Companies are acquired on a daily basis and many startups raise money to try and solve people’s problems. I’m sure that if you’ve started to read this article you’re probably familiar with the concept of “due diligence”.

There are all kinds of things people take into consideration when conducting an audit. But what about product due diligence? What are the crucial indicators of a product or service?

In this article, I’ll take you on a deep dive into conducting product due diligence.

We’ll be looking at these 4 key aspects:

1. The Product Team & processes
2. The product vision, strategy, roadmap, & status quo
3. Engineering Team & processes
4. Organizational structure & collaboration with the Product Team

Whether you want to invest in/acquire a company or join a company as a leader, this article might be insightful for you.

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1. The Product Team Due Diligence

The success of a product depends on the team building it! Evaluating a Product Team isn’t easy though. For Product Leads, it’s important to focus on the strategy and how to empower the team. The Product Managers work closely with their teams and own their product/business domain. Either way, I always check to ensure the whole team works together and understands “their craft.”

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Product Team Organization & Communication

Many organizations and teams struggle with prioritizing. The reason why is very simple: They miss strategic alignment. That’s why I always check the communication and processes of the Product Team and try to understand:

• How often and in which ways do they communicate?
  • E.g. Do they have a weekly/bi-weekly strategy/priority meeting?
• What does the product discovery process look like?
• How do they plan and build products? (process evaluation)
  • How do they collect and evaluate data?
  • Do they understand their customer’s problems?
    • Where is this documented?
• What practices and methodologies do they follow and work with?
  • Why are they using those?

Note: This list isn’t complete and there are more points to be looked at. Product Management is the foundation of any organization. Making it not only complicated but complex and requires a lot of attention to detail.

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The CPO/Product Lead Role is Crucial for Your Due Diligence

In some companies, the CEO or CTO is the CPO at the same time. I believe that works for companies of a certain size. The moment the product & engineering org grows beyond a maximum of 40 people, I highly recommend handing over the product responsibilities to a full-time position.

As mentioned, it’s mandatory for a Product Leader to focus on the strategy and to make sure they empower and coach their Product Team. There are some key questions to be asked here:

• Do they know the strategy inside and out?
  • Do they understand the market and business domain?
  • When was the product strategy last updated?
  • More strategy questions are covered in point 2. The product vision & strategy
• What’s their leadership style?
  • Are they good communicators & coaches?
  • Do they hold regular 1:1s with team members?
• How are they seen by their team and the rest of the company?
• Does the Product Lead have a track record as a Product Manager?

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Product Manager's Skillset

The role of a Product Manager varies from company to company. However, there are some underlying patterns when it comes to their responsibilities and skills. Some PMs work closely with their teams (also called Product Owners) while others are more focused on understanding the market and the business side of things. Some PMs focus on both. It’s important to identify what key skills a PM has and also what they prefer to focus on the most.

Besides that, a PM needs to understand the domain, and market and always needs to know who their customers are and what they want/struggle with.

Next to their strengths, I take a look into their backlogs, roadmaps, strategies, and other documents they are working with.

• What strengths and weaknesses do the individuals have? (technical, business, data, market, research, etc.)
• How do they plan, roll out, and announce feature releases?
• What’s the quality of their backlog(s), epics, and user stories?
  • Does the backlog reflect the current business goals, strategy, roadmap, etc.?
  • Do they clearly highlight the customer & business value?
• Do they work with an e.g. agile framework?
• How do they collect customer feedback?
  • Where is the feedback stored (tool)
• How do they collect stakeholder feedback?

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Product Design Due Diligence

Overall, it’s worth writing a separate design due diligence article. However, Product Management and Design belong together. Part of the evaluation is to figure out how Design Teams work and how they integrate into the Product and engineering organization.

• What does the design org chart look like?
  • Does design have a seat at the leadership table?
• Do they understand their users/personas?
  • Who are the users/personas?
  • Do they hold user interviews & how often?
• What are their design guidelines?
  • Do they use a design system?
  • How do they collaborate with branding/marketing?

There have been too many occasions where I’ve seen these two teams divided and working independently of one another. That’s mainly a sign of missing communication and alignment.

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2. Product, Vision, & Strategy Due Diligence

Obviously, the product or service itself needs to be validated. Not only by looking at the competition or talking to the Product Team. There are certain questions that need to be asked. Does the product have the potential to:

• solve (even more) problems?
• scale & grow faster?
• find a market fit?
• become profitable (if it isn’t already)?
• be used & sold in the future?

I wrote two detailed articles to highlight how to best define a product vision. Both are the core of building great products. Unfortunately, I still see many companies that work without them. That’s why I help teams in the definition process to make sure they align on what’s most important.

👉 If you want to go one level deeper and challenge the product vision definition process to its bones I recommend this article about the vision-based product strategy!

While checking an existing vision and strategy I check things like:

• What are the current products & services?
• What problem does it solve & for whom?
• What’s the pricing model?
• How does it perform?
  • Check: KPIs, Sales, P&L, CAC, NPS, etc.
• What’s the product vision & why?
• What does the product strategy look like?
  • Timeframe, market research, competition, calculations, etc.?
• What is the roadmap for the upcoming months?
  • What are the biggest unknowns and uncertainties?
  • When was the last product/feature launch?

It’s not only important to check if a product vision and product strategy exist. I always check if people use them in their day-to-day business and decision-making. The best visions and strategies are worth nothing if no one follows them.

In great product organizations, these points will be answered and defined by the Product Leader and his/her Product Team together.

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3. Engineering Team & Processes Due Diligence

The Engineering Team structure and development processes have a big impact on the product, as well as the Product Team. Based on the team setup and frameworks being used I’m able to derive how they work and function together.

• Which (agile) frameworks/methodologies do they work with?
  • What does the team structure look like?
• How often do they ship to production?
  • What's the average feature & deployment lead time?
  • What’s the average velocity/throughput?
  • Which environments do they deploy features under?
• How do they QA the product?
  • What’s the test coverage?
• How do they handle incidents?
  • What are the SLA’s & SLO’s?
  • Do they have an on-call rotation?

I believe it’s very important to understand how the collaboration between product and engineering works. Therefore, I figure out if they work as a team and have a good relationship. An Engineering Team that clearly understands the problems they face will find and build greater solutions. Without the “why” they can’t succeed. That’s the job of the Product Team.

If the product vision and strategy aren’t clear it’s very likely that the Engineering Team will suffer as a result.

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4. Understanding the Organizational Structure

The Product Team is the interface to all other departments in a company. That’s why I like to check how the whole organization functions on its own and how it interacts with the Product Team.

• How are the other key stakeholder departments organized?
• How do they collaborate with product e.g. Marketing, BizDev, Sales, Support, etc?
  • How do the processes & structures in other departments look?
• What are their high-level strategies?
  • Is the Product Team aware of them?
• What do they need/miss from a product & engineering standpoint?

Why is it so important to understand how other departments work and how they interact with product?

The better the relationship, the better the communication. Good communication increases the likelihood you’ll succeed drastically. A big mistake Senior Management Teams make is underestimating the power of communication and alignment. That’s why I love focusing on observing and understanding how people interact with each other inside and outside of their departments.

No matter how much you analyze a product or team. You always work with humans and the work they produce.

Emotional intelligence helps you to look behind the scenes and understand the bigger picture.

How do you evaluate products and Product Teams? Let’s discuss on Linkedin.