Book Review: “The Psychology of Money” by Morgan Housel

The book “The Psychology of Money” by Morgan Housel has been a rage last year, that aroused my curiosity to read the book. Although this does not strictly fall into the domain of product management, I would cover it here since quite a few principles the book details out are applicable to many situations a PM faces. And it never hurts to get wiser about money matters, right?!

Cover page of the book "The Psychology of Money" by Morgan Housel

Image 1: Book Cover of “The Psychology of Money” by Morgan Housel

The rest of the article is key takeaways in a list format. The book is quite an easy read anyway, and one can start reading it from any chapter

The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people. The author calls this soft skill “the psychology of money”

  1. Generations behave differently with respect to their perspectives towards money since their view of money was formed in different worlds. And therefore a view about money that one group of people thinks is outrageous can make perfect sense to another
  2. Another important point that helps explain why money decisions are so difficult, and why there is so much misbehavior, is to recognize how new this topic is, mostly 20-50 year old compared to let’s say a 10,000 year old epoch when one can start discerning some behavior changes in species!
  3. Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort
  4. As much as we recognize the role of luck in success, the role of risk means we should forgive ourselves and leave room for understanding when judging failures. Therefore we should focus less on specific individuals and case studies and more on broad patterns
  5. The hardest financial skill is getting the goalpost to stop moving that is to recognize when one has had enough money
  6. Some invaluable things in life are reputation, freedom and independence, family and friends, being loved by those who you want to love you and happiness. One should protect these things away from harm by knowing when to stop taking risks that could take them away. And knowing when you have enough!
  7. Counterintuitiveness of compounding may be responsible for the majority of disappointing trades, bad strategies, and successful investing attempts. Time is the most important factor here
  8. There’s only one way to stay wealthy: some combination of frugality and paranoia
  9. Applying survival mindset in real life boils down to appreciating three things 1. Be financially unbreakable to stick around long enough so that compounding can work wonders 2. Plan for the plan not going per the script. Having plan B is critical 3. Be optimistic about the future but paranoid about what will prevent you from getting there
  10. Short term paranoia is important for surviving long enough and exploit long term optimism
  11. Tails drive everything. The distribution of success among large public stocks over time is not much different than it is in venture capital
    • By accepting that tails drive everything in business, investing, and finance one would realize that it’s normal for lots of things to go wrong, break, fail, and fall
  12. If there’s a common denominator in happiness, it’s that people want to control their lives. And therefore controlling one’s time is the highest dividend money pays
    • Since controlling time is such a key happiness influencer, people don’t feel much happier now since over generations that control have diminished. One should use money to gain control over time
  13. The single most powerful thing to do better as an investor, is to increase the time horizon!
  14. If respect and admiration are the goals, be careful how one seeks them. Humility, kindness, and empathy will bring more respect than any horsepower ever will
  15. Wealth is financial assets that haven’t yet been converted into the stuff one sees
  16. Building wealth has little to do with income or investment returns, and lots to do with savings rate
  17. The value of wealth is relative to what one needs and therefore past a certain level of income, what one needs is just what sits below the ego
  18. Saving is a hedge against life’s inevitable ability to surprise at the worst possible moment. It is like taking a point in the future that would have been owned by someone else and giving it back to yourself
  19. Flexibility is perhaps one of most important competitive advantages, in the world where intelligence is hypercompetitive and technical skills are getting automated
  20. Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable
  21. Reasonable is more realistic and one has a better chance of sticking with it for the long run, which is what matters most when managing money
    • For example, it may be rational to want a fever if you have an infection. But it’s not reasonable and therefore we want to suppress fever anyhow even when it can be advantageous for us!
  22. The reasonable investors who love their technically imperfect strategies have an edge, because they’re more likely to stick with those strategies
  23. Anything that keeps you in the game has a quantifiable advantage. Become OK with a lot of things going wrong. Be nicer and less flashy!
  24. Acting on investment forecasts is dangerous. However, people try to predict what will happen next year. It’s human nature and is reasonable!
  25. The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services
  26. Recessions have become more sporadic over time because 1. Maybe Fed is getting better at managing business cycles or extending them 2. Service industries which have dominated last 50 years are less prone to boom-bust cycles that heavy industries

