Product Managers make multiple decisions everyday that impact their products. It is important that Product Managers ‘are right a lot’ because over time these decisions can add up to significant differences in outcomes for products and the customers they serve. The success of an individual Product Manager is measured as the positive impact they have on the outcome versus not having a Product Manager involved at all. In finance this is referred to as the Alpha which is the difference between the benchmark Beta that would have been achieved by passively investing in the market. Product Managers should be adding their product Alpha through achieving better product market fit, ensuring that the MVP is a good match for customer need and driving usage through go to market activities.
Often there is pressure to make decisions quickly and move on, especially during the implementation phase of the product development lifecycle when engineers are designing or coding the solution. When time is critical, you should evaluate your level of confidence against the risk of getting the decision wrong. Low risk decisions means deciding quickly.
A key question in determining risk is whether the decision can be reversed at a later point if you find it was the wrong call. At Amazon, we referred to this as a 1-way versus a 2-way door decision. 2-way door decisions are reversible and inherently lower risk versus a 1-way door decision. 2-way door decisions should be made quickly because if you are wrong you can change it later. 1-way door decisions should be made with caution because you might have to live with the consequences for a long time if you are wrong. A good example of 1-way door decisions is pricing. Once announced, it is really hard to raise prices but customers are fine if you reduce prices. Another example of 1-way door decisions relate to services offered through APIs. Customers then build their downstream solutions based on your API contracts and it becomes extremely difficult to make breaking changes to the contract. When making decisions you should first agree as a team whether the decision is a 1-way or 2-way door. Agreeing this is not always easy but the debate usually adds to your understanding of the problem and the options available.
In addition to risk you should also assess the time value of the decision. Typically, product decisions should be made quickly because delays impact time to market and time to learning, i.e. how quickly you get feedback from customers in the real world. However, before you make a decision, particularly 1-way door decision, you have options that won’t necessarily exist after a decision is made. This is called optionality. Counter intuitive as it sounds there can be value in not making a decision or delaying a decision on a course of action. Time itself has value because the world is changing around you and often you are learning more about a problem as time passes. An example is entering a new market. In some markets, there is a concept of second mover advantage which states that being first is actually a disadvantage. You can learn a lot from the first mover. Also, when offering a new product that customers are not familiar with you need to build the market through awareness and education. Sometimes it is better to let first movers do this for you and follow with a superior product once the market is bigger and more established. Optionality should be used with caution. In general, the decisions faced by Product Managers are often low risk, 2-way door decisions that should be made as quickly as possible with the information available at the time.
Sometimes people feel unable to make decisions because they lack sufficient information or data. Underlying this can be fear of failure or lack of confidence. People don’t want to be wrong so they delay and procrastinate. As an owner, delaying a decision can lead to poor outcomes such as delaying a much needed feature launch or impacting the company revenues. Slow decision making can impact the momentum of the entire product development process and people get frustrated. Ultimately, slow decisions can send companies bankrupt.
As a Product Manager, it is necessary to get comfortable with making decisions with limited data, assessing risk and making judgment calls. Sometimes this is called gut feel or educated guess. Whilst you often don’t have all the information that you would like, there are typically some comparables or benchmarks that you can use to make a more educated guess. The amount of time and effort spent analyzing a decision should be assessed against the risk of getting the decision wrong.
To get better at making judgment decisions you should write down your assumptions and forecast outcomes ahead of making the decision then evaluating the result. By doing this consistently over time, it is possible to improve your chances of success by calibrating from your experiences. Unfortunately, most organizations don’t have the discipline or process in place to record the assumptions, build the forecast outcome and run the retrospectives to calibrate the decision. This is a mistake as each decision is a learning opportunity for the organization.
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