Becoming a product-led organization involves:
- Creating a product manager role with the right responsibilities and structure
- Enabling those product managers with a strategy that promotes good decision making
- Understanding the process of determining what product to build, through experimentation and optimization
- Supporting everyone with the right policies, culture and rewards to allow product management to thrive
The build trap is when organizations become stuck measuring their success by outputs rather than outcomes. When companies stop producing real value to the users, they begin to lose market share, allowing them to be disrupted. Product management can and should find the opportunities to maximize business and customer value.
“You’re stuck in the build trap. To get out, you need to change the way you approach software development, both as a company and as a leader. You have to become product-led. That involves shifting the entire mentality of the organization from delivering to achieving outcomes. You will have to change your structure, your strategy, and not only the way you work but also the policies and rewards governing it.” Marquetly was a classic case of a company stuck in the build trap. The problem wasn’t that it did not have a great idea or a great product but that company itself was not setup to keep growing that product to succeed. The organization was missing the roles, strategy, and policies needed to promote and sustain real value creation.
Marquetly, is an education company that provides online training for marketers. Experts in digital markeing, create classes through their online platfom that any individual can take for a monthly subscription. Teachers want to perform 2 main tasks on Marquetly platfom, create courses and respond to student comments.
Are you optimizing your organization to continually produce value? Are you set up to grow and sustain products as a company? Companies end up in the build trap when instead of associating value with the outcomes they want to create for their businesses and customers, they measure value by the number of things they produce.
Products are not inherently valuable. It’s what they do for the customer or user that has the value — solving a problem, or fulfilling a desire or need. Instead, teams are rewarded for shipping massive quantities of features. This way of thinking is detrimental yet pervasive. In an enterprise product company, when I measured the customer use of existing features, we discovered people used only 2% of them consistently. And yet, development was underway to add more, instead of trying to evaluate what they already had.
You have to get to know your customers and users, deeply understanding their needs, to determine which products will fulfill needs both from the customer side and the business side. This is how you develop value exchage system. To gain this understanding, companies need to get their employees closer to their customers and users, so that they can learn from them.
Constraints on the Value Exchage System
Your customers and users do not exist in a vacuum, their wants and needs change according to what’s around them. Your opportunities for how to address those wants and needs are constantly evolving. Directly controlling these surroundings is out of the hands of companies, so the only thing we can do is understand them and know how to act.
To realize the maximum value, businesses need to have the right individuals, the right processes, the right policies, and the right culture. Businesses have full control over their own constraints and how they deal with them. “how do you know that what you shipped was successful?”. Outputs are easily quantified things that we produce – number of products or features, number of releases, or velocity of development teams. Outcomes are the things that result when we finally deliver those features and the customer problems are solved. True value is realized in these outcomes, both for the business and for the user or customer. Companies are not measuring the outcomes. They loose track of their strategy and vision, and they end up in the build trap. We should instead define and measure value and then celebrate them for delivering on outcomes for our business and users. We should build products that help to achive these outcomes.
Shifting into strategic thinking requires a shift in the way we think about product development. Many companies operate on a project-based development cycle. Every go live is a project. When the project is over, they move on to the next project. Many of these projects have their own measures of outcomes, but there is no aligning strategy above them. To understand product management and how it differs from project management, we first need to define what a product is and why it is important.
Products are vehicles of value. They deliver value repeatedly to customers and users, without requiring the company to build something new every time. Microsoft Excel, baby food, Tinder, iPhone — these are all products. A product is something that needs to be nurtured and grown to maturity. This is why the concept of product management — and that of having product managers — is so important to companies. You need the discipline to move toward organizing for products over projects. Comapnies that optimize their products to achieve value are called product-led organizations. These are characterized by product-driven growth, scaling their organizations through software products, and optimizing them until they reach the desired outcomes.
Many companies are, instead, led by sales, visionaries, or technology. All of these ways of organizing will land you in the build trap. In sales-led companies, the product roadmap and direction are driven by what was promised to customers, without aligning back to the overall strategy. You need to change your strategy to building features that apply to everyone, without customization.
Visionary-led companies can be very powerful — when you have the right visionary. But there aren’t too many Steve Jobses floating around. When you have 5,000 brains working on a problem (as opposed to one), you can harness the power better to succeed.
Technology-led companies are driven by the latest and coolest technology. They suffer from lack of market-facing, value-led strategy. Product strategy connects the business, market, and technology together so that they are all working in harmony. You need to be able to lead with a value proposition for your users, or you will not be able to make money. Product-led companies optimize for their business outcomes, align their product strategy to these goals, and then prioritize the most effective projects that will help develop these products into sustainable drivers of growth. To become product-led, you need to take a look at the roles, the strategy, the process, and the organization itself. What is needed is a mindset shift. You need to start focusing on outcomes and to adopt an experimental mindset to eliminate the uncertainty that what you are building will reach your goals.
What We Know and What We Don’t
Product development is full of uncertainty. It’s important to separate out the facts from the things that we need to learn. Your known-knowns are facts that you gather from data or critical requirements from customers. Known-unknowns are clarified enough that you know which question to ask. These are assumptions that you want to test, data points that you can investigate, or problems that you can identify and explore. You use discovery methods (such as prototype) to clarify these, turn them into facts, and build to satisfy those facts. Unknown-knowns are your intuition from years of experience. You should be cautious because this is often where bias thrives. It’s imperative to check and experiment to see whether your intuition is right. The unknown-unknowns are the things that you don’t know you don’t know. You don’t know enough to ask the right questions or identify the knowledge gaps. These are the moments of surprise that need to be discovered. They happen when you are out talking to customers or you are analyzing seemingly unrelated data. You need to be open to these discoveries and follow through on pursuing them because they could change the shape of your company.
Product management is the domain of recognizing and investigating the known-unknowns and of reducing the universe around the unknown-unknowns. It takes a certain skill to be able to sift through the massive amounts of information and to identify the right questions to ask and when to ask them. Product managers identify features and products that will solve customer problems while achieving business goals. They optimize the Value Exchange System. Product managers are the ones who fit right in the middle of business and technology and translate needs into a product that will satisfy the customer while sustaining and growing the business. Product managers are the key to becoming product-led.
The Role of the Product Manager
Product manager deeply understands both the business and the customer to identify right opportunities to produce value. They are responsible for synthesizing user analytics, customer feedback, maket research, and stakeholder opinions. They keep the team focused on the why — why are we buidling this product, and what outcome will it produce? (Objective and Key Results). The chief product officer is the cornerstone of the product team in companies, helping to tie together the business outcomes to the roadmap and to represent its impact to the board. A greate product manager must be able to interface with the business, technology, and design departments and to harness their collective knowledge.
Being a great product manager takes a thorough understanding of your users, a careful analysis of your systems, and an ability to see and execute on opportunities for your market. When you go through motions without active thinking, you end up with a lot of useless features. As a product manager “my job was to produce value, not develop my own ideas. It wasn’t until I found some humility that I was able to create products that people loved.” . “Start listening to your team. Involve them. Listen to your customers and focus on their problems instead of your own solutions. Fall in love with those problems. Also, go seek out data to prove and validate your ideas. Turn to concrete evidence, rather than opinions.”
The product death cycle is a specific form of the build trap. You are implementing ideas without validating them. It’s not the customer’s job to come up with their own solutions. That is your job. You need to deeply understand their problems and then determine the best solutions for them. Customers want their problems solved. Leaders want to hit goals. Pushing back is essential to building a successful product. That’s part of the job. Project managers who are put into product management roles often become waiters waving a calendar. Product managers are NOT project managers, although a little project management is needed to execute on the role correctly. Project managers are responsible for “when?”. Product managers are responsible for the “why?”. Why are we building this? How does it deliver value to our customers? How does it help meet the goals of the business? Many companies still think that the project manager and product manager are one and the same. Answering why is very different than answering when. It requires a strategic mindset that understands the customer, business, market, and organization.
A Great Product Manager
The real role of the product manager in the organization is to work with a team to create the right product that balances meeting business needs with solving user problems. An effective product manager need to understand the market, how the business works, the vision and goal of the company. They also need deep empathy for the users for whom they are building products, to understand their needs. An effective product manager is NOT a manager. They need to convince their team — and rest of the company — that what they are working toward is the right thing to be building. These influencing skills are essential. Product managers really own the “Why” of what they are building. They know the goal at hand and understand which direction the team should be building toward, depending on company strategy. They communicate the direction to the rest of the team. The product manager works with the rest of the team to develop the idea and then jumps in, as requirements become validated, to make sure that the product being created achieves the goals of the customer, user, and business. They then work to solidify the product vision, crafting it and communicating it, and then championing it. But, at the end of the day, it’s the team, collectively, that really owns the product — the what.