Image 2: Recessions cycles have become more sporadic in the last 50 years. Credit: The Psychology of Money by Morgan Housel

  1. Since economies evolve, recent history is often the best guide to the future, because it’s more likely to include important conditions that are relevant to the future
  2. Unknowns —are an ever-present part of life. The only way to deal with them is by increasing the gap between what you think will happen and what can happen while one manages to survive. The concept of room for error is important. Having a gap between what one can technically endure versus what’s emotionally possible is an overlooked version of room for error
  3. One has to take risks to get ahead, but no risk that can wipe one out is ever worth taking!
  4. The biggest single point of failure with money is a sole reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between current and future expenses
  5. People are poor forecasters of their future selves. Sunk costs—anchoring decisions to past efforts that can’t be refunded—are a harmful in a world where people change over time
  6. Career, relationships and money can take years of planning and decades to grow!
  7. The price of a lot of things is not obvious until you’ve experienced them firsthand, when the bill is overdue
  8. Thinking of market volatility as a fee rather than a fine is an important part of developing the kind of mindset to stick around long enough for investing gains to work wonders
  9. An iron rule of finance is that money chases returns to the greatest extent that it can!
  10. Identify what game you’re playing and what game others are. One should make sure that he actions are not being influenced by people playing a different game
  11. Real optimists don’t believe that everything will be great. That’s complacency. Optimism is a belief that the odds of a good outcome are in one’s favor over time
  12. Money and health are the two topics that will affect everyone’s life whether one is interested in them or not!
  13. In investing one must identify the price of success—volatility and loss amid the long backdrop of growth—and be willing to pay it
  14. The more one wants something to be true, the more likely to believe a story that overestimates the odds of it being true
  15. The illusion of control is more persuasive than the reality of uncertainty so we stick to stories about outcomes being in our control
  16. Respect the power of luck and risk and one will have a better chance of focusing on things one can actually control
  17. Wealth cannot be built unless one can control having fun with the money right now!
  18. “Does this help me sleep at night?” is the best universal guidepost for all financial decisions
  19. Independence, at any income level, is driven by savings rate. And past a certain level of income your savings rate is driven by your ability to keep your lifestyle expectations from running away!
  20. Good decisions aren’t always rational. At some point one has to choose between being happy or being “right”!

The author in the last chapter diverts towards how Americans behave towards money especially the post-War generations. Sharp inequality became a force over the last 35 years, when the Americans have held onto two ideas 1. That you should live a lifestyle similar to most other Americans and that taking on debt to finance that lifestyle is acceptable

The author also prophecies that the current chaotic era of radial expectations that “this is not working any more” may go longer and can get even worse. Two weeks into 2021, I couldn’t agree more!

Book Review: How to Lead in Product Management by Roman Pichler…

The book “How to Lead in Product Management: Practices to Align Stakeholders, Guide Development Teams, and Create Value Together” by Roman Pichler is a quick read which would resonate well with middle to senior product professionals better. The author relies on his past experiences and literature to press home his points. The chapters are organised fairly independently so one can read it backwards if one wants to!

The author starts the book by outlining key challenges for product leaders. He brings forth an important point that a stakeholder is anybody with an interest in your product!

Key challenges that product leaders face are

    • Lack of transactional powers unlike their engineering counterparts
    • Team can be large and heterogeneous with group dynamics in flux
    • Limited influence in choosing who you want to work with!
    • Dual role in terms of being able to guide as well as contribute to team goals
    • Leadership needs at vision, strategy and tactical level are varied

Thereafter author offers a few tactics to influence people and encourage change namely Behavior Change Stairway Model propagated by Voss

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Figure 1: Behavior Change Stairway Model by Voss (2016)

Author opines that empathy is probably the most important leadership quality and in order to do that that, he suggests the following (BTW as the author points out developing empathy is the first step in design thinking, an innovation process originally created by IDEO)

    • Cultivate a genuine caring attitude for the people you want to lead, whether you like them or not
    • Improve your expertise as becoming a competent, well-rounded product person requires a continued learning effort
    • Seek the right management support
    • Choose the right leadership style basis people and org context e.g. visionary, democratice, affiliative, delegative, coaching, directing or autocratic. Ultimately one should be flexible in leadership approach and balance the different leadership styles depending on the needs of the stakeholders and the situation at hand

