When Tension Snaps in Silicon Valley

I’ve heard my startup friends say they can’t watch HBO’s Silicon Valley because it’s “too true.” I feel the opposite. While it’s disconcerting to realize that startup people (like me) deserve to be mocked for certain behaviors, I love the show, in part, because it helps me understand the environment I’m immersed in. This sequence, in particular, has stuck with me.

 

I hadn’t put much thought into why I was so amused until I started reading Arthur Koestler’s 1964 book, The Act of Creation.” Koestler argues that comedy involves “bisociation,” the connecting of two seemingly incompatible frames of reference. Here’s how he illustrates the type of humor that evokes sudden laughter:

Screen Shot 2016-08-27 at 4.52.31 PM

The underlying pattern, Koestler writes, “… is the perceiving of a situation or idea, L, in two self-consistent but habitually incompatible frames of reference, M1 and M2. The event L, in which the two intersect, is made to vibrate simultaneously on two different wavelengths, as it were. While this unusual situation lasts, L is not merely linked to one associative context, but bisociated with two.”

In the case of the Silicon Valley sequence I posted above, the humor is in the ridiculousness of bisociating obscure technical innovations with notions of improving the world; e.g., “Making the world a better place… through paxos algorithms for consensus protocols.” What it means to “make the world a better place” is subjective, but the implication of world-level change is that it’s large and foundational. Many startup pitches, in contrast, sound trivial and niche to outsiders. Silicon Valley‘s mockery concisely illuminates an element of grandiose bullshit imbuing many startups: a poorly constructed facade of higher purpose.

Koestler writes:

The creative act of the humorist consisted in bringing about a momentary fusion between two habitually incompatible matrices. Scientific discovery … can be described in very similar terms–as the permanent fusion of matrices of through previously believed to be incompatible.

In short: “Comic discovery is a paradox stated–scientific discovery is paradox resolved…”

Many of the same paradoxes that Silicon Valley exposes through satire are the ones I’ve been wrestling with on this blog and in my career as a product manager. With my latest series of writing, starting with The Fundamental Tension in Product, I provide heuristics for staying committed to a world-changing vision while navigating the on-the-ground reality of real work and market signal. While the presenters in the TechCrunch Disrupt parody fall over flat in navigating the tension, some companies are able to pull it off.  Amazon has arguably “changed the world” through commoditizing cloud-based computing. “Cloud-based computing” might sound esoteric on the surface to a layman, but it’s had world-level impact by making the creation of websites significantly cheaper and easier.

The vision of many great tech companies can be expressed in the laughter-inducing syntax of the Silicon Valley pitches: “We’re going to make the world a better place, by [insert cryptic-sounding technical advancement].” Tesla’s vision has a different flavor with a similar structure. Elon Musk says he will save the world by creating cars for rich people. His master plan actually might hold up, but it could sound laughably delusional on the surface.

The paradox of a tech startup’s world-changing ambitions is just one of the interesting tensions illuminated by Silicon Valley. Another such tension is the one that exists between sales and engineering, illustrated by Pied Piper’s pivot to create The Box:

 

Starting with The Product Management Triangle, I’ve written in depth about the tensions that emerge around product between business, technology, and customers. These tensions can manifest as a clash between engineering and sales. Engineering generally wants to work on what’s unique, innovative, and artful. Sales wants the engineering team to build something that can be sold. Season 2 of Silicon Valley comically depicts an extreme resolution of the tension: simply letting the sales team dictate entirely what the engineering team builds. The result, of course, isn’t viable. The engineering team rebels. After the sales team gets fired, the pendulum swings to the other extreme. Pied Piper ships a product that was never tested on users other than engineers. The product was technologically brilliant but inaccessible to the general public.

I couldn’t think of a better stage-setting to explain the need for product management. It is precisely the job of the product manager to manage tensions like the one that led to The Box. The product manager must synthesize (or bisociate) seemingly conflicting inputs into a narrative that resonates across multiple planes of thought.

As much as I would like to escape the mockery of Silicon Valley, clearly I cannot. I’m hit dead on by Pied Piper’s temporary CEO with his “Conjoined Triangles of Success.”

silicon-valley-conjoined-triangles-of-success-poster-11-x-17-557_1000

 

Lean & Fat Product Thinking

In 2005, I took on my first product management job, developing data management tools for  CNET. Wisely, the company put me through agile training. While the agile philosophy resonated with me, I quickly fell into a waterfall trap in my first large project. The objective was to create a tool that would streamline the workflow between the editorial and data teams. Given complexities in how the two teams needed to work together, we designed an elaborate user interface to handle every last corner case. Stakeholders were happy with the design, so the developers started building it. Even though we worked in two-week sprints, the engineering effort spiraled out of control. Will to invest in the project dried up before we were finished implementing the planned design. We ultimately shipped a tool that cosmetically looked like our original design, but only portions of the user interface were functional.

While the tool was an embarrassment on many levels, it was not a complete failure. A feature that we built in the very beginning — the ability for the editorial team to publish a product review before a catalog record was processed by the data team — was a big efficiency gain over the previous state. If we had just shipped that one feature first and iterated on the design from there, we would have saved the company tons of money and delivered better results. Some of the corner cases we prepared for, in practice, never happened. The interface we handed over to the engineering team was insanely over-designed.

Fortunately, I only made that particular mistake once in my career. I started looking at all design assumptions with suspicion. After reading The Lean Startup, my conversion to skeptical product development was complete. I felt that every strategy needed to be rigorously tested and validated with users from the outset. Any small investment in an invalidated direction, in my mind, was fat that should be cut out of our operation. Lean was my religion.

When Steve Jobs died in 2011, I read Walter Isaacson’s biography. Jobs’ aggressive pushing of vision, against resistance from co-workers and the marketplace, seemed key to Apple’s unprecedented impact. To a lean extremist, the Steve Jobs phenomenon is pretty confusing. My bias was to be adaptive to marketplace signal, not to ignore it. As someone with my own dreams of changing the world, I admired Steve Jobs. Yet, I espoused a doctrine that made his success unintelligible. In retrospect, I’m amazed by how long I lived with this contradiction.