Meghan, product manager: “I always start with our mortgage division’s vision in mind. That’s our business. The vision is to make it easier and more convenient for mortgage applicants to apply (or for mortgage holders to access), their information from anywhere.” Meghan was in charge of improving the experience for first-time mortgage applicants. She spent a lot of time talking to and learning from them. “I get into empathizing with my users and figuring out what frustrates them. I call my customers Mary and Fred, they live in New York City and are looking for their first home in Connecticut because Mary is pregnant and they want more space. They have gone to their local bank branch multiple times in the past month to meet with a loan officer. They’ve filled out massive amount of paperwork in the office, sometimes forgetting documents they needed only to return the next day with them and do it all over again. Then they’ve had to wait to see if they were qualified for the amount they needed.” It was clear she knew her customers well, and she knew their pain points. But how did she decide which pain points to solve? Meghan worked with her VP of product to identify the business goal that aligned with the vision of her department: to increase the amount of first-time applications that are submitted. 60% of first-time applicants who started the mortgage process did not finish with this bank. Her goal was to improve that percentage. The first thing Meghan wanted to understand was what was driving the 60% abandoment rate. She pulled the data to find out who had started the process but did not finish with their bank, and then she reached out to them. Quite a few of the people said they were frustrated with the process and eager for someone to make it better.
Meghan explained to our team what one experiment entailed: manually taking on the work to understand how to establish an online system for uploading and verifying required documents for mortgages. The team worked with select first-time applicants and had them email the documents. The bank designated a person to review documents and to approve them during this experiment. Over that time, new applicants completed their applications 90% more often than those who had come into the office to have them verified. By running the experiment, Meghan was able to prove the best way to reach their goal and increase the satisfaction of the users was by building out a way to have everything online. “We knew we couldn’t start there, but that was our vision for the future. We had to work toward it, understanding more about each component along the way.” From there, Meghan’s team worked backward, determining what could be in the first version of the new product, by prioritizing value and understanding effort. They made plans to continue iterating on their solution, including putting AI components and online notaries, until they reached their goal of zero verification visits. “The biggest thing I’ve learned in product management is to always focus on the problem. If you anchor yourself with the why, you will be more likey to build the right thing.” said Meghan.
Start with Why?
- Why are we making everything digital in the mortgage space?
- What’s the desired result that we hope to achieve here?
- What happens if we make it all digital and nobody applies for mortgages?
- How are we mitigating that risk?
Too often product managers dive into creating solutions without thinking through the risks. All solution ideas are subject to bias, organizational or personal. The only way to fight this bias is to learn from users and experiment. Product ownership is just a piece of product management. A good product manager is taught how to prioritize work against clear, outcome-oriented goals, to define and discover real customer and business value, and to determine what processes are needed to reduce the uncertainty about the product’s success in the market. Product owner is a role you play on a scrum team. Product manager is a career. Most organizations do not give their people the necessary time to do product vision and research work. By talking with the people who did not finish applying for their mortgage, Meghan learned about the document verification problem. She found the problem to solve, instead of guessing at what needed to happen and then throwing solutions at problems that might or might not exist. She focused on the users and what they needed, rather than the wants of internal teams. After experimenting successfully, she was then able to rally the company around the vision for the entire feature. The most important role of a product manager is to marry the business goals with the customer goals to achieve value.
The foundations of working with a development team, diving into individual user needs and problems, and measuring data will always be relevant skills for a product manager at any level. Understanding the technical implications of building software or hardware, knowing how user experience can impact user value, and connecting that back to the business goals are basic building blocks of this discipline. As the portfolio scales, you need product people bringing this knowledge to a wider overview than just the features, to make sure everything is working together as a system. Typical product management career path:
- Associate product manager
- Product manager
- Senior product manager
- Director of product
- VP of product
- Chief product officer (CPO)
Open up Associate PM role to people making the switch to product management, either straight out of school or from another career. Pair them with a senior product manager to teach them the ropes. We create the senior people we need by giving junior people a chance. The product manager works with a development team and Ux designers to ideate and build the right solutions for the customers. They are the ones on the ground floor, talking to users, synthesizing the data, making the decisions from a feature perspective. The product manager needs to be strategic enough (quarterly focus) to help craft the vision of the features and how they fit into the overall product but tactical enough to ensure smooth execution of the solution. The danger is when a product manager is 100% operational, focusing only on the process of shipping products and not on optimizing the feature from a holistic standpoint. It is imperative to push back as much project management effort as possible to the team and trust them to deliver. They report to a director of product or, at a smaller company, a VP of product.
A senior product manager is responsible for the same things as a product manager, but they oversee more scope or a more complex product. This is the role for people who like difficult product problems. These people are usually the ones who will start new product lines for businesses. At some point, a company will grow enough that there are too many people reporting into the head of product. A director of product becomes necessary to help promote strategic alignment and operational efficiency, connect their product group back to the product or portfolio vision. The Director of product is the first level of people management. Someone in the VP of Product role oversees the strategy and operations for an entire product line. The VP of product is responsible for connecting the company goals back to the growth of their product line. VPs of product are also directly responsible for the financial success of their product line, not just the delivery of product features. A VP of product is the highest level in smaller companies. VPs of product are responsible for product teams of one or just a few, and they have to dive into tactical aspects of product work to ensure that things get done. This means that these people tend to be more entrepreneurial and great at launching and growing new products. A successful VP of product needs to fundamentally be more of a strategic person and to know that, in order to scale their organizations, they need to hire in people who take over the tactical and operational components. The CPO is a fairly new yet critical role for organizations. A CPO oversees a company’s entire product portfolio. This is the highest role of a product manager. A company should think of adding a CPO role when it starts to develop it’s second product, expands into another geography. This role is critical to ensure that the entire portfolio is working together to achieve the company goals. “Board members care about the financial impacts of the technology and product decisions. A successful CPO needs to be able to translate their actions into terms the board will understand.” Shelly Perry, a venture partner at Insight Venture Partners has a few key personality traits that she looks for when hiring a CPO: “Assuming they are already skilled in all aspects of product, technology, and financial management, those that make the best chief product officers also have three key traits that set them apart: they inspire confidence, empathize, and are relentless and resilient.
To inspire confidence in the product direction, CPOs work across many functions to gain buy in and alignment. It’s necessary that they bridge and unify the key departments and stakeholders. As with other C-suite roles, CPOs are rarely in a position to make decision solely based on the textbook principles of product management. Other factors, like the current state, financial objective, and rate of organizational change, must come into play. By empathizing with other members of their peer group, their customers, and their teams, CPOs can find a way forward that aligns all the goals. This allows them to also traverse adjacent industries and to immerse themselves in the customer perspective. Finally, a CPO must be relentless and resilient. They need the desire to dig in and find out what is working and what is not. They are constantly assessing and analyzing, trying to prove their hypothesis right or wrong, and holding themselves accountable to data. When something does not work as planned, they need the tenacity to keep digging and find out what will. Having a strong product leader in the C-Suite is a critical step to becoming product-led.
Organizing Your Teams
TransferWise does electronic transfers. You can send money to different countries in other currencies with very low fees, compared to what the banks charge. One team is focused on retention, another on implementing new currencies and another on acquiring new users. Each of the teams has ownership of their goal and is judged for success based on their outcomes. They are also allowed to work across all products to do whatever is needed to reach those goals. It takes a huge amount of coordination across the product teams, so everyone is responsible for collaborating intensely with one another. Even though the coordination seems like a handful, fewer teams make them ruthlessly prioritize around the most important initiatives. If one team is busy with work, another team doesn’t need to wait for them to fix a bug because they own that piece of the product.