Essentially effective leadership is centred on three components: leader, followers, and situation

After Introduction, the rest of the book is organised as the following: interactions among stakeholders, shared goals, conversations among teams, conflict and its dynamics, decision making / negotiations and self-leadership. This review is also structured along the same lines

A. Interactions

This chapter is focused on scrum master and her responsibilities although general principles could be applied to product managers as well

For effective interactions, gaining people’s trust is vital to guide and align people and to move forward together. Some tactics to build trust are 1. Coming from a place of curiosity and care 2. Listening with an open mind and 3. Being supportive

    • Organise teams around products since component teams tend to have more interdependencies than feature teams —teams that are organised around features—which makes it harder to quickly validate ideas and to offer new or significantly enhanced functionality
    • Form stable teams since teams with stable membership have healthier dynamics and perform better than those that constantly have to deal with the arrival of new members and the departure of veterans
    • Let the Team own the Solution by including the team members in product discovery and user experience work and allow them to directly observe and interact with users
      • Product discovery refers to the work that determines if and why a new product should be developed and how an existing product can become or stay successful
    • Give the Team Time to Experiment and Learn. PMs should engage in enough discovery and strategy work to see things coming and to make the right choices

Lead the Stakeholders by involving the right people. After identifying stakeholders, author refers to power-interest to suggest how to engage with individuals

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Figure 2: Power-Interest Grid Ackerman and Eden (2011)

He offers the following tactics to interact with these stakeholders

    • Subjects can make great allies who can help you secure understanding and buy-in for your product across the business. Keep them involved by aligning product roadmaps. Some examples for subjects are product folks from adjacent teams
    • Typical context setters are powerful execs. Regularly consult them to build and maintain a healthy relationship, but don’t allow the context setters to dictate decisions
    • Stakeholders with high interest and high power are called players . These individuals are important partners for PMs. Consequently, one should establish a trustful relationship with them. Attentively listen to what they have to say and empathise with them, but have the courage to decline their suggestions and requests if they are not helpful to create value for the users and business
    • Everyone else is part of the crowd. As these individuals are not particularly interested in the product and don’t have the power to influence product decisions, it’s usually sufficient to keep them informed

Build a stakeholder community. Instead of interacting with the players on a one-on-one basis, aim to build a stakeholder community whose members work together for an extended period of time and who learn to trust, respect, and support each other. In short, move from stakeholder management to stakeholder collaboration

B. Goals

This chapter introduces a set of product-centric, cascading goals as well as guidelines to help one create the right goals
A goal expresses an aim, something we want to achieve. Some goals are big and may never be fully realised, like a vision; others are SMART—specific, measurable, agreed upon, realistic, and timebound

A chain of goals for PMs typically look like this

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Figure 3: A Chain of Goals for PMs (Roman Pichler)

Product Vision: It describes the ultimate reason for creating a product and the positive change it should bring about e.g. healthy eating

    • As the vision is an inspirational and visionary goal, it cannot be measured. In fact, one might never fully realise the vision

User and Business Goals: These are strategic goals that are derived from the vision. Also one must make sure that they are specific and measurable. This allows PMs to select the right key performance indicators (KPIs) and understand if the product is meeting its goals

    • Pay particular attention to the vision, user, and business goals. If these goals are not understood and accepted, then getting people to follow product and sprint goals will be challenging

Sprint Goals: These are a step towards the next product goal, and it covers the next one to four weeks. It is a tactical, short-term goal

Objective is a goal that can be measured. One can therefore select metrics to determine progress towards the goal. If the goal is strategic in nature, like a user or business goal, then the metrics would be typically referred to as key performance indicators or KPIs

OKRs (objectives and key results) are the measures used to determine if an objective has been met

How to make goals great and effective?

