Let’s get slightly back to basics and pick it from there this time.
As product managers, our goal is to represent the business. In other words, if the products we design and push for don’t bring business, we should stop doing it. Let’s take a classic example – your dev lead comes over and states that they need to refactor a piece of code and it will take 2 weeks to do so. He calls it a ‘must have’. From your perspective, what should matter is what will happen if you don’t do it. Will development of additional features be slower as a result? Are there bugs that can’t be resolved as a result?
I came across an interesting example from a different perspective earlier this week – Asks from customer support. Customer Support are a channel for making business. If you have poor customer support, your customers will eventually abandon. Customer Support has to be part of the exercise of prioritization. If there are critical issues that require your attention, then make sure you attend to it and not something that you allocate time to address once in a while.
So now that this point has been clarified, let’s talk about impact driven culture. This is a process we started working on at Sears. The intention was to be able to state how everything we work on is planned to make an impact. If you do it the right way, you can end up with a clear process for innovation, prioritization, scaling.
With that big promise in mind, let’s see how it works.
First Step – Know What Drives Your Business
This is a must have for you as a product manager to clarify on your first few days on the job – how does your organization makes profits. Think as broad as you can about it.
Let’s take an e-commerce site as an example. Such a site can generate revenue from the following sources:
- Commission from transaction
- Subscription costs – for example, a site can open an option for a loyalty program and have users pay an initial fee that will reduce future fees
- Paid features
It’s also important to be aware of the distinction between revenues and profits. Simply put, Profits = revenues – expenses. In that sense, you can also drive your business by reducing expenses. So the above list could also include:
- Reduce storage costs
- Reduce servers
- Reduce operational costs – this could vary from reducing the number of employees required to support your operation and also to the option of replacing them with a cheaper option such as out-sourcing
- Reduce legal claims
Second Step – Think of Ways to Drive Each of Them
This is the fun part.
You can now have a brain storming session on each of these activities and think of hypothesis and activities that can impact each of the above.
What I found useful is to have a clear understanding of the user journey, aka the funnel. The funnel is the list of phases in which users can be. You want your users to move down the funnel as possible to have them generate value. Let’s taking a gaming app example. The first phase is users who actually became aware of your game. The second phase is users who downloaded the app. The third phase is users who registered, followed by users who played sufficient time and eventually users who used paid features. At any point of the funnel, users can drop. So each phase will have less and less # of users. Your goal is to increase the ratio of users who start at the first phase and end up at the bottom of the funnel, while doing so at the minimum cost. For example, if your company does a bad job in marketing the app, there might be many users exposed to it, but most likely they won’t do anything about it. If you could find out the level of conversion from the first phase to the second one by marketing channels, you might end up recommending to shut down some of these channels and hence improve your funnel.
Why hypothesis? Because there are cases where you don’t know for sure what will impact your users. For example, you can re-design your user interface and create a highly modern look & feel. Will that impact your users in a positive way? Maybe. And this is not a good answer. As mentioned at the beginning of this post, we’re representing the business. Will you be willing to invest X amount of dollars in something that maybe will yield a revenue? This is where hypothesis comes in handy. Hypothesis is formed of the following structure:
IF <describe the change you are thinking of making>
THEN <what do you think the impact on the user will be>
BECAUSE <give the logical rational for this>
It’s important to correlate your hypothesis to specific phases in the funnel. It will be easier to explain the logical rational of this hypothesis.
IF the browsing experience will be more intuitive for users
THEN first time users will convert better
BECAUSE it will be easier for them to find the thing they need and hence will proceed in the funnel.
That’s the intent of the hypothesis – to raise a suggestion on how to make an impact.
Why activities? Because in some cases we already have all the data to make a decision. For example, if in the current state it costs X$ to maintain servers to support the app and by migrating to a cloud architecture we can reduce it by 50%, then all we have to do is estimate the cost of making the change and see whether it makes sense to do it.
Third Step – Define an Action Plan
At this point, think clearly about MVP’s. You have hypothesis that you raised. There is a cost for implementing each of these solutions, and as the name suggests, you might end up failing. In that sense, think about what is the minimal viable product that you can set (not necessarily develop) in order to evaluate whether the hypothesis makes sense or not.
It could be by making a mock-up site and perform user testing on it. It could by implementing something quick and dirty in very specific areas just to get some signals. This is where your broad product team can help think together about a way to test it.
Fourth Step – Turn it Into a Culture
This is the most difficult step and the most important one. It can’t be a one time exercise, it has to be part of the ongoing nature of the company.
You want to reach a stage in which in a sprint planning developers challenge specific ideas because it’s unclear as to which hypothesis it will impact. Or that as part of a sprint demo, you don’t suffice with just showing the feature, you also talk about the hypothesis and what was learned from it. And that as part of your routine you have once every few month another brain storming session on new ideas as a result of new insights. And you have a clear dashboard showing you how your metrics are impacted and everyone in the organization are laser focused on it.
And if you managed to do all of this and your plan actually makes an impact – you just helped creating a sustainable business!