A value stream is all of the activities needed to deliver value to the customer. That includes the processes, from discovering the problem, setting the goals, and conceiving of the idea, to delivering the actual product. Every organization should strive to optimize this flow in order to get value out the door faster to customers. To do that, it makes sense to organize your teams around the value stream. First you begin with the customer or user — whomever is consuming your product, What is the value you are providing them? Then work backward. What are the touchpoints they have with your company on the way to receiving that value? Having identified these, how do you organize to optimize and streamline that journey for them? How do you optimize to provide more value, faster? Consider an insurance company. I buy car insurance because it provides me with peace of mind in case I get into an accident — that’s value. Having an iPhone app that allows you to manage your car insurance, for example, is only a piece of that product’s value stream. The app on its own is not enough value. I still need the car insurance product. You can still have a product manager owning that iPhone app’s experience., but you must make sure that they are part of the larger division that holds the true value — the car insurance division. This structure makes it possible to set strategy at the division level, with the product manager able to execute on product initiatives that tie to their product. Keeping the strategy and the value execution together is the key. This approach allows you to really evaluate the work happening on your teams and to make sure it’s essential to achieving your strategy.
We need to restructure around value streams. When we bagan breaking the product into value streams and organizing around feature sets that delivered whole value, we found that there were not 20 areas. Pandora was able to scale to 70 million monthly users with just 40 engineers, by ruthlessly prioritizing the work the copmany was doing on a quarterly basis. Staying small forced it to focus on getting the most important work done to grow the business. Product managers need room to manage toward an entire outcome-oriented goal. This means that people need to be aligned around value and to have the scope to actually make measurable impact toward it. Organize your teams around your strategy, which is the most important work for your business. When organizations lack a coherent product strategy that is ruthlessly prioritized around a few key goals, they end up spreading themselves thin.
A good strategy is not a plan; It’s a framework that helps you make decisions. Product strategy connects the vision and economic outcomes of the company back to product portfolio, individual product initiatives, and solution options for the teams. Strategy creation is the process of determining the direction of the company and developing the framework in which people make decisions. Strategies are created at each level and are deployed across the organization. With it’s customer-focused vision “To provide movies and TV shows in the most convenient and easy way for customers.”, Netflix set out to completely disrupt the way the market consumed entertainment. At the time, the company was heavily invested in the DVD space (in 2005, 50,000 movie and TV show titles in its DVD catalog), where it had been incredibly successful. But it didn’t see DVDs as the end point. In an interview in 2005 with Inc. magazine, Founder and CEO Reed Hastings said this: “DVDs will continue to generate big profits in the near future. Netflix has atleast another decade of dominance ahead of it. But movies over the internet are coming, and at some point it will become big business. We started investing 1% to 2% of revenue every year in downloading, and I think it’s tremendously exciting because it will fundamentally lower our mailing costs. We want to be ready when video-on-demand happens. That’s why the company is called Netflix, not DVD-by-Mail.“
The Netfliix’s overall strategy for the future:
- Get big on DVD
- Lead streaming
- Expand worldwide
First, Netflix focused the entire company around a solid vision. This vision has evolved over time as the market has evolved. Now the vision for Netflix is “Becoming the best global entertainment distribution service, licensing entertainment content around the world, creating markets that are accessible to film makers, and helping content creators around the world to find a global audience.” The vision states not only why the company exists but also the plan for getting there. It aligns the team in the right direction. Netflix then self-organized around key outcomes and strategies. Guideline was to “delight customers, in margin-enhancing hard-to-copy ways.” The combination of vision, goals, and key initiatives helps create a system in which Netflix can make decisions about its products — sometimes difficult decisions like Roku. Netflix can change tactics or kill ideas because it commits itself not to the solutions they are building but rather to the outcomes these solutions produce. The company then enforces this mentality with a product strategy that is coherently aligned and decision enabling. Good strategy focuses and aligns the product teams around achieving the right outcomes.
Strategy is a deployable decision-making framework, enabling action to achieve desired outcomes, constrained by current capabilities, coherently aligned to the existing context.Stephen Bungay, The Art of Action
A good strategy should transcend the iterations of features, focusing more on the higher-level goals and vision. A good strategy should sustain an organization for years. Strategy is NOT a plan, it is a framework. When companies approach strategy as a plan, they fail to achieve what they expected. The failure stems from the actions taken to fill the following gaps that exist between outcomes, plans, and actions.
Align the team with a framework of goals and direction and then step back to give that team the room to explore how to reach the goals. Enable action by empowered teams to achieve results. Autonomy is what allows organizations to scale. We’re hiring incredibly smart people to make decisions on how to grow companies by making complex software that customers love. You need to give them the room to make decisions so that you can get the full benefit of their knowledge and skill. That’s what a strategic framework promotes. If you’re aligned coherently and you have a good strategic framework, you can then allow people to make decisions.
Creating a Good Strategic Framework
“It’s pretty clear we’re not aligned on what our strategy is or what we want to become as a company.” Marquetly prioritized big projects based on customer requests or contracts. It wasn’t thinking strategically about how to grow the product. CEO was a big fan of OKRs (Objectives and Key Results), but they were very output-oriented instead of outcome-oriented. “Ship the first version of the new teacher platform”, “Deliver by June 2020.” They weren’t tied to any outcome — either business or user-oriented.
A good company strategy should be made up of two parts: the operational framework, or how to keep the day-to-day activities of a company moving; and the strategic framework, or how the company realizes the vision through prouduct development in the market. Many companies confuse these two frameworks and treat them as one and the same. Getting the strategic framework right is essential for developing great products. Strategic framework aligns the company’s strategy and vision with the products that are developed by the teams. Having a strong company vision and product vision that align to the strategic framework helps companies avoid swirl in planning and execution. Companies should be continuously evaluating (throughout the year) where they are and where they need to take action, and then fund those decisions. Spotify operates using something called DIBBs, which stands for Data, Insights, Beliefs, and Bets. The first three things, data, insight, and beliefs, inform a piece of work called a bet. Managers give employees the leeway to participate in hackathons and to implement their ideas. They setup an environment in which it’s safe to try new things and fail. Management is wiling to embrace uncertainty about what customers want, by doing so, they create a work environment that embraces experimentation and innovation and that can course-correct quickly, when necessary. When strategy is communicated well in an organization, product management and product development are synchronized. The company strategy informs the activities of the product development teams, and the execution of work on the products and data this produces informs the company direction.
Strategies are interconnecting stories told throughout the organization that explain the objective and outcomes, tailored to a specific time frame. This act of communicating and aligning those narratives is called strategy deployment.
At different levels of organizations, we tell stories with different scales of time (timespans), about our work and why we are doing it. In order for people to act on the stories they hear, the stories can’t have significantly different time scales than they are accustomed to. Agile teams are good at telling 2- to 4- week stories. That’s what they deal with on a daily basis. As you go up in the organization, you tell stories with longer timespans. Executives are really good at telling 5-year stories, but a team cannot act on a 5-year story when they’re used to thinking in 2 to 4 weeks. There’s too much space to explore.
Unconstrated team is the most frightened and scared to act in the organization. They feel like they cannot make a decision because there are too many options. Appropriately constrained teams, one who have a direction set to the right level for them, feel safe to make decisions because they can see how their stories align to the goals and structure of the organization.
One of the biggest issues I hear from executives is that they do not have the data they need to make decisions. People ask them to create a vision, but they do not continuously surface information in a way that inform the strategic decisions that enable the organization to achieve the vision. The teams should be out there, analyzing, testing, and learning and then communicating what they discover back to their peers and their management teams. This is how we set strategy.Jabe Bloom, PraxisFlow
Strategy deployment is about setting the right level of goals and objectives throughout the organization to narrow the playing field so that teams can act. While executives might be looking at 5 year strategy, middle management is thinking in smaller strategies — yearly or quarterly — bounding the teams in a direction that allows them to make decisions on a monthly or weekly basis. Not having the right level of direction lands us in the build trap. Teams are given instructions that are either too prescriptive or too broad. Strategy deployment is key, from a product development perspective. OKRs is a type of strategy deployment used by Google. Hoshin Kanri is a strategy deployment method used by Toyota. All of these are premised on the same premise — setting the direction for each level of an organization so they can act. Understanding what makes a good strategy framework is more important.
|Vision||What do we want to be in 5-10 years? Value for customers, position in market, what our business looks like||CEO/Senior Leadership|
|Strategic Intent||What business challenges are standing in our way of reaching our vision||Senior leadership Business leads|
|Product Initiative||What problems can we address to tackle the challenge from product perspective||Product leadership team|
|Options||What are the different ways I can address those problems to reach my goals||Product dev teams|
Strategy creation is the process of figuring out which direction the company should act upon and of developing the framework in which people make decisions. Strategies are created at each level and then deployed across the organization.
