Hey good q. I work in enterprise SaaS and our team builds a fairly complex product. We have a range of technical and non-technical users within a given account, who use our product in different ways, and we have accounts that range in size from dozens to hundreds of thousands of employees with the differences in terms of usage patterns and needs that you'd expect. We also operate at high scale so our engineers need to know a lot about distributed systems and the integrations that our product has with other vendors/platforms/etc. We aren't unique in any of this from my experience.
(sorry for being somewhat vague but I try to keep this account anonymous!)
It's simply too much for our engineers to spend time deeply understanding every nuance of our business ("how should we make this product tradeoff between the needs of SMBs in Asia vs. the needs of our largest 10 customers across all countries? How will this then impact our pricing strategy?"). But PMs have more context here, because in exchange they don't (for example) know every nuance of how our data pipeline works.
In terms of how we make it work, we 1. try really, really hard to align incentives between Eng/PM so that they win together, 2. make sure that teams work together closely and have time to bond, and 3. write things down in planning docs as much as possible, as that's one of the best ways to reduce conflict and also fully leverage non-overlapping expertise.
"the PM's business expertise has usually been strictly less than the most experienced engineer on the team, leading to a typically never-ending, and eventually abandoned game of catch-up."
That's rough... those don't sound like good PMs to me fwiw.
What I have seen are cases where very senior engineers have a better grasp of the overall product vision than some PMs, due to experience and tenure. But they usually don't have more expertise in all of the business questions simply due to relative lack of time spent in that domain.
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All of this isn't to say that engineers don't need to know about the business, or that it isn't a huge advantage if they do (it is). Just that there are so many hours in the day and eventually you've gotta get some division of labor.