Hypothesis-driven product planning
And a few notes on execution
In my last article, I introduced what I call the “Central Hypothesis” for a company or a product. To recap, a Central Hypothesis articulates the path you believe you have for creating a product that delivers value to your customers and your business. It doesn’t capture everything about your product or your customers or your business, but it should serve as a pretty good overview of what you’re trying to accomplish.
A strong Central Hypothesis consists of four assertions:
Who do we believe is our target customer?
What core needs/problems do we believe they have?
What do we believe we can create that will address those needs/problems?
What do we believe we can measure/observe to know if we’re addressing those problems?
This week, I’ll outline how to use your Central Hypothesis to drive your planning process and empower your team to do the work that will make your product successful.
Evaluate the current state of your product/business against your hypothesis
Your hypothesis should be fairly aspirational - parts of it will be under-optimized, under-developed, or relatively un-explored (especially at an early-stage company). The purpose of this planning process is to identify which parts of the hypothesis you’ll focus on in the next few months, and the best way to do that is to ask the following questions in the following order:
1: What’s missing?
If any part of your hypothesis is completely speculative, then it’s probably a good idea to focus there. This happens a lot for early stage companies who are building out their first product, growth-stage companies who are starting to ramp up a growth program for the first time, and later-stage companies who are adding new product lines. It can also happen when new insights about your customers or your product drive a change in perspective on your hypothesis.
For example, early in my time at Plato, we had an insight that the best mentorship relationships in our platform involved a certain level of commitment from both the mentor and the mentee, but our platform didn’t really facilitate that “double opt-in.” Mentees could book recurring mentorship calls with any mentor, and it was up to the mentor to decline those invitations if they didn’t want to meet. Our product was missing a key feature in our solution hypothesis, so in the upcoming quarter, our top priority was to ship the first version of that feature, measure its impact on our users, and begin to evaluate that part of our hypothesis. This took precedence over other initiatives because it was a gap in our central hypothesis that needed to be filled ASAP.
We’ll discuss prioritization below, but it’s worth calling out that this category is the most important one to focus on. Leaving gaps in your hypothesis is far riskier than anything else, and if you’re comfortable leaving these gaps unaddressed, then they’re probably not very “central,” and you should revisit your hypothesis.
2: What’s no longer aligned with the CH?
It should be relatively commonplace for your hypothesis to change over time as you learn new things, your market changes, new technology becomes available, etc. In these cases, you’ll run into scenarios where parts of your business or product no longer align with your central hypothesis, because it has evolved. Where these hypothesis changes are seismic, you’ll have gaps that are covered in the previous section, but you’ll also have smaller, but still significant changes that you’ll need to account for.
For example, you may have previously focused on SMBs, mid-market, and small enterprise companies in your customer hypothesis, but recent insights suggest that your product is not well-suited for your small enterprise customers. Your hypothesis needs to evolve - either you need to update your product to better fit the needs of your small enterprise customers, or you need to transition away from those small enterprise customers in favor of the smaller companies that are a better fit for your product. In either case, you’ll have parts of your product and/or business that are no longer aligned with your Central Hypothesis, and need to be brought into alignment as quickly as possible.
3: Which parts of your hypothesis are least proven/certain?
There will be times when you begin to have your doubts about parts of your hypothesis, either because they’re new and unproven, or might not be performing well and you’re having second thoughts. In this scenario, it’s important to focus on addressing those doubts as quickly as possible so you can either re-affirm your current hypothesis, or make a change with confidence.
4: What’s under-developed and/or under-performing?
There may also be scenarios where part of your product is conceptually aligned with your Central Hypothesis, but it’s not yet robust enough to deliver the impact you need from it. Perhaps you’ve begun the process of investing in SEO, but it hasn’t been running long enough to begin to see significant increases in organic traffic. So you continue investing in the content you need to drive this growth channel, because it’s under-developed but still aligned with your hypothesis.
Or perhaps you launched a new onboarding experience for your users, but some of your UX choices didn’t work as well as you expected, so activation rates are dramatically lower than you need. Your hypothesis still stands, but you need to take a fresh swing at the onboarding flow.
5: Where are the biggest opportunities for optimization?