If you don’t have a strategy in place. This is not a one-day or one-week process. If you try to do that in that time frame, you will fail. It takes time and focus to craft and maintain. You need to be identifying problems and determining how to organize around solving them at every level of strategy. For a C-suite, getting this right should be your top priority — or you’ll be setting up all your employees for failure.
Strategy is about how you take the organization from where you currently are and reach the vision. For strategy to be created, you must first understand the vision, or where you want to go. Then we can identify problems or obstacles standing in our way of getting there and experiment around tackling them. We repeatedly do this until we reach the vision.
To understand the direction, you are looking at either the vision, strategic intent, or product initiative, depending on which level you are starting on. The current state is related to where you stand in relation to your vision. It also reflects current state of the outcomes, including the current measurement of those outcomes. Option goals are the next level of outcomes you need to achieve from the team in order to make progress toward your initiative or intent. Through this act of exploring and identifying problems, you uncover data that is needed to help inform the strategy and vision. Vision is not set solely top down by management. The entire organization should be sharing information as they learn about what will help reach goals, and help inform the strategy.
The process of communicating data and direction up and down — and across — the organization is how we maintain alignment. But it needs to first start at the company level.
Company-Level Vision and Strategic Intents
The company vision is the linchpin in the strategy architecture. Having a strong company vision gives you a framework around which to think about your products.
Amazon’s vision is, “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” By keeping an eye on overall vision, the product people who test, develop, and grow these different products are able to make effective decisions about what they should and shouldn’t pursue. If you are a single product company, like Roku, this is easy because your company vision is very similar, if not the same, as your product vision. Products are vehicles for value — the things you sell to customers, while receiving some form of value in return.
What is the difference between a company mission and vision? A good mission explains why the company exists. A vision, on the other hand, explains where the company is going based on that purpose. Best thing a company can do is to combine both the mission and the vision into one statement to provide the value proposition of the company — what the company does, why it does it, and how it wins doing that.
To offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses.WARBY PARKER
At Bank of America, we are guided by a common purpose to help make financial lives better by connecting clients and communities to the resources they need to be successful.BANK OF AMERICA
Becoming the best global entertainment distribution service, licensing entertainment content around the world, creating markets that are accessible to film makers, and helping content creators around the world to find a global audience.NETFLIX
Company leaders need to spend time communicating their vision, explaining their choices, and painting an image of what is to come. You must tell a story. When that story is told, you can remind everyone through the simple vision statement. Once the vision is clear, the difficult part is connecting it back to the company’s operations. Leaders need to specify strategic intents. These few, concise, outcome-oriented goals focus the company around how to reach the vision.
Although the vision should remain stable over a long period of time, how you intend to reach that vision changes as your company matures and develops. Strategic intents communicate the company’s current areas of focus that help realize the vision. Strategic intent usually takes a while to reach, on the magnitude of one to several years. Strategic intents are always aligned to current state of the business. C-suite of the company should ask, “What is the most important thing we can do to reach our vision, based on where we are now?” There should not be laundry list of desires or goals — just a few key things that need to happen to make a big leap forward. Keeping the list of strategic intents small focuses everyone.
When organizations plan their strategic intents, they should think about how each part of the organization can contribute to these goals. One intent is usually good for a small company, and three are plenty for a large organization. Strategic intents should be at a high level and business outcome focused. They are about entering new markets, creating new revenue streams, or doubling down in certain areas. Netflix had a clear strategic intent. “Lead the streaming market.” All of its decisions, from enabling internet-connected devices to fucusing on creating more content for users, helped to achieve this goal. When that goal was realized, Netflix changed course to maintain its position by creating its own content — another strategic intent. These are not small goals. They need an army to execute, from product development to marketing to content creation. That’s the point. The strategic intents are about the whole company, not just the product solution. Once company sets its strategic intent, how the entire company could rally around these intents and crush it? And how, from a product development perspective, could they prioritize the work to win? This is where the product initiatives are defined and are aligned to the product vision.
Product Vision and Portfolio
Product initiatives translate the business goals into the problems that we will solve with our product. The product initiatives answer how? How can I reach these business goals by optimizing my products or building new ones?
“As a Netflix subscriber, I want to be able to watch Netflix anywhere, with anyone, comfortably.” This is the company’s product initiative. It then explored many possible solutions — developing the Roku, partnering with Xbox and creating app for it, and ultimately enabling all the internet-connected devices it could. All these options were aligned to this product initiative. Options are your bets. They represent possible solutions that teams will explore to solve the product initiative. Product initiatives set the direction for the product teams to explore options. They tie the goals of the comapny back to a problem we can solve for the users or customers. Product managers need to make sure product initiatives and options are aligned with the vision of an existing product or portfolio. The product vision and the portfolio vision keep you anchored in the problems and solutions that you want to explore.
The product vision communicates why you are building something and what the value proposition is for the customer. Amazon does this particularly well by creating what they call Press Release documents for every product vision. These short notices describe the problem the user is facing and how the solution enables the user to solve the problem. The product vision emerges from experimentation around solving problems for users. After you validate that the solution is the right one, you can grow it into a scalable, maintainable product.
“We help marketing professionals to advance their skills by allowing them to understand their current competencies, easily find the most relevant classes to go to the next level, and then learn the skills they need in the most engaging and digestible fashion, from world-class teachers in the marketing space.” In companies with one product, the product initiatives describe the major user problems that the company is prioritizing. They need to be aligned to both the product initiative and the strategic intents.
Companies with more than one product often wrap their products under what is called product portfolio all aligned to the value they provide to customers. Adobe has Adobe Creative Cloud as a product portfolio, which consists of applications Photoshop, Illustrator, and InDesign, among other things. It also has another product portfolio for next-generation applications, consisting of newer creative tools, such as those for rapid prototyping. The CPO is responsible for setting the direction and overseeing the product portfolio. Having a philosophy for how your products help your company reach the company vision in the near term or long term is key.
- How do all of our products work as a system to provide value to our customers?
- What unique value does each of the product lines offer that makes this a compelling system?
- What overall values and guidelines should we consider when deciding on new product solutions?
- What should we stop doing or building because it does not serve this vision?
The product initiatives emerge from the work that needs to be done across the product portfolio to achieve the strategic intents and to further the individual product visions. The CPO is responsible for figuring out how to balance the work of the teams with the direction of the company in a framework.
Product Management Process
The best solutions are linked to real problems that users want solved. Product managers use a process to identify which of those problems the team can solve to further the business and achieve the strategy. Product managers can rely on the Product Kata to help them develop the right experimental mindset to fall in love with the problem rather than the solution. They continue iterating until they reach the outcome.
The team’s strategic intent was to increase revenue from users. Except we didnt understand what the problem was. Where were we experiencing issues? How could we drive more revenue?
“Wait! Let’s all take a step back and break down what we do know. Our goal is to increase revenue from individual users. I can think of three ways to do that, based on what we know from product metrics.”. “Well, we can acquire new users. That will increase revenue. “We could also retain our existing users better. Our retention rate is only at 40% over six months.” “We could create new revenue streams for existing users. Try to find something to upsell.”
“So we have to figure out where the problems and opportunities are surrounding each of those.” “For acquisition and retention, let’s dig into the data and feedback we have and try to diagnose whether there are any issues there. For new revenue streams. Let’s discuss possible ideas”.
“We see that we are doing well with marketing, but even with the discounts we already have, they aren’t signing up. How do we figure out what is stopping them? We don’t have any of their information.”
“Have you heard of a tool called Qualaroo?” “It shows us to poll people when they go toward the back button or try to leave the page. We can ask them what’s stopping them from signing up. I can easily add this to the site in about 10 minutes.”
Within a week, it had more than a 100 responses. “It’s amazing, we learned so much, and no one said they were leaving because of free trials!” About 55% of the people said they were leaving because they couldn’t find enough classes in new types of marketing methods, like social media. Another 20% said they were looking for something that could help them get into marketing as a career transition, but they didn’t see how these classes proved they gained any skills.”