The first time I became consciously aware that lean product thinking had limits was from reading Product-Driven versus Customer-Driven by Venkatesh Rao in 2014. Rao pointed out that, with lean startup methodology, attempts to iterate at minimal cost towards market validation can take you away from your original vision, leading to what he describes as “visioning-process debt.” Rao writes: “While there is a vast repository of programmer knowledge about refactoring techniques, there is no comparable metis around pivoting and paying off visioning-process debt.”

Rao’s words about the limitations of lean startup felt profound to me, but I didn’t know what was tangibly on the other side. If lean startup wasn’t an optimal way to think about product, what was the optimal way?

Additionally, Rao convincingly claimed that “there’s an indispensable asshole at the top for product-driven” companies. Since iterating based on customer feedback is insufficient to achieve large impact, an asshole is necessary to get a whole company to go along with a vision that cannot be market tested along the way. Being a visionary product thinker is insufficient — you need to intimidate a group into following you, or so the argument goes.

This was troubling to me since, with a high autonomic response rate, I’m biologically wired to not be an asshole. Was I was facing a non-asshole ceiling in my ambitions as a product leader?

Time will tell whether I’m facing a non-asshole ceiling, but I’ve at least made progress grasping what’s on the other side of lean thinking. Rao’s recent piece offers a nice way of framing it: “fat thinking.” Of course! It’s only natural that fat thinking would follow lean thinking, similar to how philosophical movements zig zag between opposites, like structuralism leading to deconstruction.

Fat thinking, however, does not replace lean thinking. The optimal product crafting process must balance both modes, recognizing the correct context for each one.

Here’s how Rao characterizes fat thinking:

When you get away from lean regimes, you’re running fat: you’ve deployed more capital than is necessary for what you’re doing, and you’re deriving a return from it at a lower rate than the maximum possible.

So why would you ever deploy more capital than is necessary? Consider the decision to build a platform. A lean extremist would say that you shouldn’t build a platform until you’re scaling an app with proven demand. Otherwise, you risk creating a platform that no one will use. Why not first find out if people give a shit before doing the heavy lifting?

The fat thinker’s answer is that building a platform can enhance your ability to discover a killer app. If you start by only making a platformless prototype app, if it fails user validation, only minor iterations come easy. There’s no way to quickly manifest the essence of the original vision in widely varying forms.

Platform fat can make you leaner in attacking specific opportunities. I saw this at my previous company. We had a platform for rating the sustainability of products. While we started with a consumer focus, we later discovered demand for an enterprise app. The platform made validating this direction cheap. If the original consumer app was only a prototype, we would have had to almost start from scratch testing the enterprise app. Instead, it only required bolting on a new UI. As it turned out, we ultimately had to rebuild the platform, but we did so with a paying partner.

Building a platform before you’ve validated a killer app requires faith in a vision. In his 1896 paper The Will to Believe, philosopher William James explains why this type of untested belief is not in conflict with a scientific sensibility. James argues that there are cases, like religion, where you need to believe a hypothesis to find out if it’s true. Building a platform-first startup is such a case. You’re not going to build an unvalidated platform if you’re skeptical of its value.

This gets us to another difference between lean and fat thinking. In lean startup methodology, we’re predominantly skeptical of all hypotheses. A direction must be proven before it’s adopted. In fat thinking, we cannot be skeptical. We must believe that we are on the right course. Skepticism will cause failure. (My last post explains this point in more detail.)

In one sense, the distinction between lean and fat thinking maps to Karl Popper’s separation of science and pseudoscience. While it’s been debated by others, Popper argues that the defining characteristic of science is that its hypotheses must be falsifiable. Falsifiable hypotheses are key to lean startup methodology. If an experiment cannot result in a failure, what can you learn from running it? A pseudoscience, in contrast, is based on confirmation. Astrology has traction because so many happenings can be interpreted to confirm its claims. The visions that motivate fat thinking share pseudoscience’s potential for wide interpretation, but towards positive ends. A powerful product vision attracts believers. Google’s mission “to organize the world’s information” or Facebook’s mission “to make the world more open and connected” bring people under the tent in an astrology-like manner.

However, the believers attracted by companies like Apple, Facebook, and Google must also be scientists. Lean and fat thinking must be combined under the same roof. Elon Musk’s master plan for Tesla is a perfect illustration. Musk believes that his company can help prevent the collapse of civilization by driving sustainable changes through the economy (requires fat thinking). Doing so requires using limited resources to win in specific markets that exist now, starting in the high-end car market  (lean thinking).

Here’s my summary heuristic for how to combine lean and fat thinking:

  1. Use lean thinking to adapt your creations to the world as it is now.
  2. Use fat thinking to conceptualize how you will change the world or anticipate how the world will change.

Lean thinking is how you win markets, tap into behavioral patterns, adapt to the economy, and create a killer app with graphs that go up and to the right. Fat thinking is how you create markets, change human behavior, transform the economy, and build a platform that births a multitude of killer apps.

While much systematic thought has been published on lean manufacturing and thinking, there’s less out there on fat thinking. Today, fat thinking is primarily visible from (A) charismatic “assholes” who easily attract followers to their vision or (B) creationist-style thinkers who don’t believe that science has a role in product design.

To make fat thinking a fruitful enterprise for scientifically-minded non-assholes, we need to create new systems. Rao’s “leak before failure” notion is the beginning of one such system. Warldley value chain maps are another example. Both ideas provide justifications for adding fat to your creations in anticipation of world change.

To conclude, I’ve reposted the diagram from my post, The Fundamental Tension in Product.  The inner loops describe how to stay oriented in your current environment. The goal here is to stay lean. Quick cycles translate to market advantage. Your fat should come from the outer loops, your vision for how the world should or will be.

