Does impact designs better products?

This article was originally published in MSM's Medium Account here.

Impact: the new toolbox for product managers that want to win

A year ago, a group of brilliant people working in product (Camille Coyac, Sara Guerreiro de Sousa, Pedro Saleiro, and many others) got together to understand how we could bring more products with social and environmental considerations into the world. This question stayed in my mind. “Could it be that impact-driven products perform better?” This topic formed the backbone of a recent presentation I did for the Lisbon Digital School series on It’s All About Product & Innovation, ‘Products with Impact’, where I dug into this issue and tried to answer that question.

As someone indoctrinated by traditional economic models that perceive resources as infinite, I now see that this mindset does our planet and its inhabitants a gross disservice. We’ve been riding a wave of short-term gain, often at the expense of long-term sustainability and ethical concerns. Working in impact investing for over six years, I knew there had to be another way.

The changing paradigm of our times offers hope amidst the difficult challenges. Increasing social inequality, accelerating climate change, and rising global challenges — from pandemics to wars and mass migrations — have created a collective consciousness around sustainability. Wealth concentration, heightened consumer scrutiny, and the quest for purpose-driven work have shifted business incentives. Investors, talent, and consumers seek more sustainable solutions.

Impact investment focuses on resource allocation in solutions that solve social and environmental challenges. These solutions are goods or services through which people and the planet interact for their benefit. Therefore, if we do not consider the social and environmental impact of these solutions, we forget the interface between capital and people & planet. Solutions that are built from these considerations are what I call impactful products.

Impactful products are designed to improve people’s quality of life and promote environmental sustainability, hence offering an exciting economic opportunity. They provide internal benefits — aligning with the company’s mission, motivating teams, and enhancing financial resilience. Externally, they improve unit economics, user retention, attract top talent, attract more capital, differentiate from other products, and manage reputational risk.

But how can we integrate impact considerations into product development? That’s where the Impact Management Project (IMP) comes in. The IMP is a tool that helps organisations understand their products’ positive and negative impacts. It arose from a consensus-building initiative involving 2000 organisations aiming to standardise impact measurement, management, and reporting.

The IMP defines five dimensions of performance to help us understand a product’s impact.

By integrating IMP with product development, we can create products that not only drive profit but have a positive aggregated impact on the stakeholders they touch.

Adapted from ‘Responsible Products’ public doc.

During the discovery process, we can use the IMP to consider impacts on all stakeholders and discipline data collection. We can then design UX/UI that is more accessible and avoids dark patterns. By the development phase, impact considerations have already been identified, reducing the risks and ensuring a more responsible product.

The result? Our product metrics improve. Why?

• User acquisition improves because we create more inclusive and accessible products.
• User engagement improves because users become more loyal to products that have positive social and environmental impacts.
• There’s also a reduction in risk, for instance, through the appropriate use of data.

Let’s follow an example. Imagine a marketplace for secondhand clothing (like Finds, although this is an imagined example, and none of the data presented below has been validated). Now let’s run the first three dimensions of the IMP through five relevant stakeholders.

As you can see, the ’how much’ column can integrate several lock-step metrics: metrics that translate both the performance of the business and its social and environmental impact.

Now that we understand the impact of the marketplace on all identified stakeholders, let’s focus on the buyers, as they are very relevant for product teams. However, we can run the five dimensions of the IMP to any stakeholder to assess the impact of a given product.

Based on the previous analysis, product teams can ideate.

How might we…?

• Reduce the number of first-hand clothing pieces bought by our users?
• Ensure that the use of the marketplace decreases the consumption pattern of first-hand pieces of users?
• Attract users who prefer new clothing pieces to prefer second-hand clothing?

From these questions, we can now jump into a well-known product framework: the opportunity solution tree from Teresa Torres.

The success metric ‘Ratio of ‘# second-hand pieces bought on the app / # total pieces’ should not disregard the remaining ones and the risks we identified earlier in the IMP. Why? Because if a person significantly increases their consumption pattern, both in new and second-hand pieces, the ratio will be the same or even better even though the impact is negative. We want to increase this ratio and keep the denominator unchanged. Therefore, it is important never to forget the risks.

Additionally, if this marketplace did not consider its risks, product teams would have likely optimised for the number of second-hand pieces bought on the marketplace, which would represent the number of transactions made and business revenues. By running this exercise, we landed on a ratio. This change is critical because it can inform product features such as pop-ups, data collection and content strategy.

In summary, The Impact Management Project (IMP) is a vital tool for comprehensively evaluating product impacts on stakeholders, complementing, not replacing, existing sustainability frameworks. It acknowledges the dual nature of every product — embodying both positive and negative, intended and unexpected impacts, as well as associated risks. Through IMP, we can enhance positive effects, lessen negatives, and aptly manage risks. It advises focusing on three to five priorities each cycle (e.g., OKR, stakeholder reports), prompting continuous improvement and learning from setbacks. Merging impact management with product development frameworks creates an opportunity for superior user experiences that also contribute positively to our world. This patient, consistent, and impact-oriented approach is paving the path towards a sustainable and beneficial future for everyone, including our planet.

Check out Applying a product mindset to test VC platform initiatives to learn how we are supporting early-stage founders through a product-led VC Platform.

If you want to discuss this further, reach out via LinkedIn or at cristina@msm.vc.

If you are looking for a product crash course, I started with ‘Product Foundations’ by One Month PM founded by André Albuquerque, and I recommend it.