“We do the assessment at the beginning when they sign up, but we never reassess them to show they’ve mastered any skills”. “I think we found two big problems.” The other team was also fast at work exploring retention. “We found that only 40% of people stay with us after 6 months.” “We followed up with 100 people who recently left and asked them why, and 90% of them said they ran out of content that was interesting to them. They have taken about 10 of our classes, but they didn’t find enough on new ways of marketing.” Now we had 2 groups of people — existing users and new users — both with the same problem. They were not finding the classes they wanted on the site, and there were not enough to justify them staying for longer than 6 months. “We know we need more content, but how do we get it?” “Do we have right teachers for this, or do we need to attract them? How much content are our teachers producing?” Christa found that teachers are having trouble creating courses. Most of them had created only one, yet more than half of the current teachers wanted to create a new course but couldn’t do so. The teachers had 2 problems, the platform was difficult to use, and they were not sure what students wanted. “Had I known they were interested in social media, I would have started there.” The options and product initiatives are starting to emerge.
We believe that by increasing the amount of content on our site in key areas of interest, we can acquire more individual users and retain existing users, resulting in a potential revenue increase of $2,655,000 per month from individual users.
Options to explore
- Easier and faster ways for teachers to create courses
- Feedback loops for teachers on areas of interest for students
- Outreach to new teachers who can create courses in areas of interest
We believe that by creating a way for students to prove their skills to prospective or current employers, we can increase acquisition, resulting in a revenue increase of $1.5M per month.
Options to explore
- Continuous assessment that allows students to constantly take tests to prove skills
- Certificates of completion and competence
The first task is to get to the product initiative. To do this, you need to understand the strategic intent, evaluate the current state of that strategic intent in relation to where your products can help, and determine what problems you can solve to further that strategic intent. This is what was done earlier during research and analysis to arrive at the product initiatives of increasing content and building out a more robust assessment.
To determine whether we are getting closer to achieving our product initiative, we need to break the success metrics into something we can measure on a shorter time scale. We call this team goal, and it’s how we measure the success of the option. Although it can take six months or longer to reach the product initiative goal, the team goal should be somehting we can measure after every release, which gives us feedback that our option is working the way we want it to. We set the team goal with the same process as we did for the product initiative.
It’s exciting to kickoff A/B test or to prototype something. It’s important to take a step back and understand where you are and what is needed in that stage before you jump into any work. This is where the product Kata helps. We ask ourselves the following:
- What is the goal?
- Where are we now in relation to that goal?
- What is the biggest problem or obstacle standing in the way of me reaching that goal?
- How do I try to solve that problem?
- What do I expect to happen (hypothesis)?
- What actually happened, and what did we learn?
These questions take us through problem exploration, and solution optimization phases. Many times product managers are experimenting unnecessarily when the problem is not yet known or when there is already a good idea about the solution. When considering whether to experiment around a particular solution: “Don’t spend your time overdesigning and creating unique, innnovative solutions for things that are not core to your value proposition. If someone already solved that problem with a best practice, learn from that, implement their solution, gather data to determine if it’s successful in your situation, and then iterate. Reserve your time and energy for the things that will make or break your value proposition.” For an e-commerce check-out page, learn from those who have optimized already, implement their best practices, and tweak from there. When the problem that you are solving is core to your value proposition, take a step back and don’t rush into the first solution. Use your unique context to set you apart from competitors. Experiment with a few solution ideas before committing to one. Remember it’s about quality, not quantity. The tasks of focusing on the product kata and identifying which phase you are in and what tools are available there are keys to successful product management.
1. Understanding the direction
“Now let’s go back over the data that we already have,” “What are our current retention and acquisition rates?”. “We currently retain users at a rate of 40% after 6 months. That isn’t great.” “We left Qualaroo running on our site for about a month, and we’re finding that, of the people who answered, about 55% of them said they were looking for more course variety. Extrapolating, we are potentially losing out on 82,500 people every month signing up.” “We polled the people who left recently, and 90% of them said there were not enough courses to interest them. We’re losing $180,000 a month in revenue. Not as much as the potential acquisition but still an issue.” “We know that not everyone will be retained at 100%, and we know that the acquisition rate isn’t going to be 100%. What do you think we can feasibly affect with these numbers?” “If we increase the retention rate from 40% to 70%, we willl be gaining $90,000 a month in revenue. If we double our acquisition rate, we can get $7 million more a year. That brings us to a total of $8 million a year, which could bring us close to that 30% goal of revenue growth with our strategic intent.”
We believe that, by increasing the amount of content on our site in key areas of interest, we can double acquisition and increase our retention of existing users to 70%, resulting in a potential revenue increase of $8 million a year from individual users.
“We’re going to walk thourgh the Product Kata in order to set you up for success. First, you need to identify your obstacles or customer problems standing in the way of teachers creating more content. Let’s regroup in a week and see what you’ve found around that.” Christa enlisted the help of their Ux designer and lead engineer to dive deeper.
“I can set up a quick open-ended survey with a text box for our teachers and ask what is preventing them from doing a second course,” said the Ux designer. “I can pull session times out of the sytem from when people start a course and when they complete it. We have event timing around this.” the lead developer said. After a week, “It’s bad,” Matt said “I didn’t realize how poorly the experience was designed, and the teachers are incredibly frustrated. It takes a month to put togehter a course, even when they have most of the content already developed. We’re missing a ton of the features that they would like, such as audio-only lessons, bringing in outside content, and linking out to more articles. Plus, it’s very buggy. There’s a lot we can do around here to improve the experience, and the teachers really would love to create more courses.” Ux guy said. “Yeah, I found similar information in the databases and event records. On average, it takes a teacher 61 days from the day they start a course until they publish one. Over 75% of teachers who start a course never publish it.”
Now thinkg about what can result from improving this experience that will lead to more course creation. You need to identify your leading indicators.
Ux Christa said “We can increase the rate of published courses, and we can increase the number of second courses created by teachers.”. “Now you have to baseline the numbers and pull them together into an option statement.”
We believe that, by making it faaster and easier for teachers to create courses, we can increase the rate of published courses to 50% and increase the number of second courses created to 30%.
Product metrics will tell you how healthy your product is, and, ultimately, your business, given that a healthy product contributes to overall health of the business. How many users are on their product, how many daily page views they have, or how many logins their system has. These are vanity metrics. You can turn a vanity metric into an actionable metric by adding a time component to it. Do you have more users this month than last? What did you do differently? In addition to vanity metrics, I often see product teams measuring output oriented metrics, such as the number of features shipped, story points completed, or user stories worked on. These are not product metrics. We need to set metrics that can help tie the results of product development back to business. My 2 favorite product frameworks to help you think through the appropriate product goals are Pirate Metrics and HEART metrics.
Pirate Metrics: Think of it as a funnel: Users finding your product is acquisition; users having a great first experience is activation; keeping users returning to your product is called retention; users recommending others because they love your product is referral; and, finally, users paying for your product because they see value in it is revenue; Put it all togeter and you get AARRR – Pirate Metrics.
Acquisition is that users land on your site and sign up. Activation is when someone takes the first step with your product toward having a great experience. For Marquetly, that would be taking the assessment so that they understand which courses to take. Activating people well at the beginning leads to retention down the line. If you are a B2B product with a sales team, you generate revenue before users have activation. You can swap the order of these to match your product’s flow. With the right funnel, you can easily calculate the conversion through each step. This informs you as to where people are falling off and allows you to act to fix it. The goal here is to keep people retained and paying. Pirate metrics did NOT talk about user satisfaction.
The HEART framework metrics measure happiness, engagement, adoption, retention, and task success. These are used to talk about a specific product or feature. Adoption is similar to activation and retention is retention in Pirate Metrics. With HEART, you add in other metrics to talk about how the user interacts with the product. Happiness is a measure of how satisfied the user is with the product. Engagement is a measure of how often users interact with the product. Task success measures how easy it is for a user to accomplish what they were meant to do with the product.
All product related activities contribute to revenue or cost, for the business. This is how we connect product metrics to business outcomes. But it’s important to have metrics at every level of strategy, so we can tell whether we are successful along the way. I call the system of two metrics that balance out each other mutually destructive pairs, although there can be more than just two. There is one problem. Retention is a lagging indicator, which is impossible to act on immediately. It will be months before you have solid data to show that people stayed with you. This is why we need to measure leading indicators such as activation, happiness, and engagement. To determine the leading indicators for retention, you can qualify what keeps people retained — happiness and usage of the product. Usually the success metrics we set around options are leading indicators of outcomes we expect on our initiatives, because options are strategies on a shorter time scale. The success metrics need to be commensurate with the length of the bet. Measuring the metrics at your option level prevents surprises when cold, hard facts come in later at the initiative level. This is the first thing every company should do — implement a metrics platform. Amplitude, Pendo.io, Mixpanel, Intercom, and Google Analytics are all data platforms. Some like Intercom and Pendo.io, also implement good customer feedback loops, because they provide tools to reach out to customers and ask questions. Having a metrics platform implemented, is essential for a product-led company because it enables product managers to make well-informed decisions. You won’t be able to set success metrics without investigating the problem. This is why we first need problem exploration. The success metrics you set will be relevant to that problem you discover and the solution you implement to solve it.
