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Teague Hopkins

Mindful Product Management

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Lean Startup

Mar 07 2014

Your Brain is not as Smart as it Thinks

Why should you care about ego risk? Because risks to innovation and new ventures follow the Pareto principle: only 20% of the risks a startup talks or thinks about are ego risks, but ego risks account for 80% of the challenges they face.

I’ve talked before about the 3 types of risk in new ventures. While tech and market risk get all the fanfare, ego risk is at the heart of most problems startups encounter. If you don’t manage market risk, you will build the wrong thing. If you don’t manage tech risk, you will fail at building that thing. If you don’t manage ego risk, you will fail to build anything at all.

Here’s the kicker: Most startups don’t die because they built the wrong thing. They die because they didn’t build anything.

Creative Commons Credit: LMH on Flickr
Creative Commons Credit: LMH on Flickr

Ego risk encompasses the whole set of challenges of managing ourselves, our teams, and our companies. As a leader in an uncertain venture, there’s no map to follow. With no clear yardstick for gauging success (except at certain rare intervals), managing your personal psychology and the mental health of your team becomes a crucial task, not just to prevent the productivity drop-off at the half-life of enthusiasm, but to avoid falling prey to cognitive biases and misapplied mental heuristics.

We’re all vulnerable to cognitive biases: traps in our thinking that lead us astray. Here are a few to watch out for:

Survivorship Bias – We focus on the startups that made it, and ignore the ones that disappeared before we heard about them. Then we draw conclusions about the whole from that small subset. For example, the startups that we’ve heard of mostly failed because they didn’t build the right thing. We never even hear about the vastly greater number of startups that built nothing. So we erroneously conclude that most startups fail because they build the wrong thing.

Overconfidence Effect – We estimate that we’re right more often than we actually are. We are often 99% certain that our estimates are correct, only to find that 40% of the time, they are wrong. Humans are notoriously bad at predicting the future, and it wreaks havoc on business plans. Entrepreneurs may plan and act as if the future is clear and make large bets when it might be more prudent to start with a smaller bet and wait for confirmation.

Sunk Cost Fallacy – People tend to throw good money after bad when in fact, it doesn’t matter how much we’ve spent: the only thing that should matter is the payoff from the investment we’re considering making – and the opportunity cost of not doing something else with that investment. But if we invest in a plan that doesn’t work out, we are more likely to double down on trying to make it work than to ignore our losses and invest in the best current option.

Availability Heuristic – When something is easy to recall, we think it must be more likely or more common than something that is harder to recall. If the last 2 people you talked to like the color green, you will think that most people seem to like the color green. This can lead us to jump to conclusions about our product or our market, instead of objectively evaluating the reality of people’s preferences and needs.

Confirmation Bias – We see what we want to see more often than it’s actually there. Especially when there is some level of ambiguity, our brains will interpret data to be consistent with our hypothesis, rather than challenge it. This can be dangerous when it causes us to think we have confirmed a theory, and proceed to act on it, when we’ve actually gained no further validation.

Bandwagon Effect – People tend to believe what other people believe. If most of your team believes something to be true, the rest of the team may come to believe the same, regardless of evidence to the contrary. The absence of dissenting opinions can make for a dangerous environment where the whole team moves in one direction without examining whether it is in fact the right strategy.

Halo Effect – We assume that people who have one positive quality must have others as well. One result of the halo effect is that we think that attractive people are correct more often than people who are not conventionally attractive. Just because a founder is good at code doesn’t mean they understand selling – and vice versa: yet another reason to set measurable goals and test against them early and often.

Hindsight Bias – We forget how wrong we were, and underestimate the importance of those first experiments. This is why it is so important to document hypotheses and minimum success criteria.

Dependence of self-concept on success of the business – When the business is failing, it’s common for the founder to feel like they are personally a failure. The countless entrepreneurs who have talked about this usually begin by referencing many of their friends and colleagues who suffer from the same thing, but don’t talk about it. So it’s a pretty reasonable bet that this is universal. Don’t feel bad.

