successful internal products and a more efficient, innovative organization.

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Key Performance Indicators (KPIs) for Internal Products

Measuring the success of internal products is crucial for demonstrating value, guiding development efforts, and securing ongoing stakeholder support. Unlike external products, where metrics like revenue and market share are often clear indicators of success, internal products require a more nuanced approach to performance measurement.

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​Nat Brown of Pendo shared several key performance indicators (KPIs) that internal product managers should consider tracking. Brown pointed out that application adoption remains a fundamental KPI for internal products. This metric is often expressed as monthly active users (MAU), weekly active users (WAU), or daily active users (DAU). It provides insight into how many employees actively engage with the internal product. However, it's important to note that in the context of internal products, where usage may be mandatory, adoption rates should be considered alongside other metrics to get a complete picture of product success.

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Workflow productivity is another critical KPI that directly ties internal product performance to business outcomes. This metric measures the time it takes for employees to complete critical workflows using the internal product. Improvements in workflow productivity can translate to significant time and cost savings for the organization. For example, a new internal tool reduces the time it takes to process a customer order by 20%. In that case, that efficiency gain can substantially impact the company's overall performance.

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Employee Net Promoter Score (eNPS) offers valuable insights into user satisfaction and the likelihood of employees recommending the product to colleagues. While NPS is commonly used for external products, it can be equally useful for internal tools when adequately segmented. For instance, scores from power users or employees in critical roles might be weighted more heavily.

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Task completion rate is a KPI that measures the percentage of users who complete a specific task or workflow within the internal product. This metric can help identify areas where users might be struggling or where the product could be improved to increase efficiency.

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Time to proficiency is particularly relevant for internal products requiring training or onboarding. This KPI measures how long it takes a new user to become proficient with the tool. A decrease in time to proficiency can indicate improvements in the product's usability or the effectiveness of associated training materials.

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Error rates can be a crucial KPI for internal products, especially those used in critical business processes. By tracking the frequency and type of errors, product managers can identify areas for improvement and potentially prevent costly mistakes.

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Lastly, return on investment (ROI) is a high-level KPI that attempts to quantify the overall value of the internal product to the organization. This might involve calculating time saved, reduced errors, or other efficiency gains and translating these into monetary values.

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While these KPIs provide a solid foundation for measuring internal product performance, tailoring metrics to each product's specific goals and context is essential. It’s critical to set clear baselines and realistic targets. This allows for meaningful measurement of improvement over time. That said, while numbers provide concrete data, qualitative feedback from users can offer valuable insights into the user experience and potential areas for improvement.

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It's also important to regularly review and adjust KPIs as the product and organization evolve. What's critical to measure in the early stages of an internal product's lifecycle may change as the product matures or business priorities shift. For example, adoption rates might be a primary focus in the early stages. Later, the emphasis might shift to more nuanced metrics around specific feature usage or workflow improvements.

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This data-driven approach to internal product management aligns well with broader business objectives, helping to secure resources and support for ongoing product development efforts.

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Case Study: Improving the Onboarding Experience

To illustrate the principles and practices of internal product management in action, let's examine a real-world case study focused on improving the employee onboarding experience. This example, drawn from Hannah Berger's presentation at the New York Product Conference, showcases how Walmart applied product management techniques to address a critical internal challenge.

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With over 2.3 million employees globally, Walmart faced a significant challenge in effectively onboarding new hires. Working on the product team for people experience at Walmart, Berger recognized that onboarding was a crucial touchpoint in the employee lifecycle. The team identified a startling statistic: 20% of employee turnover occurred within the first 90 days of employment. This high early turnover rate was costly regarding recruitment and training expenses and indicated a deeper issue with the initial employee experience.

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The first step in addressing this challenge was identifying the onboarding process's pain points. Berger's team employed classic product management techniques, including user research and data analysis. They attended new hire orientations, sent out surveys, and collected feedback from recent hires. This comprehensive approach allowed them to gather insights directly from their "customers"—in this case, the new employees.