ProductDriven

 

The Risk of a Scientific Creative Process

Sometimes we create as a form of play, for fun, or to satisfy unguided curiosity. Other times we create with a purpose, an intent to move the world in a direction we want it to go.

As I explain in my post The Fundamental Tension in Product, there is a paradoxical nature to creating for change. Changing the world seems to simultaneously require bending the world and bending to it. Products, artworks, and political movements achieve minimal impact, regardless of their genius, when they are too far away from public consciousness, economic realities, or technological feasibility.

To fit our work with current reality, we are compelled to adopt a scientific sensibility; a mindset of running experiments and dispassionately discarding ideas shown to be false. We take on the perspective of the skeptic, looking at our own intuitions with suspicion. We require seeing evidence before believing hypotheses to be true.

Within your organization or movement, it may be the case that you are a minority voice advocating for a more scientific approach. Frustrated by watching investment in seemingly arbitrary directions, perhaps you’re begging your peers to read The Lean Startup. But for now, let’s assume the value of testing ideas is a given.

As the pendulum of our creative process swings towards science, a new risk emerges. With the scientific approach, we methodically weed out bad assumptions, continuously conforming our creations to living behavioral patterns. However, as our creations transform, after countless iterations and discoveries, we risk losing touch with the original vision we sought to make real at the outset — we crossover from changing the game to mastering its rules. Venkatesh Rao characterizes this phenomenon as visioning-process debt.

A scientific approach, while optimal in many scenarios, is insufficient for changing the world. The most impactful creations seem to come, in part, due to an unwavering vision that willfully ignores the apparent workings of society.

It might appear on the surface that holding an “unwavering vision” is incompatible with the scientific sensibility, but this is not necessarily the case. If you were to stay committed to a hypothesis that was proven false, there is surely a problem. But this does not imply that a hypothesis must be proven true before you invest in pursuing it.

In his 1896 paper, The Will to Believe, pragmatist philosopher William James argues for the necessity of believing some hypotheses before you have proof. His overall agenda is to argue for the compatibility of religion and the scientific sensibility. Religion is the archetypal untestable hypothesis. Belief in an afterlife cannot be falsified until you’re dead.

But there are less extreme cases that require believing hypotheses before they’ve been tested. Consider what it’s like to work with a team. You must believe that other members of your team will be genuinely committed to the same cause. If you require evidence of commitment before you contribute your part, your skepticism will cause the hypothesis to fail. Your team members, seeing your disengagement, will also disengage.

James writes on religion and other cases where a hypothesis must be believed prior to testing:

We cannot escape the issue by remaining sceptical and waiting for more light, because, although we do avoid error in that way if religion be untrue, we lose the good, if it be true, just as certainly as if we positively chose to disbelieve… Scepticism, then, is not avoidance of option; it is option of a certain particular kind of risk. Better risk loss of truth than chance of error,-that is your faith-vetoer’s exact position. He is actively playing his stake as much as the believer is; he is backing the field against the religious hypothesis, just as the believer is backing the religious hypothesis against the field. To preach scepticism to us as a duty until ‘sufficient evidence’ for religion be found, is tantamount therefore to telling us, when in presence of the religious hypothesis, that to yield to our fear of its being error is wiser and better than to yield to our hope that it may be true.

While for me, as James puts it, religion is a dead hypothesis, I think his sentiment sheds light on how great creators persevere against the social grain. On the one hand, science is underused in how people strive to spark change. Science should creep into more and more creative domains. On the other hand, experiencing the power of the scientific sensibility can bias us against less testable directions. I designed the below maze to illustrate this bias.

thumb_IMG_3108_1024.jpg

After entering the maze, you quickly reach a fork in the road. If your goal is to efficiently solve the maze, you will likely look ahead in both directions before committing to a path.

If your eyes follow the path on the right, you immediately see avoidable dead-ends. This path is intended to evoke the scientific sensibility, a process centered around avoiding falsehoods. The hope is that methodically avoiding errors will lead to the discovery of a meaningful new truth, but this is not guarenteed.

The left path, in contrast, winds around with no foreseeable dead-ends. But it very well could ultimately lead to a dead-end. Finding out will take time. Heading this direction requires a “leap of faith.” You will get no feedback, positive or negative, until you reach victory or failure. It’s intended to be a metaphor for staying committed to an unwavering vision, regardless of evidence, or lack thereof.

So which road do you feel inclined to pick? Either one comes, as James argues, with potential upside and risk. However, as the scientific sensibility increasingly takes over our mindset, we risk becoming biased to take the path on the right, overlooking the opportunity presented on the left.

 

The State of Your Company (Slideshow Template)

With my  latest posts (The Fundamental Tension in Product, A Visual Framework for Product Vision), I’ve been developing a visual framework for situational awareness in product development. To make it easy to apply the framework within the context of your company, I created a slideshow template covering (1) how your environment is changing, (2) where you stand, and (3) how you see the future. Here’s the template. Make a copy, fill it in, tweak as you see fit, and discuss with your team.

To address ambiguities with how to use the template, I made an example based on my side project, Double-Loop.

Give it a try and let me know what you think.

A Visual Framework for Product Vision

In product development, situational awareness requires a continuous sense of (1) a product vision and (2) the current state of your product in relation to that vision. Without such understanding, contributors are fundamentally disoriented, either directionless or oblivious to the facts.

Maintaining situational awareness is non-trivial due to the fluid interplay between product vision and state. When the product vision shifts, contributors must reinterpret the purpose of their active work. Inversely, discoveries on the front lines can inspire or force vision reform. When a group of people is involved, the potential for stale situational awareness is high.

So how do we manage the interplay between product vision and state? Given its foundational nature, I would expect there to be a framework to structure our thinking in this regard. But as far as I can tell, no system like this exists. While it is commonplace for companies to articulate their vision and evaluate their situation, the popular patterns are insufficient.