1. Problem exploration
Ux lead is leading her team through the Product Kata. “What is our option’s goal?” Increase the rate of published courses to 50% and increase the number of second courses created by teachers to 30%”. “Where are we now?” “We’re still at the beginning: the publish rate of those courses that started is only 25%. Pretty dismal. The number of second courses is at just 10%.”. “What is the obstacle standing in our way that we want to tackle?” “We don’t understand enough about the problems the teachers are facing when creating courses.” “What is one step we can take to better understand this?” “User research.” “I will line up 20 of our teachers for one-hour sessions and watch them create courses. In two weeks, I should have enough for us to identify the key pain points. Can you help me with the interviewing, the Ux person?”
There was so much angst in those sessions, but it was well warranted. The team, video chatted with most of the users and had them screen share. They had few teachers who hadn’t launched their courses yet, and they were able to show them where they were stuck. After the interviews, they synthesized the data and regrouped.
I know this workflow is completely off. Let’s write out the problems and map out the desired flow for the user, and we can work from there.”
- When I am transferring my course from another school, I want to easily and accurately upload all my information into Marquetly so that I do not have to spend time reentering everything.
- When I am creating a new course, I want to import all of my content easily so that I can launch faster.
- When I am creating a course, I want an audio-only option so that I can save time creating videos and can appleal to people who like podcasts.
- When I am launching a course, I want to know what my potential students want to learn so I can create relevant content for them.
They drew the current user journey on the whiteboard and marked the areas that were particularly troublesome. “I think our biggest opportunity is around solving the time it takes for people to get their content into the system.” “We should start with that as our problem and then experiment around it.”
Hypothesis: We believe that, by helping teachers get their lesson content into the system painlessly and quickly, we can increase the rate of published courses to 50% and increase the number of second courses to 30%.
Product managers are often spoken about as the “voice of the customer,” yet too many of us are not getting out and talking to customers as much as we should. Although data analysis is important, it can’t tell the entire story. User research, observations, surveys, and customer feedback are all tools that you can harness to better explore the problem from a user standpoint. User research is not to be mistaken for usability testing, which involves showing a prototype or website and directing people to complete actions. Evaluative. Problem based user research is generative research, its purpose is to find the problem you want to solve. It involves going to the source of the customer’s probem and understanding the context around it. The team went to the customers, conducted observations, and then asked questions. “What is the biggest problem standing in the way of you finishing your course? What’s the pain?” When you understand the context around a customer’s problem, you can form a better solution to solve it. Without that, you are just guessing. If you don’t have an underlying understanding of the problem, you can never deliberately create the right solution. “Nobody wants to hear that their baby is ugly.” No body wants to hear that their solution stinks. Instead fall in love with the problem you are solving.
App idea: “Where they were in the process?” “which problem they are solving?” “Where did this idea of an app come from?”. On my first day, I met the product and leadership teams to dig deeper into their idea for the new app. They wanted to use Tinder-like interface to match women up with pontential business mentors. Step back and ask: “Do women feel comfortable connecting with strangers for mentorship in this manner?” We interviewed many women and pitched the app idea to those who were struggling to find a mentor. “Eww, no.” was the typical response. Many of these women were finding mentors through referrals by people they trusted: friends of their parents, university alumni.. They didn’t want to swipe to find a mentor. By getting into the mindset of solving problems early, you allow much more time to build the right thing, because you’re not wasting time chasing after the wrong things.
In B2B, you can work with the sales or account managers to have them be your research spies — asking the questions you might need to know during their sales calls or follow-up meetings. Even if you have access to the people, customer research is not without its pitfalls. People often immediately jump into telling you the solution. “Oh, I just need a button here that lets me do X,”. You need to ask, “Okay, but why? why do you need a button? Why do you think a button is the right thing?” “What are you trying to accomplish?” It is understanding the user’s need — not the button — that helps you to get closer to understanding the root of the problem. Remember, it’s not the customer’s job to solve their own problems. It’s your job to ask them the right questions.
Validating the Problem at Marquetly: “So we’re betting that, if we make it painless and quick to get content into the sytem, we can increase the number of published courses. What if we just automate the creation of the course? They could easily upload all their content somewhere, and we could just take care of putting into the right place.”. Let’s go back to Kata and walk through it.” “What did you learn on your last step?” “We learned more about the teachers’ problems. We know that they have trouble getting the content into the system. Figuring out how our system works seems to be the biggest hurdle.” “Now what is your current state, based on that last step?” “We are still where we were in relation to the goal. We haven’t moved any closer to it.” “Okay, so what is the biggest obstacle standing in the way of your reaching that goal?” “What do you need to learn next?” “The next thing we need to learn in order to move forward is how to solve the biggest pain point for the user — getting the content into the system — and what about that is taking so long.”
“It sounds to me like you need to do some generative solution research. that means you need to answer questions like ‘what do they value in a solution?’. This is less about providing a hypothesis and more about understanding what would make a good solution to test.”
Team reached out to 20 teachers, who had just begun creating a new course and asked them if they were having trouble getting their course into the sytem. Ten answered yes, and they pitched their service as, “We’ll take on the work to get your course into the system — you just have to get us the content. Then you can take a look and edit whatever you would like.” Five teachers agreed to work with them ove the next 2 weeks. They asked the teachers to send them whatever they had in any format that worked for them. There were dropbox links, Google Docs, spreadsheets of curriculum, and links to YouTube. Teachers were sending them unedited, with instructions on how they wanted them edited. The audio files came separately.
Can we ask teachers to provide us all the material through an email? We can put this altogether manually into our sytem. “I didn’t think we were going to be video editing for them,” “I thought we told them they had to send us finished content.” “Remember, they aren’t experts in creating online courses. They are good at developing curriculums but not necessarily at making videos, what if we understood the problem wrong? What if it isn’t getting the content into the system but creating online content — videos in particular — that is the problem?”
“Your website sucks and it’s pretty hard to create a course because I have to learn how to edit videos and create videos that are engaging. If I could create videos faster, I would be able to finish this course in half the time.” Video creation was one of the biggest pain points the teachers had. They were spending upward of 2 months editing the videos.
2. Solution exploration
“We found a bigger problem standing in the way of reaching our goal,” “Our teachers are spending upward of 80 hours over 2 months, editing videos for their class. There are some people who are even reshooting the videos over and over again so they don’t have to edit.”
“See trying to solve one problem uncovered a bigger one. What is the next step?”
“We know that video editing is a problem for most of our teachers, but we need to learn whether solving this problem willl increase the published rate of courses.”
“How do you make that happen?” After 2 weeks.
“Well, it didn’t go as we expected, but we learned things.”
“The type of experiment you are running is a concierge experiment. They are, by nature, expensive because you’re manually taking on the work. You need to learn what makes sense in the solution and then think about how you can scale this to a sustainable offering — that is, if it proves your hypothesis. Let’s check back in and see whether the teachers give the green light to publish within the month.”
The team identified the solution components that mattered to its teachers:
- Recipe or how-to guide for successful video creation
- Ability to splice together talking-head video, slides, images, audio, and YouTube videos
- Ability to show text on top of the video
- Introduction slide to the video
- Control over the finished product
- Ease of getting information to the editors
- Human language on what is needed — not technical speak
By the end of the 3 weeks, 12 teachers had published. Success!
Companies often confuse the building to learn and building to earn. Experimentation is all about building to learn. It allows you to understand your customers better and to prove whether there is value in solving a problem. This means you’l need to eventually scrap whatever you build and figure out how to make it sustainable and scalable, if it does succeed.
