3 Answers to 3 Questions
1) How can you develop your product organization into an "idea factory?" 2) How should product managers respond to "hiccups?" 3) What should you do if you're wrong about the product strategy?
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1) You mentioned Netflix was an "Idea Factory." How can you make a Product team become an idea factory too?
A product “idea factory” requires five things:
A clear articulation of the problems you’re trying to solve.
Metrics to measure which ideas work.
A culture that encourages experimentation and risk-taking.
Teams who have the intellectual curiosity to explore new ideas and the courage to share/debate them.
Independent teams that are experts in their area and aren’t required to build consensus across the organization.
Here’s some detail on each of these five attributes:
1) A product strategy articulates the problems you’re trying to solve. Product strategies are hypotheses of how to delight customers in hard-to-copy, margin-enhancing ways. As an example, one of the high-level product strategies at Netflix is personalization. The hypothesis: A personalized experience will make it easier for members to find movies they’ll love. Most of the creative work in the personalization swimlane at Netflix focuses on creating and delivering ideas to prove this hypothesis. Product strategies provide the focus for an “idea factory.” They articulate the problems teams need to solve.
2) Product strategy also defines proxy metrics to measure which ideas work. At Netflix, most of the product strategies focused on improving retention. But retention is slow to move, so we had more sensitive, lower-level proxy metrics. For instance, the proxy metric for personalization was the percentage of members who rated at least 50 movies in their first two months with the service. The ability to measure results via proxy metrics creates a meritocracy where great ideas come from many sources. Metrics turn subjective debates into objective, provable hypotheses. A strong metrics focus creates an environment that is the opposite of top-down, “hiPPO” environments where the Highest Paid Person’s Opinion is most important.
3) Company culture helps establish an environment that encourages risk-taking and experimentation. When I asked Reed Hastings, the co-founder of Netflix, what he wanted his legacy to be, he answered, “consumer science.” Through ongoing experimentation, he hoped Netflix could develop extraordinary consumer insight. Once, when Reed and I debated two possible approaches for too long, he suggested, “Let’s test both.” Reed also encouraged the team to take on risk, “As we get big, we need to maintain the same level of risk we took on as a startup, and avoid playing it safe.” This gave teams the license to explore and test lots of ideas.
4) Cultural values encourage skills and behaviors to help create an environment where teams have the intellectual curiosity to explore new ideas and the courage to share and debate them. Three of Netflix’s cultural values are “intellectual curiosity," “courage,” and “candor.” These values help create an environment where team members are open to new ideas and engage in passionate, spirited debate.
5) Netflix encouraged lots of independent teams to develop expertise in their area and didn’t require consensus across the broader organization. By design, teams were “highly aligned, loosely coupled.” They were aligned in the overall strategy for the company but “divided and conquered” effectively to form discrete teams, each focused on building different aspects of the customer experience. The merchandising team, for instance, worked to create the right site/tv/mobile structure for the store, the personalization team helped surface the right titles for each member, and the content team focused on acquiring the best movies and TV shows. The merchandising and personalization team didn’t weigh in on what content to acquire, and the content team didn’t engage in decisions about merchandising or personalization. Doing this would be “highly aligned, tightly coupled,” which slows decision-making and diminishes risk-taking.
Over time, Netflix developed very focused “swimlanes” who could articulate:
the problems they were trying to solve, as well as
the metrics they used to evaluate success,
We also created a culture where team members:
were willing to take on bold risk, and
had the capacity to generate, share and debate lots of ideas.
For me, these are the characteristics of an “idea factory.” The exercise for you is to see how your product organization does against each of the five characteristics I outlined above. With persistent effort, your product organization will become an idea factory, too.
2) How should product managers respond to hiccups like missing a ship date or shipping something that has to be rolled back?
A big part of a product manager’s job is to broadly communicate what’s happening, along with the “why” and “when.” Over-communication is critical. There’s a tendency, however, to over-communicate the wins and under-communicate the losses. Work to communicate both equally.
If something is not shipping on time, give as much warning as you can that the project is delayed, along with context for why. A common challenge: balancing time, quality, and money. It takes years to develop your own approach to these trade-offs. My style was to ship products quickly with only reasonable quality so I could learn faster. But sometimes, my initial launches sucked — it’s a tricky balancing act.
What not to do:
Procrastinate or hide the truth
You want to demonstrate that you have strong judgment and can be trusted, and each of the three actions above erodes trust. Be transparent about what’s happening, do a post-mortem, and share your learnings across the organization so others can learn from your “hiccups.”
I’ll give one example from my Netflix history.
We weren’t a “ship-on-time” culture but instead rolled things out when we felt the product or feature was ready. But for the launch of streaming, we committed to a specific date: January 15, 2007.
By that time, Netflix had been a DVD by mail company for nine years, and the financial markets were very curious about when we would transition to streaming. But because our launch plans were material, non-public information that would tip off both Wall Street and potential competitors, we chose to keep our launch plans secret. But we committed ourselves to a launch date on January 15th by inviting the press to a special preview on January 5th. We required the press to sign NDAs and embargo their stories until the 15th.
On January 5th, 40 journalists visited the building, and the result was a disaster. In nearly half the cases, we couldn’t get the streaming software to work on the journalists’ laptops. Equally bad, our goal had been to have one thousand titles at launch, but we only had three hundred. So for the 50% of journalists who could stream to their laptops, the selection was sparse.