When one thinks of “product vision,” Facebook’s mission “to give people the power to share and make the world more open and connected” might come to mind. While inspiring, it doesn’t shed light on the concrete work necessary to win markets. Great companies connect the layers from the abstract to the tangible.

Business plan formats, like lean canvas, provide actionable product direction, but only within the narrow confines of established markets and user problems. Visionary companies aspire to do more — “changing the world” entails creating new markets and behaviors.

Agile and lean startup methodologies, based on short iterations and feedback loops, are optimized for situational awareness. Yet, while they keep you tuned into the state of your product, they don’t offer structure for how to expess a product vision. Vision is left as the magical antecedent of the development process.

A framework for situational awareness in product development must meet the following criteria.

  1. It can express a company’s “world-changing” vision.
  2. It can represent a company’s strategy for winning markets, and how that connects to their larger vision.
  3. It can capture the status of a company’s situation, relative to the components of #1 and #2.

In my last piece, The Fundamental Tension in Product, I introduced a model for how great companies paradoxically “change the world” while operating within the world as it is now. By way of a diagram (re-posted below), I explained how companies use orientation loops to win markets and use markets as stepping stones for realizing their grander visions. In the first iteration, my goal was only to describe the phenomena of the most impactful products.

ProductDriven

Now, I’m going to extend the framework to represent “product vision” and “product state” in a manner that meets the criteria defined above.  My hope is to provide a practical format to help ambitious product teams grasp where they are, where they’re going, and how they’re going to get there.

Let’s look at this version of the diagram where all 18 directional links have been labeled.

Links.png

Each arrow is labeled according to the nodes in the product system the link connects. For example, “CT” labels the link going from Capital (C) to Tech (T). Conversely, “TC” labels the link going the other way, from Tech to Capital.

It’s all about the links. Your product vision is how you see the links forming. Your product state is the current status of each link.

Let’s dig into product vision. You can express your vision by answering a subset of questions, each corresponding to a particular link in the system.

1. How will you win your market?

  • CT. What will you build?
  • TU. What’s your value proposition?
  • UC. How will you monetize?

2. What’s your approach?

  • TC. How will you build?
  • UT. How will you understand users?
  • CU. How will you acquire users?

3. How will you change your environment?

  • US. How will your users change society?
  • CE. How will your business model change the economy?
  • TW. How will your technology open new doors for other builders?

4. How will changes in your environment benefit you?

  • SU. How will social trends create new users?
  • EC. How will economic changes improve your financial situation?
  • WT. How will technology advancements open development pathways?

5. How will you “change the world”?

  • SW. How will social changes, sparked by your product, facilitate new technology advancements?
  • WS. How will technology advancements, sparked by your product, change society?
  • WE. How will technology advancements, sparked by your product, change the economy?
  • EW. How will changes to the economy, sparked by your product, facilitate new technology advancements?
  • ES. How will changes to the economy, sparked by your product, change society?
  • SE. How will changes to society, sparked by your, change the economy?

As I mentioned above, your product vision need not address all these questions. A less ambitious company may only strive to win their market and not spark broader change; e.g., if you’re selling cupcakes. They would only have answers in sections 1 and 2. Ambitious companies, as well, limit the scope of their visions. It’s a common pattern for VC funded startups to postpone plans around monetization while they focus, first, on user growth and social impact. They don’t address link UC, “How will you monetize?”, out the gate. Furthermore, companies should be cognizant of their inability to predict the full consequence of their product. While the economic impacts of a product like Uber can, in some ways, be anticipated, the social impact is more tenuous to forecast.

The key is that companies should make explicit what’s included and not included in their visions. Everyone in a company should know which links they are attempting to create, and which ones will be ignored, temporarily or permanently. To represent the scope of a product vision, I’ve created a visual vocabulary where you can attach one of the following icons to each arrow in the diagram.

  • Lightbulb. You have a vision for how the link will be formed.
  • Question mark. You don’t know how or if the link will be formed.

To illustrate, I speculate Facebook’s original vision looked roughly like this.

FB.png

 

Here’s my guess for how they approached each link in the product system.

1. How will you win your market?

  • CT. What will you build? A social network.
  • TU. What’s your value proposition? Connect with your peers.
  • UC. How will you monetize? Unknown.

2. What’s your approach?

  • TC. How will you build? We’ll build it ourselves.
  • UT. How will you understand users? They are fellow college students.
  • CU. How will you acquire users? One college at a time.

3. How will you change your environment?

  • US. How will your users change society? They will spread social networking.
  • CE. How will your business model change the economy?  Unknown.
  • TW. How will your technology open new doors for other builders?  Unknown.

4. How will changes in your environment benefit you?

  • SU. How will social trends create new users? The spread of social networking will grow demand.
  • EC. How will economic changes improve your financial situation? The VC industry will fuel our growth before we monetize.
  • WT. How will technology advancements open development pathways? Unknown.

5. How will you “change the world”?

  • SW. How will social changes, sparked by your product, facilitate new technology advancements? Social networking behaviors will change how people use the Web.
  • WS. How will technology advancements, sparked by your product, change society? Unknown.
  • WE. How will technology advancements, sparked by your product, change the economy? Unknown.
  • EW. How will changes to the economy, sparked by your product, facilitate new technology advancements? Unknown.
  • ES. How will changes to the economy, sparked by your product, change society? Unknown.
  • SE. How will changes to society, sparked by your, change the economy? Unknown.

These answers capture elements of a vision for winning the social network market, one college at a time, while creating a foundation for further tech innovation by creating new social networking behaviors.

The visual vocabulary can be used to express product state. When an element of the vision succeeds, we can replace a light bulb with a checkmark at the corresponding link (if it fails, we could replace it with an “X”). As a company’s vision comes to fruition, they can expand the scope of their ambitions. Question marks convert to light bulbs.

Facebook’s initial strategy, of course, succeeded. This next version of the diagram represents the state of the Facebook product after their value proposition and user acquisition strategy had been validated. Again, I’m sure this doesn’t precisely represent how FB was thinking at the time. My intention is only to illustrate how the framework can be applied, using Facebook as a familiar example.