I talk more about solution experimentation. These experiments are designed to help companies learn faster. We are experimenting to learn, not building to earn. The Product Kata is a great tool for grounding people in learning. “What do you need to learn next?” There are many ways to experiment to learn. Concierge, Wizard of Oz, and concept testing are three examples of solution experiments. Setting expecations on experiments with your customers is key to keeping them happy and to mitigating risk of a failed experiment. Explain to them why you are testing, when and how the experiment will end, and what you plan to do next. Communication is key to a successful experimentation process.
Concierge experiments deliver the end result ot your client manually, but they do not look like the final solution at all. Your customers will understand that you’re doing it manually and that it’s not automated. Because you get to work with your customers closely, there is a ton of feedback flowing through and there are tight learning loops. By taking on the work yourself, you can learn how to build the software correctly the first time. You should conduct these experiments with just enough users so that you can stay in regular contact with them, get plenty of feedback, and then use that information to iterate. When you are ready to see whether your solution scales to more people, you should use another type of experiment.
WIZARD OF OZ
The idea behind the Wizarad of Oz is that, unlike the concierge experiment, it looks and feels like a real, finished product. Customers don’t know that, on the backend, it’s all manual. Someone is pulling the strings — just like the Wizard of Oz. Zappos actually started with the Wizard of Oz method. Founder Nick Swinmurn put a simple website up on WordPress. Visitors could view and then buy the shoes online. But on the backend, it was just Nick, single handedly running around, buying shoes from Sears and shipping them out from UPS himself. Companies are tempted to leave Wizard of Oz experiments up for a long time because they look real to the customers. This is not wise, because it is stilll manual on the backend.
Concept testing is another solution experiment that focuses more on high-touch interaction with the customer. You try to demonstrate or show the concepts to the user to gauge their feedback. These can vary in execution, from landing pages and low-fidelity wireframes to higher-fidelity prototypes or videos of how the service might play out. The idea here is to pitch the solution idea in the fastest, lightest way possible to convey the message. This is generative than evaluative. Just like problem research, generative solution experiments help you to gain more awareness around what a user desires in a solution. When you show the concept to users, you are asking them to put themselves into the scenario in which they are experiencing the problem, and you are asking them questions about how the solution would or would not solve their problem. Landing pages always pitch the idea and contain an ask in the form of entering an email address. This is how Dropbox got its first round of investment.
So the company turned to a solution experiment. The team put together a rough video, demonstrating what Dropbox could do. It had not built a demo or a prototype but instead used video edition to demonstrate what it would look and feel like to the investors. It felt like a real product demo, even though it wasn’t a finished product. When investors saw it, they went wild. It was magic.
Prototypes are the most popular tool for testing. Prototypes do not require any code, and there are many software products out there that can help you link screens together to make the flow feel real. First explore the problem before any solution activities, including prototypes. Your biggest objective is learn NOT earn.
Learning reduces risk. The goal of solution exploration is to get faster feedback. If we take too long to get feedback, we not only waste money but we also waste time. Every industry and product has unknowns — getting creative about how you answer these unknowns is key.
Internal tools are often neglected, but they stil matter to the company. They need to be treated the same way as any other product. You need to understand the direction, diagonose the problem, learn more about it, and then learn what the right solution is. After you have experimented to prove value, you can concentrate on building your first version and optimizing.
3. Solution optimization
The team used a technique called story mapping, created by product management veteran and consultant Jeff Patton, to make sure they all understood the work and to prioritize the first release. They then prioritized the work, cutting out a few less-critical components in the first version. After a month after release: “Our adoption rate isn’t quite where we need it to be,” “We only had 60% of the teachers adopt the video-editing software in that first month. The ones who did adopt it are surpassing our previous published course rate with a 75% publish rate. Let’s reach out to those who did not adopt it last month and find out why.”
Evolving the Product Vision: North star document explains the product in a way that can be visualized by the entire team and company. This includes the problem it is solving, the proposed solution, the solution factors that matter for success, and the outcomes the product will result in. North stars are great for providing context to a wide audience. They should be evolved over time, as you learn more about the product. It’s important to note that this is not an action plan — it does not include how the team will be building the product. That is where story mapping comes in.
Story mapping helps teams break down their work and align around goals. As Patton says, “It’s purpose is to help the team communicate about their work and what needs to get done to deliver value.” Building understanding as a team helps you develop product faster, which means getting value out to the customers faster. You don’t want to sacrifice that. After you have understanding around where you are going, it also makes it easier to scale back to a version 1 of your product. You need to always start at that big picture — the north star — to do this well. Otherwise, there is nothing to anchor you, and you end up leading yourself into the build trap.
To get to a Version 1, you need to prioritize your work. Prioritization is a top issue for product managers. Benefits mapping, kano model are some frameworks to help prioritize. My favorite is Cost of Delay. If you understand the desired outcomes from a strategic perspective, you can use Cost of Delay to help you determine what to ship sooner. Cost of Delay is a numeric value that describes the impact of time on the outcomes you hope to achieve. It combines urgency and value so that you can measure impact and prioritize what you should be doing first. When you think of building and releasing that first version of the product, you need to consider the trade-offs between the amount of value you can capture with the scope of the release and the time it takes to get it out the door. It’s an optimization problem. Reduce the scope enough so that you can capture the maximum value in the right time. This is how you build with intent and get out of the build trap. CoD is the money that will be lost by delaying or not doing a job for a period of time. For example, if a prospective feature would be worth $100,000 per month, and there was a delay of three months, the total CoD would be $300,000.
The Product-Led Organization
The product-led organization is characterized by a culture that understands and organizes around outcomes over outputs, including company cadence that revolves around evaluating its strategy in accordance to meeting outcomes. In product-led organizations, people are rewarded for learning and achieving goals. Management encourages product teams to get close to their customers, and product management is seen as a critical function that furthers the business.
“This quarter, we were able to launch the video-editing software and onboard 150 new classes to our site, all in key areas of interest for our users. Since the launch of those courses, we have seen an increase in acquisition rate from 15% to 25%, and our retention numbers have risen to 60%.” A year ago, teams never talked to customers and were rewarded for shipping software instead of customer-centric and outcome-oriented mindset. If there is one main reason I have seen companies fail to make a transition, it’s the lack of leadership buy-in to move to an outcome-oriented company. Leaders will say they want to achieve results, but, they still measure success by features shipped. It’s important to have a cadence of communication that shows progress at every level of the organization, tailored to each specific audience.
Visibility in organizations is absolutely key. The more leaders can understand where teams are, the more they will step back and let the teams execute. The more you try to hide your progress, the wider that knowledge gap becomes. If you keep things transparent, you will have more freedom to become autonomous. When leaders do not see progress in the form of outcomes, toward goals, they resort to their old ways. We need a cadence of communicating strategy that matches our strategic framework. Remember our four levels of strategy: vision, strategic intent, product initiatives, and options. Each of these is on a different time horizon, and progress toward them should be communicated accordingly.
- Quarterly business reviews
- Product initiative reviews
- Release reviews
During QBRs (quarterly business review meetings), the senior leadership, should be discussing progress toward the strategic intents and outcomes of a financial nature. This includes reviewing revenue, churn of customers, and costs associated with development or operations. The CPO and their VPs of product are responsible for communicating how the outcomes of product initiatives have furthered strategic intents. New strategic intents can be introduced in this meeting, as older ones are coming to completion.
The product initiative review is another quarterly meeting that can be staggered with the quarterly business review on off months. This meeting is for the product development side of the house — CPO, CTO, design leaders, the VPs of product, and the product managers. Here we review the progress of the options against the product initiatives and adjust our strategy accordingly. This is the place for product managers to talk about the results of preliminary experimentation, research, or first releases, as they relate to overall goals. New product initiatives can be introduced in this meeting for feedback and buy-in along with funding from the product development leadership group.
Release reviews provide the opportunity for teams to show off hard work they have done and to talk about success metrics. These should happen monthly, before features go out, to showcase what is in the pipeline to be released. We should be communicating only what we know is going to ship — not experiments or research. Executives attend this meeting to see what is being shipped out to customers. This is also a place for teams to communicate their roadmaps internally so that marketing, sales, and the executive team are aware. Decision making happens after the meeting, when something that needs action pops up.
Instead of thinking of roadmaps as a Gantt chart, you should view them as an explanation of strategy and the current stage of your product. This combines the strategic goals with the themes of work and the emerging product deliverables from it. To do this, the product roadmap should be updated constantly, at the team leavel. These are Living Roadmaps. Our roadmaps consist of a few key parts:
- The theme
- Goals and success metrics
- Stage of development
- Any important milestones
Experiment: This phase is to understand the problem and to determine whether it’s worth solving. Teams in this phase are conducting problem exploration and solution exploration activities. No production code is being created.
