Dragon thinking and product strategy
I’ve been thinking about how orgs move from backlogs to strategy, and how to make product strategies more strategic. I ended up in a strange place…
Marty Cagan has observed that many companies don’t just have a bad product strategy, it’s that they don’t have a product strategy at all. All I would add is that in my experience, those companies likely don’t know that they don’t have a product strategy, nor what one looks like.
It’s not too much of a stretch to conclude that means a significant proportion of Product Managers are also in the same boat. Or they know what a product strategy looks like, but they’re not managing to land the need for one. Either way, there’s work to do.
Analogies and stories are my preferred go-to to help me understand things, so I’ve been trying to come up with something to useful to help illustrate the underlying shift in thinking. Where I’ve landed is that it’s the difference between dragon thinking and civilisation building (in a world occupied by dragons, obviously!).
Dragons and their hoards
What is dragon thinking? It’s where your primary concern is growing your hoard of gold. You don’t really care where it comes from, or what it is, you just want more of it. So you go on hunting missions to see what you can acquire.
The problem is, the more you add to it, the harder it becomes to manage. And the treasure you already have does nothing to help you get more treasure. You have to battle just as hard for every extra jewel or coin. Bear with me on this analogy, it gets stretched even further.
When you’re successful, your hoard grows. Over time what you’re building becomes unwieldy, uncomfortable, and structurally unsound. It may be a very valuable pile, but it’s hard to navigate without potentially causing avalanches. And it gets harder and harder to defend. Bits go missing to little sneak thieves you don’t notice at first, but they get bolder with each success until you’re continually on the lookout, and you can’t go hunting anymore. If you’re ever properly attacked, it tends to be a winner takes all outcome.
In product, what this typically looks like a list of unrelated opportunities that you could go after. A backlog if you will. But very little way of differentiating what’s important, other than the size of the expected haul and the difficulty to acquire it. There’s always more to do, and the list keeps growing.
When it gets to prioritisation, it becomes super hard. Do you spend more time defending your pile, or go out scouting for more gold? Do you need to refactor your lair or upgrade your security? How do you know how big each haul will be, until after the slaughter? If goblins move in next door, how do you move your hoard to a safe place? I’m sure you can build out the analogy further in any direction you want. Hopefully you get the idea. That’s what I mean by dragon thinking.
Settlements and civilisations
So what’s the alternative? What is better than being a dragon? Being a human of course. They’re the ones who survived and superseded dragons, right? Yes, I’ve read more fantasy books than history books, so that’s the way it works in my head.
Instead of dragons, think about fiefdoms, castles, villages and all the other ways humans have prospered and progressed. In this analogy, you’re the ruler or regent and your job is to grow from a small settlement into a city. You can think of it like playing a game of civilisation if it helps.
Side note: This analogy assumes you’ve found product-market fit as a business, which is akin to finding an unoccupied piece of land to build your first settlement.
The best strategy will combine lots of different aspects — an understanding of the surrounding landscape, the availability of natural resources, and the capabilities of our people. What will work for us and what will work against us. What we can use to our advantage, and what will hurt us.
We’ll know we’re making progress when day-to-day survival no longer requires everything we have.
Moats and other strategic mechanics
In case you’ve lost sight of how this relates to product strategy, let’s break from the analogy for a moment. Gibson Biddle talks about product strategy as “a set of hypotheses for how to delight customers in hard-to-copy, margin-enhancing ways”. Again, it’s hard to disagree. But how do those hypotheses relate to each other? How might we think about those hypotheses in a way that gives us a structure that is not just another long list of loosely related opportunities?
I’m going to start with the hard-to-copy aspect because another way of describing hard-to-copy in business is to call them “moats”. And moats, and castles, and settlements all go quite well together…
Lots have been written about different types of moats in business strategy. For ease, breadth and simplicity, I’ve been using a basic version of the 7 Powers: The Foundations of Business Strategy by Hamilton Hemler as strategic mechanics that you can harness. Here's a quick summary of the seven :
- Scale economies — as you grow, the unit cost of production decreases. Think production run size, logistic networks, computing costs, etc. Amazon is exceptional at leverage economies of scale in a myriad of ways.
- Network economies — as each new customer joins the network, the network becomes more valuable to each customer. Think social networks, telecoms, standards and protocols, etc. Facebook or LinkedIn are obvious examples.
- Counter-positioning — often known as “disruption”, where a new business model gain traction as incumbents are slow to react due to damaging their existing business. Think Wikipedia vs Encyclopedia Britannica, Kodak and digital cameras, etc.
- Switching costs — when the cost of switching is prohibitive relative the the value gained by switching. Think software or digital purchases, bank accounts, etc. Apple and Android are classic examples.
- Branding — when your brand is so strong and recognisable that it’s what drives people to purchase your product or use your service, often at a premium. Coke, Apple, Ferrari, Jimmy Choos or Christian Louboutin shoes, etc.
- Cornered resource — when you have preferential access at attractive terms to a valuable resource. Think anything from talent loyalty (eg. Pixar) to mining rights for precious resources. Disney and its cast of characters is another example.
- Process power — operational excellence and a system of improvement that exceeds competitors, and therefore compounds process improvements over time. Think Toyota, Amazon and Tesla. Very few of these exist, and they take a long time to develop.
That is the lightest of light touches on those topics — there’s plenty more you can read about them if interested. Also worth noting, even if you don’t achieve true “power” in these, they are mechanics that create virtuous cycles that help you become more efficient over time.