FB_state.png

In the above diagram, I’ve circled in red the link statuses that changed since the original vision. The state of the product can be expressed by revisiting the same set of questions.

1. How will you win your market?

  • CT. What will you build? A social network –> VALIDATED.
  • TU. What’s your value proposition? Connect with your peers –> VALIDATED.
  • UC. How will you monetize? Unknown  –> We’ll build an advertising platform.

2. What’s your approach?

  • TC. How will you build? We’ll build it ourselves. –> We need to scale the engineering operation.
  • UT. How will you understand users? They are fellow college students. –> We need to scale our customer service and analytics capabilities.
  • CU. How will you acquire users? One college at a time. –> VALIDATED (we created a viral loop transcending college communities).

3. How will you change your environment?

  • US. How will your users change society? They will spread social networking. –> VALIDATED.
  • CE. How will your business model change the economy?  Unknown. –> We’ll create a new market for advertising based the social/interest graph.
  • TW. How will your technology open new doors for other builders?  Unknown. –> We’ll create the ability to build apps on top of the social graph.

4. How will changes in your environment benefit you?

  • SU. How will social trends create new users? The spread of social networking will grow demand. –> VALIDATED.
  • CE. How will economic changes improve your financial situation? The VC industry will fuel our growth before we monetize. –> VALIDATED
  • TW. How will technology advancements open development pathways? Unknown.

5. How will you “change the world”?

  • SW. How will social changes, sparked by your product, facilitate new technology advancements? Social networking behaviors will change how people use the Web. –> VALIDATED.
  • WS. How will technology advancements, sparked by your product, change society? Unknown. –> Apps based on the social graph will change how people interact with each other.
  • WE. How will technology advancements, sparked by your product, change the economy? Unknown.
  • EW. How will changes to the economy, sparked by your product, facilitate new technology advancements? Unknown.
  • ES. How will changes to the economy, sparked by your product, change society? Unknown.
  • SE. How will changes to society, sparked by your, change the economy? Unknown.

Facebook’s impact continued to grow beyond the state represented above. They successfully monetize through advertising and transformed the digital marketing industry.

The Facebook example is a crude illustration of how this framework can be used to express a product vision and capture the state of a product relative to that vision. My hypothesis is that companies can improve their collective situational awareness by using this framework to inspire discussion and alignment.

If you give it a try let me know! I’d also love any feedback on how to make it more useful.

 

 

The Fundamental Tension in Product

Preface: This post is the first in a new chapter of my thinking about product. While I’m passionate about the diagram presented below, my explanation of it is a bit too brain dumpy for my taste, and I’m not convinced I’m framing it optimally. After many failed attempts to refactor how I walk through it, I’ve decided that it’s better to get this out there in the world while I continue to dwell on some of the problems. I’m looking forward to your thoughts. 


In crafting products, there’s a tension between two dispositions.

On the one hand, methodologies like lean startup and agile push us to regularly fit our product to the real world. By regularly running tests, validating demand, and shipping in small iterations, we can keep an up-to-date map of our product’s environment. Using market signals as a steering mechanism seems to be the surest way to create value.

On the other hand, the most impactful products, don’t just react to their environment, they change it. Igniting real change, it seems, requires a leader’s unwavering commitment to a vision of how the world should be.

How can “unwavering commitment to a vision” coexist with “using market signals as a steering mechanism”? The options are to (a) bend your vision to fit the discovered realities of the real world or (b) charge straight through obstructions until you break through or blow up.

While it’s alluring to commit to one disposition over the other, the great companies simultaneously change the world and operate within it. There’s no formula for how they do it. But I’ve created a diagram that can at least help describe how the most impactful companies reach for their vision while adapting to the world as it is.

 

ProductDriven
The full diagram.

Now that I’ve bombarded you with the full diagram, I’ll unpack it through describing three types of loops:

  1. Reality-Orientation Loops. How companies create feedback loops to win customers and markets.
  2. Transcendent Loops. How companies use markets as stepping stones for “world changing” impact.
  3. Vision Loops. How companies create new behaviors, markets, and industries.

Reality-Orientation Loops

Companies have a vision for where they want to go, but the evolving landscape around a product is filled with surprises, both good and bad. A company faced with a setback can overreact like a government in the wake of a terrorist attack. And new pathways to success can go unobserved. The reality-orientation loops represent how companies, guided by market signal, stay oriented as they move forward. If you can maintain the healthy functioning of these loops, you can retain mastery of your context and act accordingly.

Let’s start with the loop that frames the reality-orientation loops.

InnerLoop
Winning a market.

 

Tech, Users, & Capital

The loop encircling Tech, Users, and Capital represents how companies try to win markets. The objective is to apply resources to build a technology and attract users with a stellar user experience. Hopefully, people will love or need the product so much that they’ll pay for it (or be valuable to advertisers). If all goes well, the company will reinvest revenue or other funds back into enhancing the technology. The loop, given success, repeats.

Companies can’t conquer markets guided by only gut feeling. To stay oriented, they need three intersecting feedback loops.

FeeddbackLoops
Reality-orientation feedback loops.

Users & Tech

No matter how powerful a company’s vision, even if you’re Apple, you can’t blindly sustain a great user experience. Companies require insight into the people who use or might use their product. This type of insight exists in qualitative forms, like user testing and surveys; and quantitative forms, like web analytics and A/B testing. When this feedback loop breaks, the organization can’t adjust when the product doesn’t stick. When the loop is healthy, product usage provides a strong signal for product direction.