    • Shared so that people feel responsible for reaching them
    • Neither pressure individuals to agree with you nor leave it up to others to decide the goals
    • Realistic – achievable and measurable. This does not apply for visionary goals
      Inspirational
    • Alignment creating
    • Holding other people accountable for meeting agreed goals, and don’t let them getting away with ignoring goals they have agreed to

C. Conversations

This chapter helps reflecting on and improving listening and speaking habits so that one becomes even better at understanding and guiding people

  • Listen deeply. Effective listening not only helps you receive what is being said but also allows you to tune into the speaker’s emotions and empathise with the person

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Figure 4: Covey’s Listening Levels

PMs have to listen with the intent to understand, not to critique or convince

  • Listen inwardly. When listening, pay attention to feelings and thoughts. If you are getting distracted or overwhelmed by your reaction to what you are hearing, then pause the conversation
    • Give the other person full attention. Pay close but respectful attention to the other person’s body language and look out for inconsistencies, expressions that don’t match the words
    • Also prefer face-to-face meetings over email and telephone conversations, particularly for important conversations
    • The speaker’s choice of words, pitch, volume, and facial expressions, including eye movements, gestures, and other body language elements, often reveal her or his feelings
    • A great way to discover the needs behind people’s words is to ask why questions

Listen with patience. Learn to be comfortable with silence which is often necessary to encourage the other person to continue to talk and to share something that might be uncomfortable or difficult

How to handle difficult conversations?

    • Positive first. Before you say something critical or negative, first share a positive observation. This must be genuine and not flattery
    • Another way to help people receive difficult messages is flipping and framing
      • Name it: What is the problem?
      • Flip it: What is the positive opposite? Example: instead of saying you always come late to the product backlog meeting,” say, “It would be great if you could be on time for the meeting”
      • Frame it: What is the desired outcome of the positive opposite?

How to be kind in speech?

    • Keep your speech free from anger or other unwholesome emotions
    • Be grateful for the other person’s time and interest, even if you disagree with the individual
    • Apply kind speech not only to the people who are present but also to those who are not
    • Postpone continuing the conversation if you feel that no meaningful progress can be made right now, possibly due to the presence of strong, difficult emotions

D. Conflict

This chapter deals with some tactics to deal with conflict which is perfectly normal at work

Some common pitfalls with conflict

    • Win-lose. Treating conflict like a zero sum game gives rise to the following common but unhelpful conflict strategies a. Competitive confrontation b. Passive aggression c. conflict avoidance d. Passivity which is the opposite of competitive confrontation: You give up what you want and agree to the other person’s requests or demands, thereby trying to appease the individual
    • Blame game. Accepting responsibility and moving from a blame frame to a contribution mindset will help the two individuals stop being caught up in a blame narrative and resolve the conflict
    • Artificial harmony. This is germinated in the workplace because of either fear of confrontation, wrong priorities, work culture or lack of trust

How to resolve conflict?
Conflict resolution is not about winning, retaliating, or putting the other person in her or his place. It’s about developing a shared perspective on what happened, agreeing on the changes required, and re-establishing trust

    • Acknowledge any wrongdoing, but do not allow it to define who you are
    • Author offers compassionate communication template which flows along the lines of

“When I see / hear [observation],
I feel [emotion]
because I need / value [need].
Would you be willing to [request]?”

    • Before one starts the conversation to resolve a conflict, one must let go of negative emotions and thoughts. One must be willing to share observations while being mindful of words
    • Uncover needs. In non-violent communication, needs are considered to be at the root of our feelings; they are the real reason why we feel the way we do and why we want what we want
    • A great guide to your needs is your emotions: Becoming aware of them and asking yourself why they are present will usually lead you to your needs
    • Make Your Request Clear, Specific, and Positive
    • When you make a request, ensure that you ask and not demand

What should one do when they cannot resolve a conflict?
Stop the process, talk to your line manager and HR, and consider involving a neutral and skilled mediator who can help resolve the conflict
When you witness conflict between several stakeholders and the individuals don’t show any sign of successfully resolving the disagreement, don’t ignore the situation since a lingering conflict does not only affect the people involved but also impacts the rest of the group by reducing morale and productivity

E. Decision Making and Negotiation

This chapter shares the techniques to help one develop inclusive solutions and reach sustainable agreements

Benefits of collaborative decision making

    • Better decisions since it harnesses power of collective wisdom
    • Stronger alignment
    • Increased motivation

How to be set up for success?