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Through this research, several key themes emerged. New hires sought information before their first day on topics such as office logistics, company culture, benefits, and even seemingly minor details like where to get lunch. The anxiety and uncertainty surrounding these questions contributed to a suboptimal onboarding experience and potentially influenced early turnover rates.

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With these insights, Berger's team created a pre-boarding site. This internal product was designed to address the identified pain points by providing new hires with crucial information before their first day. The site included details about office locations, company culture, benefits enrollment, and other frequently asked questions.

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The development of this pre-boarding site exemplifies several vital principles of internal product management:

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1. User-Centric Design: The site was built based on direct feedback from new hires, addressing their specific needs and concerns.
2. Cross-Functional Collaboration: Creating the site required cooperation between multiple departments, including HR, IT, and various business units.
3. Iterative Development: The team initially launched the site for two locations and then gathered feedback to refine and improve the content before expanding to other places.
4. Scalability: To make the solution scalable across Walmart's vast organization, the team created a template using Adobe Experience Manager. This allowed other locations to add specific content and images easily, facilitating a consistent yet customized experience across different offices.

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The pre-boarding site is an excellent example of how internal product management can address complex organizational challenges. By applying product management principles to an internal process, Walmart created a solution that improved the employee experience from the very beginning of their journey with the company.

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Measuring the impact of this internal product was crucial. While Berger didn't provide specific numbers in her talk, she emphasized the potential for significant cost savings. For a company of Walmart's size, even a tiny improvement in early employee retention could translate to millions of dollars saved in recruiting and training costs. Moreover, by providing a better onboarding experience, the company could see improvements in employee engagement and productivity right from the start.

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This case study also highlights the importance of considering the entire user journey in internal product management. By focusing on the pre-boarding phase, Walmart addressed a critical gap in the employee experience that occurred even before the first day of work. This holistic approach to the user journey is a key principle of effective product management for internal or external products.

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The Walmart case demonstrates how internal product management can drive innovation within traditional corporate functions like HR. By applying a product mindset to HR processes, Berger's team created a digital solution that transformed a crucial aspect of the employee experience.

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The success of this project likely had ripple effects beyond just improving onboarding. It demonstrated the value of applying product management principles to internal challenges, potentially opening the door for similar approaches in other areas of the organization. This success can help build a culture of internal product management, where teams across the organization start to think about their work regarding user needs, iterative development, and measurable outcomes.

Summing it all up

As explored throughout this essay, internal product management is a critical yet often overlooked aspect of organizational success. The growing importance of this field reflects the increasing recognition that employees, like external customers, benefit significantly from well-designed, user-centric digital experiences.

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Two key takeaways stand out:

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1. Internal product management requires a unique blend of skills, combining traditional product management techniques with a deep understanding of organizational dynamics and stakeholder management.
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2. The impact of effective internal products extends far beyond mere efficiency gains. They can potentially transform employee experiences, drive innovation, and contribute significantly to a company's bottom line.

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For product managers, the call to action is clear: embrace the challenges and opportunities presented by internal product management. Whether you're currently focused on external products or are new to product management, consider how your skills could improve internal tools and processes within your organization.

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Start by identifying pain points in your company's internal workflows. Engage with colleagues across different departments to understand their needs and challenges. Apply the user-centric design principles and data-driven decision-making approaches you've honed in external product management to these internal challenges.

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Remember, the following great product you build might not be for external customers but for the colleagues sitting next to you. By focusing on internal product management, you can create a lasting, meaningful impact within your organization, improving the daily work lives of your colleagues and contributing to your company's overall success. And who knows – maybe one day, that internal product you’ve built will extend outside of your organization and turn into the next big software platform that others use as well – as was the case with Basecamp for the team at 37Signals! But even if your product stays internal, know that you have an opportunity to make a giant impact.

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