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The biggest mistake a product manager can make is not understand the difference between the problem and a solution.

For example, Jill knows that Mark’s birthday is in a few days and she would like to send Birthday wishes. She can send a greeting card, email or call Mark. All these are different solutions to the same problem – Jill needs to convey her wishes to Mark. Understanding this difference is the key to building great solutions. In this example, AT&T competes with Hallmark to win Jill's business.

Before Intuit launched Quicken, the number one way home users did accounting was with a paper and pencil. Intuit realized that they need to compete with the paper and pencil method and not other home finance software vendors. If the home user thought the paper and pencil method was better, they would never adopt Quicken. Using this knowledge, Intuit designed the product with wizards and other UI techniques that made it more effective than the paper and pencil method.

Unfortunately most product managers define competitors in a narrow solution space who have similar technology and business models. Quick, What is a competitor to Microsoft’s Frontpage? Macromedia Dreamweaver? How about portal software that allows editing via web browser. How about software that creates email newsletters. Unless you know the problem that the end user is trying to solve it pretty difficult to tell, who your competitors are.

Companies that are competitor focused and blindly replicate features because a competitive product has it on it feature matrix are run by product managers who are carrying a signboard that says – Run over me. The right way to build a product is really know the pain of the customer problem and find an innovative way to solve it.

Products that are narrowly focused die out when there is a better solution to the same problem the end user is trying to solve. Remember the dial-up BBS business, the Internet has consumed it. Technologies like DSL make dial-up modems useless. It’s no use being the number vendor in a dying category.

If you are with a company whose marketing folks can do fancy spreadsheets and graphs but cannot tell you what problem they are solving, it is time to bail out.