Stay tuned for some tactics that can help you manage ego risk.

Written by Teague Hopkins · Categorized: Main · Tagged: Cognition, Cognitive bias, Critical thinking, Decision theory, ego risk, Intelligence analysis, Lean Startup, Management, Risk

Mar 04 2014

How to Set your Minimum Success Criteria

When you’re running a lean experiment, one of the key decision points is setting your minimum success criteria: the breakpoint at which you consider the experiment to have validated or invalidated your hypothesis.

Make sure you explicitly set the criteria before you run the experiment, and make a record of it. It’s too easy to fudge the numbers later and rob yourself of any valuable insight.

There are two methods I recommend for determining the minimum success criteria for your experiments.

The ‘business school’ method of setting minimum success criteria is to put together your pro forma spreadsheet with projections of what numbers you need to hit for the business to be financially viable and then reverse engineer the conversion rate you need to hit to make those numbers.

The approach that I find tends to work better, particularly for companies that are in the early stages, is to ask your team. What conversion rate would you have to see for you and your team to still be excited about the opportunity? This is the half-life of enthusiasm approach (H/T Frank DiMeo for the terminology).

half-life of enthusiasm
the time taken for your team’s enthusiasm to drop to half of its initial level

In early-stage companies (we’re talking pre-product/market fit), funding is tight, but usually not the limiting factor. Enthusiasm and the will to continue is usually in much shorter supply. So, optimize for your scarcest resource. If it’s truly funding, make the numbers work. If it’s enthusiasm, make sure the problem opportunity still excites the team.

Written by Teague Hopkins · Categorized: Main · Tagged: Breakpoint, Decision theory, Lean Startup

Feb 12 2014

Lean + Agile DC: A Summary in Tweets

Written by Teague Hopkins · Categorized: Main · Tagged: Agile, Lean, Lean Startup, Web 2.0

Oct 11 2013

The Secrets of Product Management

I’ve had several conversations recently about the nature of product management and the role of product managers. One thing that kept coming to mind was an old post by Martin Eriksson, which defines the product manager as the person who sits at the intersection of UX, Tech, and Business.

Eriksson says that the role of the product manager is to:

    Image Courtesy of Martin Eriksson
    Image Courtesy of Martin Eriksson
  • assess and articulate the needs of the user,
  • understand business goals and constraints, and
  • communicate requirements and prioritization to the tech team.

That’s a good starting point, but I wanted to add a few things to that description that have come out of my conversations with product managers and the people who work with them.

UX is not UI

It’s been said before, but it bears repeating: user experience is not about the interface. It’s about the complete end-to-end experience of engaging with your company and your product. This is the part where the product manager observes the user and designs experiments to gain more insight, so that they can be the voice of and proxy for the user in internal discussions. Lean startup principles and customer development are two ways of thinking about how to collect those data and insights about what drives your customers. The product manager has to collect that qualitative and quantitative data and make sense of it in the form of a product strategy.

Vision

The product manager holds the overall vision for the product. That person must be able to guide the fine-tuning of the details without losing sight of the bigger picture of what the company is trying to build. Usually, this involves maintaining a product roadmap for internal communication.1 The goal is to help guide the team in the process of creating a high-quality product that achieves that vision without diluting that value. One of the most difficult parts of the product management role is saying no to good ideas. A lot of good ideas don’t add up to a great product. If you’re having trouble with ideas in isolation, try making it a strategic decision by choosing among choices instead of making a series of binary decisions.

All Together Now

The product manager also has an important role in coordinating between the development, design, marketing, and sales teams, as well as accounting and business development. Each of these groups speaks a different language – with different jargon and different salient variables and goals. The product manager is the ultimate cross-cultural communicator, speaking each language and translating among them. Building consensus and coordinating efforts across functions is critical to executing a strategic plan, and the product manager is responsible not only for coming up with the strategy, but also for seeing it through.

Bonus

On teams that use Agile, the product manager sometimes serves as the Product Owner, in the role as proxy for the customer or end user. While insights from the true product owner – the user – are key to setting strategy, the product manager is the one inside the building and available to give clear decisions about murky ideas. Those decisions aren’t necessarily always right, but they help the team avoid analysis paralysis.