Users & Capital

The terms of the loop connecting Users and Capital is how we traditionally describe the health of a business. No matter how viral a product is, to grow revenue, companies must invest specifically in acquiring users, whether it’s through traditional or untraditional methods. Even Facebook advertises itself. Industry thinking about how to balance user acquisition and revenue is ever-evolving. The feedback loop is problematic when the product is not achieving the intended balance between customer acquisition cost and revenue. If you’re trying to be profitable, the loop is broken when acquired users are not converting to paying customers. If you’re trying to grow, the loop is broken when your pricing strategy introduces too much friction. For an example of a thriving users-capital loop, see how Uber used “Capital as a Performance Enhancing Drug.”

Capital & Tech

Engineers shouldn’t build, build, build all day. To ship the right product at minimal cost, teams need to examine their process regularly. Process improvements can be in the form of tweaking project management structure, communication methods, or tools. When the Capital-Tech loop breaks, teams fail to deliver within business parameters; i.e., they ship a flawed product or run out of time. When the loop is functioning, the team continuously improves its velocity and the soundness of each release.

Transcendent Loops

All companies must create reality-orientation loops to navigate their local environment. No matter how grand a company’s vision, to realize it, they must win real markets. Customer-driven companies, as defined by Venkatesh Rao, operate only in these inner loops. These companies play a zero-sum game, remixing established technologies and business models to engage customers already made legible by a market. They win by taking customers from others. The winners ultimately fade away when larger forces erode the market. In contrast, product-driven companies (again, in the Rao sense) alter their environment, feed off the flux, and create new markets, industries, and behaviors.

The “transcendent loops” in the diagram represent how companies can use their local environment as a stepping stone to set in motion a more fundamental impact, transcending current markets. We can use this framework to separate the paths of the most impactful companies.

BridgeLoops
Transcendent Loops.

 

Capital & The Economy

A company’s business model can do more than capture wealth; it can transform the economy around it. Google’s search advertising business model, for example, disrupted findability for businesses, creating a new class of Internet-based companies. Google’s platform is now foundational for anyone striving to make money online.

For this to happen, Google had to start by taking users from competitors like Yahoo in the inner loops of the search engine market.

Users & Society

Product-driven companies, through their user base, impact society at large. While Facebook started by scratching the social itch of college students, the power of the platform has reached global proportions, even playing a role in political movements like the Arab Spring.

For Facebook to reach for its vision of “making the world more open and connected,” they’ve had to monetize through the inner loops brand advertising market.

Tech & What’s Possible

While customer-driven companies meet customer and business objectives through remixing established technologies, some companies create new building blocks, opening new possibilities for all developers. Amazon, for example, created AWS as a side effect of their eCommerce business, making it easier and cheaper for anyone to launch an internet company.

Amazon started by taking on incumbents in the inner loops of the booksellers market.

Vision Loops

While some people work at startups to make money, others dream to make a dent in the universe (and, conveniently, make money). The most ambitious companies, if successful, introduce novelty into the world, causing unpredictable change. The company who creates a dent is positioned to be the primary benefactor of the change they create. They are the first on the scene to understand it and build on top of it.

 

OuterLoop
Vision Loops.

Society & What’s Possible

Winning a market requires tapping into established patterns of behavior, often solving problems for their users. Deeper product impact, however, unearths latent behaviors. To grasp the phenomenon of Twitter, one might ask “What problem does Twitter solve?” You can force an answer, but to pose the question misapplies customer-driven dynamics on a product-driven phenomenon.  Rao suggests that product-driven companies tap into an “anomie.” He writes:

… there exist untapped regimes in their universe of behavior that are marked by undefined restless energy and undirected curiosity… This creates a certain level of anxiety, and a regime of under-developed behaviors (often bucketed under “play” or “hobby” behaviors, characterized by amateurishness, which is another way of saying pre-economic).

When a product unleashes new behavioral forms, a slew of new companies follow to build technologies around the behavior, e.g., all the companies striving to re-channel the desire to tweet.

Product directions can fail by prematurely banking on their ability to create new behaviors. Blippy and Swipely failed to entice users to broadcast their purchases socially. Now, Venmo has successfully created this new behavior. Why Venmo succeeded and the others failed could be a combination of execution and timing — the precise factors are impossible to know.

Society & The Economy

It is has been argued by Peter Thiel and others that the most significant innovations don’t play in existing markets, they create new ones. Apple, for example, wasn’t the first company to produce a tablet. However, they created the tablet market with the iPad and captured the majority of the market’s value. When a market is legible, customer-driven competitors can attack the space from a variety of angles to win share. While erosion will happen with time, market creators are so valuable due to their high probability of extended business success.

Marc Andreessen says that if you’re looking for the next great startup idea, you can dig through the graveyard of failed companies from the late 90s. The grocery delivery market, for example, is growing now, fueled by Instacart and other players. Companies like Webvan and Kozmo failed to reach the same vision previously, perhaps due to lack of the smartphone and the entrenched online shopping behaviors we have now. One might argue that the iPhone and Amazon.com products created the grocery delivery market, not because they are competing in the space (although Amazon is), but because they created the necessary conditions for the market to form. Visionary companies, to massively succeed, don’t need to capture all, or even the majority, of the new value they create.

The Economy & What’s Possible

When new behaviors and markets enter the picture, new industries form to support the changing world order. You can walk down the value chain to anticipate the rippling effects of market changes. To bolster the iPhone, Apple expedited the formation of the mobile app industry by creating the App Store marketplace. Slack is applying a similar strategy with their developer fund and app directory.

While some companies intentionally create supporting industries as a strategy, the most impactful products can engender supporting industries as an unwanted side effect. For example, the rise of search engines created the SEO industry. While SEO can be a good lens through which to improve the relevancy of web pages, Google continuously has to battle SEO specialists who try to game their algorithms.

Conclusion

That’s it for walking through the diagram. I hope you found it useful. It begs the question: what do we do with it? Unfortunately, I’m not sure yet, and I feel like I still have a long way to go wrestling with the subject matter of this post. If you think of any applications of the diagram or ways to improve it, let me know. Otherwise, stay tuned!

Update: My new post, A Visual Framework for Product Vision, uses the concepts described here to create a practical format that companies can put to use.