How would you handle this situation? We decided “the show must go on.” Through detective work on each reporter’s machine, we realized they weren’t representative of our members. Reporters download lots of prototypical software on their machines, which creates many software conflicts, so we guessed our streaming service would likely be “good enough” at launch.
As for getting to 1,000 titles by launch, there were many challenges, largely for our content team in Los Angeles. The content team needed to acquire the digital rights to TV shows and movies, negotiate terms, and get the digital content.
The biggest challenge was digitizing the content into multiple streams for playback on PCs. Back then, it was an archaic process, sometimes as rudimentary as “ripping” movies from a DVD source. And at that time, given so much of the content came from Hollywood, we envisioned that the digitization process would happen in LA and be the responsibility of the LA content team.
I was good about the things I could control — the interface, making the required software download as straightforward as possible, and effectively merchandising the titles that we did have. What felt out of my control was getting to the one thousand title threshold.
Looking back, I was a bit of a lunatic. I called daily for updates, offered to visit LA for two weeks — whatever I could do to help. While I intended to find ways to be helpful, the LA team thought I was over-aggressive and not helpful in any way.
We launched on January 20th, and about 5% of our members watched at least fifteen minutes of content that first month and fewer than five percent of these members had technical issues. Some of our members noticed there wasn’t a lot of great content, but it was free, and they enjoyed the novelty of watching movies instantly. Looking back, we had enough content to get started and to learn about building a successful streaming service in the long term.
With perfect hindsight, here’s how I would evaluate my response to the hiccups:
I stayed the course and executed the plan reasonably well despite initial panic about buggy software and lack of content. We were clear that we would ship on time and accept some compromise in the quality of our work — both the bugginess and the limited library.
We did a reasonable job of over-communicating our plan and why we were willing to accept compromises. Launching would put us on a much faster course to learn from our members about what would delight them—and what would not. We’d also learn the potential “gotchas” like the content ingestion challenges.
Areas for improvement
I responded poorly to the things that were out of my control. My badgering of the L.A. team diminished trust between the product and content teams, making my job harder in the long term. I should have stayed focused on my job and anticipated 300 titles were “good enough” for the initial launch.
As part of the learning process, we moved the encryption process to the technology teams in Los Gatos. Over time, it was obvious that the digitization process was a technology, not a content issue.
The important thing is to recognize that “hiccups” happen with technology projects. Learn to develop your own approach to the balancing act of time, quality and money, outline your plan, then over-communicate when things go well or poorly so everyone can learn together. In the long-term, if you do this well, your credibility within the organization will grow, making it easier for teammates to trust your judgment and execute future projects together.
3) What should I do if I was wrong about the product strategy?
Get used to it— you’re going to get it wrong about half the time. When this happens, document what you learn, then form and execute new hypotheses.
As a product leader, you’re trying to align three forces:
Product strategy. Developing hypotheses for how you will delight customers in hard-to-copy, margin-enhancing ways.
Consumer science. Testing ideas with consumers to see what works.
Culture. Creating an environment that embraces experimentation. Building an organization that collectively has good judgment about people, products, and the business.
Your product strategy is your initial plan. Consumer science provides the means to test the plan. Culture helps set the tone for experimentation and risk-taking. More importantly, over time, culture becomes the storehouse for accumulated knowledge. Given few employees stay at a company forever, culture is the mechanism through which companies slowly become better “guessers” about what will work or not.
I have been very wrong in the past. When I joined Chegg— a textbook rental company— I articulated the following product vision:
Get big on textbooks
Expand into other student services
The anticipated shift from textbooks to eTextbooks was based on my experience at Netflix as we went from DVDs-by-mail to streaming. But with the transition from physical to digital at Chegg, it quickly became clear that the eTextbook transition would take decades. So I rearticulated the second step as “lead high-margin digital services for students” as a placeholder. My thinking was that we had to move from physical textbooks to a digital format to deliver higher profits, but I wasn’t sure what that product would be — yet.
We bought six small startups, which was the fastest way to experiment with multiple ideas. One of these startups, Cramster, provided step-by-step textbook solutions for all of the answers in the back of textbooks. Our initial proof-of-concept was for a broader “homework help” service, which gradually expanded into “Chegg Study,” a monthly digital subscription service for college students.
After the initial success of our step-by-step textbook solutions, I amended the product vision:
Get big on textbooks
Lead homework help
Expand into other student services
You can think of a product vision like a high-level hypothesis of a company's big steps forward over time. The product vision keeps organizations focused on the long-term.
But even in the case of Chegg, where I got the long-term product vision wrong, it wasn’t a disaster. Both a product strategy and a product vision help point teams in the right direction, and then it’s your job to make adjustments to the plan when things go wrong, or you learn more about what works.
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PPS. Once I answer a question, I archive it. I have responded to 49 questions so far!
Would you apply the strategy/science/culture framework differently at the 0-to-1 stage, vs at a later, more established stage? Anything come to mind immediately?
To carry question 3 a bit further: given that a product strategy is wrong +/- 50% of the time, how can you ensure you're at a company where that sort of failure is permissible, expected, and, ideally, welcomed in these high-stakes decisions?