One note here: the Scrum Master in Agile is the person who owns the Agile process. The product manager cannot effectively serve as the Scrum Master, because those roles have different priorities that often naturally involve some productive conflict, and that should remain a separate role.

Double Bonus

As the person who can most clearly articulate the problem you’re trying to solve for your customer, your product manager can be a great evangelist for your company. The fact that she has interactions with and an understanding of almost every part of the business is an added benefit. If you have a product manager who is a good public speaker, take advantage of it and put her out there. You will probably see extra benefits from giving her more time “out of the building.”

Product Manager Job Description

This got me thinking: if I was writing a job description for an exceptional product manager, what would I include? The following is my take on the skills needed to excel in this role. Feel free to commandeer this for your own purposes.

Experience with lean startup and customer development. Understand the customer, and not just by asking them what they want.

Ability to influence without authority. Much of the product management role requires coordinating among people who don’t report directly to them. Diplomacy and negotiation is a requirement, not a nice-to-have.

Previous P&L Responsibility – The product manager must understand business to the degree that he can understand the constraints, risks, and tradeoffs, and make educated bets with imperfect information.

Analytics and data – Qualitative data are great, but even more useful when they are not used in a vacuum.

Coaching technical teams – It’s critical that the product manager has some sense of what is easy and what is difficult for developers. Also required: being able to communicate what you want to the team and predict challenges the team might confront.

Technical Background – When you can speak your developer’s language (if not write it), everything goes smoother because you can skip steps by understanding technical limitations and complexities.

 

1. The internal caveat here is key. If you publish the roadmap, customers will see it as a promise instead of a flexible plan.

Written by Teague Hopkins · Categorized: Main · Tagged: Agile, Agile software development, Business, Lean, Lean Startup, Management, Marketing, Product management, Product manager, Project management, Risk, Scrum, Software project management, Systems engineering, Systems engineering process, User

Sep 12 2013

Lean Startup Panel Discussion

Last night I had the privilege of moderating a panel discussion with four other lean startup practitioners at the Ballston BID Launchpad in Arlington, VA. The event was organized by Lean Startup Machine, and the five of us will all be mentoring at the upcoming Lean Startup Machine DC on September 20-22.

Moderator

Teague Hopkins – Founder of THG, Lean Startup Coach. THG helps teams at corporations, nonprofits, universities, and government agencies innovate more efficiently and effectively.

Panelists

Frank DiMeo – VP, Technical Staff at In-Q-Tel. In-Q-Tel is a not-for-profit venture capital firm that invests in high-tech companies to help the CIA and other intelligence firms equipped with the latest in information technology in support of United States intelligence capability.

Frank Taylor – CEO of Restin, Head of Partnerships at Fosterly. Restin provides robotic massage chairs for rent and lease to the engagement marketing industry and for various applications in the corporate wellness & hospitality space. Fosterly is a platform to organize and share entrepreneurial knowledge.

Bruce Mancinelli – Executive Director, Incspire. Incspire is a business incubator education program that supports emerging businesses and startups through the pairing of mentor teams to each incubated company in the program.

Laura Kennedy – Head of Corporate Development, Living Social. Living social  is a deal-of-the-day company that features discounted gift certificates usable at local or national companies. Based in Washington, D.C.

Panel Recording

Topics

  • What was your first introduction to Lean Startup?
  • An introduction to the components of Lean Startup Methodology.
  • How have you implemented the lean startup methodology at your company?
  • What’s the most surprising thing you’ve learned from running an experiment?
  • We’ve all heard about skunkworks. The goal is to insulate innovation teams from the culture and oversight of the larger organization. To be successful, do companies need to separate those doing innovation from those running operations?
  • What will we learn at Lean Startup Machine?
  • What are some tips for getting the most out of Lean Startup Machine?

Written by Teague Hopkins · Categorized: Main · Tagged: Business, Culture, Lean, Lean Startup, Marketing, Technology

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