    • The more important a decision is, and the less people know and trust each other, the more beneficial it is to bring everyone together in the same room
    • Employ a dedicated facilitator in situations when people either don’t know about collaborative decision making or don’t trust each other
    • Set ground rules. Always speak from a place of respect for others and assume good intentions on the part of the group members
    • Don’t bargain over positions
    • Delegate a decision if others are better qualified to decide or if your input is not needed
      • Delegation ensures that the best-qualified people decide, and it frees up your time
      • When applied correctly, it also sends a positive signal to the appointed decision makers
      • If you need to be involved in the decision, then do not delegate it to others, but participate in the decision-making process
    • Choose a decision rule. Such a rule clearly states who decides and how you can tell that the decision has been made. Four common decision rules that facilitate group decisions: unanimity, consent, majority and product person decides after discussion
      • Unanimity and consensus are not synonyms. The former means that everyone agrees; the latter refers to reaching some form of agreement
      • Unanimity should be used when the stakes are high but we wary of it getting degenerate into design by committee
      • Consent is the absence of objections. A decision is made when none objects

Taking the right decision making steps

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Figure 5: A Collaborative Decision Making Process based on Kaner et al (2014)

    • Gather diverse perspectives. Be wary of groupthink in well functioning teams. Play devil’s advocate, suggest to get out of the building and adapt the group composition
    • Build shared understanding. Help people understand where they are coming from and encourage them to explore the needs and interests behind people’s perspectives
    • Develop an inclusive solution. While it’s great to care about the decisions you make, don’t search for the perfect decision
      • To develop an inclusive solution, start by considering how you can address people’s needs, interest, and concerns while at the same time moving the product in the right direction

Tips for negotiating successfully
Conversation techniques which can be used during negotiation a. Mirroring (repeating the words) b. Labelling. Acknowledge emotions c. Open-ended question to uncover other person’s needs d. Patience for active listening

    • One should not be desperate to strike a deal. Don’t allow the other person to put you under pressure. No deal is better than a bad deal
    • Behavior Change Stairway Model – explained in Chapter 1
    • Principled negotiation method by Fisher and William (2012)
      • People : Separate the people from the problem
      • Interests: Instead of arguing over positions, look for shared interests and needs
      • Options: Invent multiple options, looking for mutual gains, before deciding what to do. Avoid the mistake of prematurely excluding options and opting for one solution
      • Criteria: Use objective criteria or a fair standard to determine the outcome

F. Self-leadership

Self-leadership is about developing yourself, about becoming a happier individual and a better leader

    • Practise mindfulness. Mindfulness means paying attention to the present moment, to what is happening right now. It helps you become more aware of your feelings, thoughts, and moods
      • “The point is not to get carried away by our feelings and thoughts but to relate to them wisely
      • Benefits of developing mindfulness – greater serenity, increased empathy, better decision making, improved communication
    • Hold personal retrospectives. Every week around 30 mins to ask oneself and note A. What did I get done this week? B. how am I feeling right now? C. What changes do I want to make next week? Select one or two things which you can realistically improve

Leverage Failure. Cultivate self-compassion i.e. being kind towards yourself, without ignoring the shortcomings you might have

Do one thing at a time. To focus your efforts, consider setting yourself a daily goal. Spend a few minutes in the morning planning your day, and decide what the main thing is that you want to achieve and what the desired outcome should be

Don’t neglect important but less urgent work like product discovery. Author suggest Eisenhower Matrix towards the same

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Figure 6: The Eisenhower Matrix to prioritise time

The book ends with the advice about taking care of one’s health and not prioritizing one’s job over everything else. As the book says, there is more to life than work!

Overall, I feel this book packs a few punches for tackling practical PM situations and can be read quite enjoyably by middle and senior levels of product professionals. I can however identify a few things which could be improvised upon in future editions

    • The book is probably more biased towards Agile ways of working. It also emphasizes role of Scrum Master in first two chapters which seems out of place with overall theme of the book
    • Although chapters are supposed to be independent from one another, a certain background implicitly is assumed which could be bewildering for new PMs
    • Sometimes I feel the content could be sequenced better. Conversion techniques appear under negotiations, whereas stairway case for behavior change appears in two chapters with similar level of detailing
    • For couple times, points seem to be just enumerated and they don’t necessary gel with the structure of the chapter

The book can be ordered from Amazon. Could not find it on Flipkart!