 

Feedback Loops, Orientation, & The Substance of Product

Note: I’ve further explored ideas from this post in a new writing, The Fundamental Tension in Product. The content from this post comprises the “reality-orientation loops” section — I’ve expanded the framework to include “transcendent loops” and “vision loops.”


When I received the question on Quora, “What does ‘closing the feedback loop’ mean with regards to product management?”, I found immediate inspiration. It was the middle of a work day, so I chose to crank out an answer and publish. But the question stuck with me. I had the intuition that feedback loops are core to product in a way that my cursory Quora response neglected. To follow the the thread, I set out to express feedback loops in the visual terms of the product management triangle. The result is a new, loopy iteration of the product triangle that expresses the substance of “product” in a way I haven’t done previously.

ProductLoops
Figure 1. Product Loops.

While each term in the diagram is familiar, the visual structure may be hard to digest. So I’ll unpack it by going through its components separately. Let’s the start with the outer loop…

OutLoops
Figure 2. The Outer Loop.

The outer loop summarizes what we aspire to achieve through product. We’ll use our resources to build a technology. We’ll attract users to our technology by crafting a stellar user experience. People  will love or need it so much they’ll pay to use it (or be valuable to advertisers). Then we’ll reinvest our revenue back into enhancing the technology. The loop will repeat, leading to more revenue and glory.

Unfortunately, it’s not so simple to move through these big loops. To do so, we need three intersecting feedback loops. Building and maintaining these feedback loops is where we get into the meat of product — it’s how companies stay oriented while reaching for their vision.

UserTechLoop
Figure 3. Tech-Users Loop.

Let’s look at the feedback loop that connects technology and users. No matter how powerful our vision is, even if we’re Apple, we can’t blindly sustain a great user experience. We need insight into the people who use or might use our product. This type of insight exists in qualitative forms like user testing and surveys; and quantitative forms like web analytics and A/B testing. When this feedback loop is broken, you can’t course adjust when the product doesn’t stick. When the loop is healthy, product usage provides strong signal informing product direction.

UserCapLoop
Figure 4. Users-Capital Loop.

The terms of the loop connecting users and capital is how we traditionally describe the health of a business. No matter how viral your product is, to grow revenue, you’ll need to invest specifically in acquiring users, whether it’s through traditional or untraditional methods. Even Facebook advertises itself. Industry thinking about how to balance user acquisition and revenue is evolving. The feedback loop is broken when the product is not achieving the intended balance, whatever that may be. If you’re trying to be profitable, the loop is broken when acquired users are not converting to paying customers. If you’re trying to grow, the loop is broken when your pricing strategy introduces too much friction. For an example of a thriving users-capital loop, see this piece on how how Uber used “Capital as a Performance Enhancing Drug.”

CapTechLoop
Figure 5. Capital-Tech Loop.

Finally, we have the feedback loop connecting capital and tech. Even the most talented engineers shouldn’t build, build, build all day. To ship the right product at minimal cost, teams need to periodically examine their process. Process improvements can be in the form of tweaking project management structure, communication methods, or tools. When the capital-tech loop is broken, teams fail to deliver within business parameters; they ship a flawed product or run out of time/money. When the loop is functioning, the team continuously improves its velocity and the soundness of each release.


To conclude, the process of creating and writing about these diagrams has led me to believe that orientation is a core responsibility of product management. Companies have a vision for where they want to go, but the landscape around a product is filled with surprises, both good and bad. A company faced with a set back can overreact like a government in the wake of a terrorist attack. And new pathways to success can go unobserved. Feedback loops are how we stay oriented. If the product manager can maintain the healthy functioning of loops described above, the company as a whole will understand its own context and act accordingly.

The Startup Triangle

1/ A startup is an evolving relationship between technology, users, and capital.

ST_1

 


2/ Startups must grow in three areas: output, impact, and value.

ST_2


2A/ Advancement on the “Output” axis indicates the startup’s capacity to turn capital into technology.

 

ST_2A


2B/ Advancement on the “Impact” axis indicates the scale of user adoption.

ST_2B


2C/ Advancement on the “Value” axis indicates the startup’s ability to monetize usage.

ST_2C.png


3/ Startups cannot advance along each axis independently.

ST_3.png


4/ All layers of a growth must be connected.

ST_4


4A/ Connective tissue is required to produce technology that users will embrace.

ST_4A


4B/ Connective tissue is required to attract users who will pay.

ST_4B


4C/ Connective tissue is required to reflect business learning in the development process.

ST_4C


5/ A startup, sometimes intentionally, becomes off balance when advancement is not equal across all axes.

ST_5


6/ A startup with Tech Equilibrium produces technology in a tight feedback loop with user interaction.

ST_6


6A/ A startup on the Users side of the Tech Equilibrium line faces technical limitations in handling user growth.

ST_6A


6B/ A startup on the Capital side of the Tech Equilibrium line produces technology with invalidated demand.

ST_6B


7/ A startup with User Equilibrium has an equal value exchange with its user base.

ST_7


7A/ A startup on the Tech side of the User Equilibrium line does not sufficiently monetize its audience.

ST_7A


7B/ A startup on the Capital side of the User Equilibrium line dampens user growth with over monetization.

ST_7B


8/ A startup with capital equilibrium is building a technology with proven business value.

ST_8


8A/ A startup on the Users side of the Capital Equilibrium line is allowing a successful product to stagnate.

 

ST_8A


8B/ A startup on the Tech side of the Capital Equilibrium line is prematurely scaling its product development operation.

ST_8B


9/ VCs supply startups with artificial Capital Equilibrium so they can focus on growing output and impact before trying to capture value. They bet that user equilibrium can be created late in the game.

 

ST_9

 

 


10/ While startups may intentionally lose balance on the way, they must ultimately find complete equilibrium to sustainably grow.

ST_10


What does your startup look like? Visualize it with this template.