Your organisation likely has a degree of these mechanics in effect that you want to develop for further strategic advantage. You’re not going to have something going on in all of them, but hopefully you’re trying to build something in at least one of them. Your competitors are likely doing the same.
Back into the analogy, you can think of these mechanics as your natural resources and landscape.If your settlement is at the mouth of the river you may want to develop a fishing capability or become a trading hub, or both. If you’re on the edge of a forest, logging could be your thing. If you’re situated atop a rocky mountaintop, maybe conquering others will be your preferred style.
Similarly, if your business is a social network, you’ll be paying attention to network economies. If you’re in hardware, you’d be crazy not to think about switching costs. See the connection?
In your settlement, you’ll still need access to all the other things people need to survive — food, clothing, shelter, etc, but you’ll want something you can capitalise on that you do better than others and works in your favour to make all those other aspects of survival easier. And that’s your strategic mechanic that you want to invest in and build your strategy around.
Goats and other means of production
Once you understand what you’ve got to work with, you’ll need to work out where your focus needs to be. Do you need to defend against threats, or expand into new territory, or should you be innovating and doing things more efficiently?
Let’s assume you have a herd of goats that are used for meat, milk and wool. At times you’ll need to defend them against wolf attacks, or build shelters and train dogs to protect them. At other times you will want to clear more land for grazing pasture. At other times, you’ll want to work on a new type of loom to increase the speed with which you can make woollen clothing. All are good things to do, but which one is the right thing to do today will very much depend on what your current situation is.
How do you apply that to product thinking? There are many ways, but I like the simplicity of this classification (apologies, I don’t recall the source — if you know, please let me know):
- Defend — what you need to do to protect yourself from threats, known or suspected. The things you need to do to keep up with increasing customer expectations, or investment in technology to keep moving at pace, etc. It’s generally doing what you currently do, but better. These activities usually only maintain current growth trajectories in the best-case scenario, but also prevent declines.
- Expand — perhaps you’re interested in expanding geographically, or to a new segment in the market. Or to broaden your product offering. Again, it’s typically doing something very similar to what you currently do, but doing it for more people. These activities are often seen as the fastest path to growth.
- Innovate — this is generally doing something differently. You usually don’t know what it is when you start and there may be a much higher degree of uncertainty, but the payoff can be substantial, as you create more efficient mechanisms to deliver the same output.
How much you want to invest in each of these activities will vary depending on your situation and will change as the external factors around you change. But you need to be intentional about what is the right focus right now, and how this capitalizes on your strategic mechanics.
Moats and goats
Bringing it together, imagine your village is nestled into the side of an old forest, but you also have plenty of grazing land. Your primary food source is your goat herd, and it’s currently sufficient to feed everyone with a bit left over for trading for other supplies.
If you don’t think about the relationship between things, you might decide to create a timber industry to capitalise on the access to the forest. As the forest shrinks, the wolves start coming out to hunt your goats and suddenly you’re not sure if you’re going to have enough meat to get through winter. Maybe that’s ok if you’re making enough out of the timber to get food from elsewhere, but you want to be sure of that before you start cutting trees. Perhaps it would be wiser to find a way to improve the quality of the goat’s wool for trading purposes, before venturing too far into the forest.
That’s probably about as far as I can credibly stretch the analogy usefully at this stage, so let’s get back to product strategy.
A useful exercise
As a way to help me tease out the strategic parts of a backlog, I like to map the backlog hypothesis and opportunities to the template below. Where does each one fit best? It’s ok if stuff doesn’t fit — not everything has to be strategically valuable.
If you’re not sure where things might fit, here are some examples:
- A redesign may fit into Branding|Defend in order to protect your brand from a poor experience
- A technical migration might fit into the Process power|Defend if it’s about speed of delivery
- Support for a new marketing channel might be Scale economies|Expand if you have a fixed cost base
This should give you a different view of your backlog, and can help you focus on which are the most important things to focus on first. You can also plot your competitors strengths and weaknesses.
To help refine your thinking, ask yourself any of the following :
- Are there any things we’re doing that we can’t place easily here? And are we sure they’re worth doing? Are they going to build any advantage for us or are they just another pile of gold that is nice but can’t be leveraged?
- Which is the most important thing in each row? Which is the most important thing in each column? What if we doubled down on just them?
- Are there any gaps where we should be investing that we’re currently not investing? Can we ideate in those spaces?
- Where are our competitors beating us? What are they really good at? What mechanics are working for them?
- Where you have two or more initiatives in the same box, are they all trying to achieve the same thing? Would you be better off focussing on fewer in the same space. If one was super successful, would the rest be needed?
- Are there any things here that if we succeed will conflict with anything else?
All of this is about helping refine your focus so you can do fewer things better. (If you’re unsure why fewer things should be the focus of your strategy, take a look at Martin Eriksson’s Decision Stack — another awesome thought piece on product strategy)
It’s not a substitute for a well-defined product strategy. Think of it more as a nudge in that direction. It’s a relatively quick exercise that can help move a backlog towards a strategy. And hopefully it will prompt more strategic conversations.
If you’ve made it this far, and liked what you read, would love to know what you think either through a comment or a clap (sorry, there’s no thumbs down).
Notes
1. The type of dragon referred to in this article are typical western/anglicised dragons. Fire breathing, gold hoarding, scaly beasts, typified by Smaug from The Hobbit.
2. The sketch of a dragon use an underlay of a dragon picture I found here: https://www.quora.com/Why-do-dragons-hoard-gold. I’m sorry I don’t know the original source.