Book Review: Escaping the Build Trap…

‘Escaping the Build Trap’ by Melissa Perri offers some practical insights into why organisations fall into the habit of just building stuff. She works her approach through a case study format which makes the book an enjoyable and relatable read

Although the mandate to escape build trap often requires CXO-level interventions, there are quite a few takeaways from the book for product people at every level

What is the Build Trap?

The build trap is when organizations become stuck measuring their success by outputs rather than outcomes. It’s when they focus more on shipping and developing features rather than on the actual value of those things

Companies can get out of the build trap by setting themselves up to develop intentional and robust product management practices

Fundamental premise in the book is to view companies as a value exchange system and explaining product management as a key driver of this exchange

Companies which fall in the build trap typically confuse this fundamental exchange. They also cannot define value for their customers since they don’t understand customer problems

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Figure 1. Companies as a Value Exchange by Melissa Perri

Community, technology and market typically act as outside constraints on this system, although companies can control their own policies, strategy, incentives and structures to efficiently provide value to customers

The book also argues that the most optimal way for organizations to deliver customer value is to morph into product led organisation which has the following key components

    • 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 organizational policies, culture, and rewards to allow product management to thrive

A major chunk of the book is organised along these four themes – role, strategy, process and incentives for product managers. I summarize the book in the same buckets

Part 1. ROLE of product managers

A few short chapters focus on the following key questions

1.1 How do you define Product?

The author discriminates between products and projects since the two can be interchangeably used in some orgs. Products are defined as vehicles of value, which can provide recurring value to customers without requiring a company to build something new every time. OTOH services use human labor to primarily deliver value to users and projects are discrete pieces of work towards a specific aim

Product-led companies have the following characteristics

    • They optimise their products to achieve value and desired outcomes
    • Growth is driven by product
    • Organisation is scaled through software products

1.2 What is product management?

Defined as the domain of recognising and investigating known unknowns and reducing the universe around unknown unknowns

1.3 What does it take to be a great PM?

    • Product managers are focused on WHY whereas projects managers on WHEN
    • Goal of a good product manager is to reduce risk by focusing on learning
    • Great product managers always focus on the problem and WHY

1.4 How should the product teams and their roles be organised?

Traditional teams are organised around value streams (think end-to-end customer value prop), features or technology. However best teams are organised around org strategy

Part 2. What is STRATEGY? 

    • It is a framework which helps make decisions. It is not a plan. Sometimes it can also be thought as what a company would NOT do
    • It can also be thought of as a deployable decision-making framework, enabling action to achieve desired outcomes, constrained by current capabilities, coherently aligned to the existing context (Ref. Steven Bungay, The Art of Action)
    • Strategy should not change every year or month, lest it be confused with a plan

2.1 What are the pitfalls of strategy as a plan?

It typically fails owing to divergence between outcomes, plans and actions. This gives rise to three gaps a. Knowledge gap b. Alignment gap c. Effects gap

Organisations try to respond to the knowledge gap by more detailed information, alignment gap by detailed instructions and effects gap by tighter control. And this does not work smoothly across functions unless companies view strategy as an action enabler towards achieving results

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Figure 2. The Effects Gap by Stephen Bungay

2.2 What does a good strategy framework contain?

Should be made up of two parts 1. Operational framework for day to day activities 2. Strategy framework detailing how the company realises the vision while strategy deployment is the act of communicating and aligning narratives and stories told through the org

It has four levels in the org 1. Vision 2. Strategic intent 3. Product Initiatives and 4. Options or Solutions

2.3 How to create strategy?

The book introduces a framework called The Product Kata for scientifically creating products

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Figure 3. The Product Kata Framework by Melissa Perri

2.4 What is a company Vision?

A good mission explains why the company exists. A vision explains where the company is going based on that purpose. Sometimes the vision is clear, the difficult part is connecting it back to the company’s operations. This is where it’s necessary for company leaders to specify strategic intents. These few, concise, outcome-oriented goals focus the company around how to reach the vision. Strategic intent is always aligned to a company’s current state. They are also at a higher level and business focussed

2.5 Where do product initiatives come in picture?

The product vision communicates why you are building something and what the value proposition is for the customer. OTOH Product initiatives translate the business goals into the problems that we will solve with our product. The product initiatives answer how

If there is no coherent vision, product may not be able to scale 

Part 3. How to uncover the right solutions to build? What is the PROCESS behind it?