 

ST_11

 

3 Types of Product Management: Which One is Right For Your Company?

I love how Daniel Demetri applies the product management triangle in his post, 3 Types of Product Management: Which One is Right For Your Company? . He uses the tension areas in the triangle to explore the mindsets of different PM types:

  1. The User-First Product Manager
  2. The Business-First Product Manager
  3. The Technology-First Product Manager

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The Conflict in Building a Product for Yourself

There is a fundamental tension in product development between going wide or narrow. Ultimately, reaching a large market is necessary for creating substantial business success. But if you immediately strive to create a product for too many people, you risk creating something for nobody.

In his 2012 post How to Get Startup Ideas, Paul Graham argues that you should focus first on users who will want your product to the extent that “… they’ll use it even when it’s a crappy version one made by a two-person startup they’ve never heard of…” More commonly, Graham says, successful startups start narrow, like a deep well.

Rob Go expresses the “start narrow” sentiment in his recent post, The Niche Pitch. When faced with feedback that your company needs to address a larger market, Go says you should “… do the opposite. Become even more focused, more obsessed with the one thing that will make your product really really great, and the specific types of people who will absolutely love you for it.”

The most extreme incarnation of a narrow focus is building a product first for yourself. For example, Slack spent months building a messaging app for their own team before inviting other companies to use it. “Eating your own dog food” tells you what’s actually important in your product.

Building a product for a narrow audience, with the ambition to scale later, is a leap of faith. It may have been predictable that if Facebook went viral at Harvard, it would work for other colleges. But not all products have a clear path to scale.

Similarly, building something you love does not imply other people will. In his 2010 post, 1.0 Is the Loneliest Number, Matt Mullenweg writes:

Usage is like oxygen for ideas. You can never fully anticipate how an audience is going to react to something you’ve created until it’s out there. That means every moment you’re working on something without it being in the public it’s actually dying, deprived of the oxygen of the real world.

The “Release early, release often” philosophy is taken almost as a given amongst agile product teams. While releasing early may lead to shipping products with known flaws and limitations, the approach can be the shortest path to achieving the best product. Usage helps you find issues and teaches you how to prioritize enhancements. Testing your product with real users can tell you that your product was based on a false assumption, giving you the opportunity to change course before investing more in the wrong direction.

The dictums “start narrow” and “usage is like oxygen for ideas” are often compatible. The correct approach for your product may to be to release early, but only within the narrow target audience.

But, the two sentiments can conflict. If you are starting by making a product for yourself or your own company, it may not be trivial to get others, even in your narrow audience, to use it. Making a product that users love is different than making a product that people will use. Just because somebody would love a product if they used it doesn’t imply they will be willing to try it or get over the hump of unlocking the value. When you’re making a product for yourself, presumably you don’t have to convince yourself to start or keep using it. If you’re making a product for others, in contrast, you have to spend energy creating a clear upfront value proposition and stickiness mechanisms to drive continued usage.

This leads to a strategic question:

If you’re building a product first for yourself, how far do you push it before spending the effort to get other people in your niche to use it?

For a startup with limited resources, the question is significant because you may invest heavily going down one of the two paths only to hit a dead end at the next phase. That is, you could burn your energy creating a product you love that no one else is willing to try. Or, you could crack the formula for driving demand before knowing whether you can deliver on the promise.

I’m facing this dilemma with my side project, Double-Loop.

Double-Loop records a history of your past product launches for the purpose of organizational memory and learning. My hypotheses is that you will make better products if you (1) record a clear objective and expected impact of each launch, (2) loop back to previous launches to record the results compared to expected outcomes, and (3) allow all team members to read and author the history of your product.

Double-Loop has been developed to the point where the primary behaviors are now possible in the app. My company, a digital healthcare startup, has used Double-Loop to create a timeline of product events going back to September of last year. This has proven valuable: Double-Loop has helped us be more methodical in our product approach, connect changes in our metrics to deployments, and communicate our impact to the broader company.

While there is clear utility in the current version of the app, there’s a lot more to be done to perfect the tool for my company’s use. For example, Double-Loop could integrate with web analytics services to contextualize the launch timeline. And Double-Loop could be enhanced with a streamlined tool for taking and annotating screenshots of each launch.

This is option A. I could continue iterating on Double-Loop purely to solve the needs of my company.

But my goal with Double-Loop is not only to create a great tool for my company. I want to transform how all software companies think about their product development process. For this reason, in the spirt of “Usage is like oxygen for ideas,” I’ve recently opened Double-Loop for other companies to use. I published a post, Double-Loop 1.0, that explains the vision and invites early users. About 5% of readers signed up so far.

It’s too early to tell if the first group of companies trying Double-Loop will use it long enough to unlock the value of creating a product history. I speculate that many of them won’t. The pay-off is small for creating one or two events in the system. The true benefit emerges only after you’ve recorded a timeline that extends beyond your active memory. Even for me, when Double-Loop was first ready to use, I had to push myself to add events until the benefits started to accumulate.

It’s difficult to grow a product that requires a new behavior, like consistently recording your product history. It’s doubly difficult when the new behavior comes with a delayed reward. The habit loop breaks down.

With Double-Loop, I have ideas for solving this stickiness problem.

  • Double-Loop could integrate with teams’ deployment processes such that events are automatically created with each deploy. These auto events could be pre-populated with project management tasks and code commits. My hypothesis is that companies will be more likely to unlock Double-Loop’s value if the effort creating a product history is dramatically reduced.
  • Double-Loop could integrate with Slack such that each new event in Double-Loop triggers a notification. A Double-Loop bot could remind you to loop back to capture the results of launches that happened previously. These features would help Double-Loop spread within a company and nudge continued usage.

Pursuing this direction is option B. I could focus on enhancing Double-Loop in a manner that increases the likelihood that other companies will unlock it’s value.

So which path should I take, option A or B? Should I keep making Double-Loop great for my company or should I try to get others using the product, even before it is great?

If you’d like to go on this journey with me and help craft the future of Double-Loop, signup below.