Alpha: This phase is to determine whether the solution is desirable to the customers. This is a minimum feature set or a robust solution experiment, but built in production code and live for a small set of users. These users understand that they are getting early access to a feature that might change or be killed, if it is not solving their problems.
Beta: This phase is to determine whether the solution is scalable. This release is available to more customers than the Alpha phase, but is only a smaller subset of the entire population, since we are still testing. At this point, we’ve proven that the solution is desirable to customers, so it is unlikely that this feature will be killed unless it is not technically stable.
Generally Available (GA): This phase means that the solution is widely available to all our clients. Sales teams can talk openly about GA products and can sell as much as possible to the target market.
Poorly constructed roadmaps are the source of much tension between product and sales. Creating working agreements and roadmaps that can be communicated to customers is key to developing a good relationship between product and sales. You can make an agreeement with the sales that anything being released as GA can be added to its sales roadmap. Great communication, in the form of working agreements, meeting cadences, and roadmaps, can solve many of the alignment problems in the company. It takes a lot of work to put all of this together. This is why you need a product operations team.
Product Operations: As product teams scale to more than a few teams, keeping track of progress, goals and processes becomes a challenge. Deploying the strategy and goals, understanding success of experimentation, and reporting on progress was too much work for the product leaders. They need to focus on growing their product, and operations work was getting to be too much of a distraction. We ended up implementing a product operations team, run by chief of staff who reported to the CPO. The Chief of staff created a team of two people to help her streamline operations and reporting. They oversaw the cadence of strategy, found an analytics partner to set up tracking, and collected and organized the progress toward goals into reports for executives. This allowed the product people to focus on what they were good at, while product operations helped them to make informed decisions by surfacing up those reports.
The point of the team is to create the criteria for inputs and outputs of the work. The product operations team should be made up of a combination of project managers, product people and a few developers so that they can integrate with third parties, or build custom tools to fit a specific purpose. When we spun the team, I told the new VP of product operations, “Success for you would be automating away your team.” It’s an efficiency engine dedicated to automating, streamlining, and optimizing. Product operations team promotes good communication and alignment of the organization.
Rewards and incentives don’t just affect the actions of product teams, they also affect other parts of the organization. Tying retention numbers to Sales team’s success metrics can help to ensure that they target the right people. You should be rewarding the people for moving the business forward — achieving outcomes, learning about your users, and finding the right business opportunities.
Product managers need a certain amount of trust from the organization to have room to explore different options. If they are not allowed to explore weird paths, they will never push the status quo. With the rise of Lean Startup, we began to focus on outcomes, yes, but we also started to celebrate failure. Learning should be at the core of every product-led organization. It is better to fail in smaller ways, earlier, and to learn what will succeed, than spending all the time and money failing in a publicly large way. This is why we have problem and solution exploration in product management — to de-risk failing in the market. Sometimes we fail in the most spectacular way. How we respond to these situations really determines our company culture. Netflix is a safe, innovative place that pushes the boundaries. Companies fail slowly. They release products and never measure whether those products do anything, whether they are producing value. This is the more dangerous and costly way to fail. Taking 10 years to fail, slowly burning through cash and never getting anywhere, is more problematic than allowing for smaller failures along the way.
“Hey, I think the most costly thing we can do is build this product without knowing it’s the right product to build. How do I test it and ensure that this is actually what we want? How do I become more confident that we’re on the right path before I invest money in this?” Leaders who give people the room to do that, see the best results and avoid the build trap. It’s also the leader’s job to give people boundaries within which to operate. “Okay, you’re going to go experiment, but you can only spend $100,000 on this experiment. We don’t want to invest more. Come back to us when you know more.” Instead of launching the product to everyone, start with a small representative population, learn from them, and then expand to more people as you feel more confident. The first experiment is always the scariest, for everyone — leaders and product managers. Explain to your boss the possible impact of your experiments. How are you going to mitigate risk? How can you save money? If you are an executive, think about how you can create safe spaces for people to learn.
Budgeting: It is wiser to look at funding product development like a venture capitalist. The investment that VCs give the companies helps them get to the next level, until they are profitable. If a team is trying to build out a new product line as a way of generating a new revenue stream for the business, it might ask for $50,000 to get started and explore this new area to see whether they’re on to something. After they’ve proven that there is a market and have shown the data that it will succeed, the team could ask for $250,000 to do more exploration or to begin product development. If the people adopt the product, the team can go back and ask for a much larger amount, in the millions, to scale and fund its efforts to grow the product line. The idea is that all budgeting should be tied to getting a product to the next stage. It’s an effective way to both focus the teams and make sure you’re not overspending.
Customer Centricity: Having the right communication, rewards, incentives, budgeting, policies, and safety are all important in an organization, but one more thing is still required to make you truly product-led. In addition to a culture that rewards and promotes learning, you need a culture that focuses on the customer.
The most important single thing is to focus obsessively on the customer. Our goal is to be earth’s most customer-centric company.Jeff Bezos
This is the core of what it means to be customer-centric — to put yourself into your customers’ shoes and ask, “What would make my customers happy and move our business forward?” John Deere sends its people to a fully-functioning farm set up a few miles from the office. It’s a real, running farm with equipment that people can come try out before deciding to buy. The engineers and product managers all go out there to learn more about farming. John Deere also has people in the organization who are farmers. Many of the software teams spend fridays helping the farmers turn over their crops. Even when economic times were tough for the company, he has always been allowed to visit his customers. This is what it means to be customer centric: knowing that the most important thing you can do to create great products is to deeply undertand your customers. This is also the core of what it means to be product-led.
Product-Led: Chris knew that, if he did not adopt the outcome-oriented mindset, the customer centricity, and the comfort with uncertaintly, no one else in his organization would. I expalained to Chris how I had seen some major transformations fail because they were delegated.
When I was first starting off as a product manager, I needed to learn about humility. I needed to learn to be humble and to gain the support and buy-in of my team in order to make great products. Experimenting with my team taught me the power of data. Data beats any opinion every time. As I moved on to more senior roles, I learned that having a good strategic framework could make or break a company. If you did not judge people for success by outcomes, you would never achieve those outcomes. People will get in the way of good product every time. You need to deeply understand what motivates people and to know how you can address their personal motivations by introducing information and data that wins them over. One of the quickest ways to kill the spirit of a great employee is to put them in an environment where they can’t succeed. The truth is that most organizations out there are not product-led. Being product-led is a winning strategy. Best companies are developing products with the intent to deliver value to their customers. Being agile, being customer-centric — these things are already baked into their culture. The fundamental criterion for building a product is that the product solves a problem for a user. They build things to further their business.
Six Questions to Determine Whether a Comapy Is Product-Led
Who came up with the last feature or product idea you built?
“What do you mean who came up with it? Well, our team did. Right? That’s how it normally works.” This kind of response is a sign of healthy product management organization, in which management sets the goals and the team is given room to figure out how to reach them.
What was the last product you decided to kill?
Another sign of an unhealthy product management culture is the inability to kill a product or idea that will not help a company reach its goals. “We never really kill anything.”
When’s the last time you talked with your customers?
Without a healthy dialogue between a company and its customers, there is no way to truly learn about what customers want or need. Product managers should be comforable talking to customers.
What is your goal?
If the product manager cannot articulate a clear goal, it’s a sign of poor product management at the organization level. If the product manager has the goal but it is more output centric than outcome focused, this also signifies an unhealthy product team. Goals should be outcome oriented, actionable, and clearly communicated throughout the organization.
What are you currently working on?
Successful product manager talks more passionately about the problems the product development team is solving than the solutions they are shipping. I want to hear about what big problems they are tackling for the user and the business.
What are your product managers like?
As product managers, we want to work in an organization where the role is respected and well regarded. Product managers are NOT well respected, because, either they are too strong or too weak. A sign of a healthy product team is hearing development and Ux people say, “I love my product manager. She has clear direction, communicates well, and keeps us stay focused on the goals and problems.”
The dream organization for product people is one that sees product managers as leaders who help shape the direction of the company and the services they provide to their customers. They are respected as partners in steering the ship forward. These six questions can help you to ensure that the company you are in — or want to join — will support and encourage you to do everything you can to succeed.