Enter the Product Kata as explained earlier, there are 4 steps to this. However understanding which phase in a product under is critical to success

    1. Understanding the direction 
    2. Problem exploration
    3. Solution exploration
    4. Solution optimization

3.1 How do we understand the product direction?

This is where product metrics come in. She introduces two frameworks 

    1. Pirate metrics or AAARR framework as promulgated by Dave McClure. The familiar acquisition, activation, retention, referral and revenue framework does not capture customer happiness and therefore…
    2. HEART framework which stands for happiness, engagement, adoption, retention and task success. However overly relying on retention has the lacunae of it being a lagging indicator. A product may not have that long a runway and therefore need to focus on leading indicators like engagement

3.2 How do we perform problem exploration?

There are well known frameworks like problem based user research aka generative research whose objective is to find which problems to solve. They key here is to ask customers the right questions

3.3 Which solutions to build?

First the PM has to be clear about the distinction between building to learn and building to earn. She defines MVPs as something which is built to learn and therefore should be scoped out as something which contains the minimum effort taken to learn

There are 3 frameworks introduced to explore solutions 1. Concierge which is essentially delivering solutions to customers manually and see if it works. More suited for B2B companies and of course it is labor intensive and won’t scale 2. Wizard of Oz which is real-like product rolled out to a larger set of users. The key here is to not run the experiment longer than it should since the experiment is still essentially manual 3. Concept testing like with a prototype. It is more generative than evaluative in nature 

3.4 When should you not do a design sprint?

Although design testing has become a preferred method to experiment and learn, they should not be conducted before user research and identifying customer problems to solve

3.5 How do we optimise a solution?

This is where product vision helps, in sensing direction of progress and helping teams find alignment in solutions proposed. North Star document is one such tool

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

3.6 How do we prioritise among different solutions?

Although there are many framework prioritization, she talks about the Cost of Delay in prioritizing work. 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

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Figure 4: Qualitative Cost of Delay by Arnold and Yuce

Part 4. How to transition to being a product-led ORGANISATION in ethos and practice?

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

4.1 Why is communication important in organisation?

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 PMs try to hide their progress, the wider the knowledge gap becomes and it becomes difficult to sustain the product for long

4.2 How should one communicate product roadmaps?

Instead of thinking of roadmaps as a Gantt chart, one should view them as an explanation of strategy and the current stage of product. This combines the strategic goals with the themes of work and the emerging product deliverables from it

4.3 Why should one communicate the product phases clearly?

It is important for company wide alignment on what stage a product is in – experiment, alpha, beta or generally available (GA). This helps in reducing friction among different units as well. For example, alpha – a phase in which the objective is to determine whether the solution is desirable to a customer – cannot be included in the sales presentation to customers. Beta products – to see whether the solution is scalable – can be

4.4. How should people be rewarded?

One should be rewarding people for moving the business forward— achieving outcomes, learning about your users, and finding the right business opportunities. Rest is vanity!

4.5. Why should experimentation be encouraged?

Experimentation is the ultimate risk-management strategy because, when you experiment early, you can prevent the failure of something you will have spent billions

4.6 How to budget products?

Fund them like VCs. One should allocate the appropriate funds across product lines for things that are known knowns and ready to be built, and also in discovering new opportunities

Lastly the book ends with tips for identifying whether a company is product-led. My favorites are

    1. Who came up with the last feature or product idea you built? The answer should normally be the team
    2. What was the last product idea that you killed? Killing products is sign of a healthy product culture
    3. When was the last time you talked to your customers?
    4. What are your PMs like?

Overall this is an excellent succinct resource for all product professionals. Some of the things I think could have been better covered because of their relative importance in avoiding the build trap are

    • She could have elaborated more on aligning CXOs towards the need for being product-led org. Also for people below in hierarchy, it becomes quite impossible to manage this chasm and the book does not quite offer tactics to manage this transition without the risk of becoming a product martyr!
    • Delving deeper into which product metrics to adopt since they are critical to assessing the product direction and identify product initiatives
    • Product roadmap’ing and communication have been largely not covered although she does refer excellent resources on the same

The book can be ordered on Flipkart and Amazon!