When you’ve achieved some degree of product-market fit, and your high-level strategy becomes relatively stable, you’ll start to look at how to optimize your product and business to increase efficiency and business performance.
Many teams and companies jump into this category too early, though, and this comes at the cost of addressing more fundamental opportunities in the other categories. Optimization becomes worthwhile above a certain scale, but until you get there, the returns just aren’t worth the investment, and you’ve got bigger things to focus on.
Identify high-priority focus areas
After working through those questions, your next step is to start from the top again and decide which area(s) you’re going to focus on for the next few months. Working from the top of the list is critical here - items at the top of the list are virtually always more strategically urgent than anything further down. It’s equally important to stop when you reach the maximum number of strategic focus areas your team can handle.
This will be the most painstaking part of the process - let’s acknowledge that clearly. Every team I’ve been on has faced pressure to take on too much. It’s far too easy to ignore opportunity costs and tack on another initiative or workstream, and I honestly think every startup struggles with this. This is self-defeating - it adds risk by undermining the team’s ability to focus and move quickly, and ultimately makes success less likely. It adds management and coordination overhead, creates more opportunity for confusion and misalignment, and complicates your messaging to your team about what they should focus on.
Generally speaking, the number of strategic focus areas your team can handle:
is smaller than you think it should be; and
increases with the size of your team, (but not as much as you wish it did).
As a rule of thumb, this is how the number of focus areas grows with your team, in my experience:
A company of 1-40 people can handle no more than one strategic focus area at a time
A company of 40+ people can handle up to two strategic focus areas at a time if they have to
A company of 120+ people can handle up to three strategic focus areas at a time if they have to
A company of 500+ people can handle up to four strategic focus areas at a time if they have to
Regardless of your team size, if you can focus on one strategic area of your business at a time, do that. If you absolutely must focus on two, and your team is large enough to handle that, then proceed with caution. If you think your team needs to tackle three or more areas at a time, give some serious thought to the possibility that you’re over-extending them and making success less likely. Proceed only if absolutely necessary, but first try to trim things down.
Define success in your focus area
Once you’ve determined which area of the business you’ll focus on, you need to determine how you’ll define success for that focus area within the time period you’re planning for. I’m not especially dogmatic on “output vs. outcome” targets here - sometimes when you’re really confident in a particular initiative, the best thing to do is to hold your team accountable for delivering that initiative, and holding yourself accountable for its impact. And sometimes you should set an ambitious impact target for your team and support them in determining how to get there. I’m familiar with all the conceptual arguments against output-based goals, but in practice, I’ve found that sometimes they are better at setting a team up for success.
Either way, make sure to set a clear definition for success in the focus area you’ve selected, and communicate it to your team as clearly as possible.
Write up a short strategic narrative document and share it with your entire company
Your team will need a fresh articulation of your Central Hypothesis, especially if it has changed in any way, some context on your evaluation of the business and product against it, and a crystal-clear presentation of what your strategic focus area(s) will be for the quarter and why. Spend a bit of time on this - it’s a really important leadership artifact and it can be incredibly powerful in creating clarity and empowerment for your team. But keep it short and to the point - one page if you can manage it, no more than two at the absolute maximum.
Determine what bets you will make
Within your one (or ok, MAYBE two) strategic focus areas, you then need to determine what you’re going to deliver in order to further bring your hypothesis to life and put it to the test, and achieve the success you’ve defined for your team. These are the features your team will build in the product, the new marketing programs you’ll run, and the operational changes you’ll make to bring things better in line with your Central Hypothesis.
Stay focused. Really.
Chances are, you’ll see things that aren’t fully aligned with your Central Hypothesis that are outside your strategic focus area. It will be tempting to try to address this, but I advise caution here. On the one hand, you definitely don’t want to sustain this kind of misalignment longer than you have to. But change takes time and focus, and each additional change you try to make at one time adds risk to the others. My guidance in this situation is to be laser-focused on the strategic area you’ve identified, and get to the other stuff later. Ultimately I think this actually accelerates your timeline to get everything aligned with your hypothesis, because it reduces the likelihood of mistakes and confusion on your team.
Within each strategic focus area, you should identify a handful of initiatives for your team to deliver. Each one should be tied directly to the definition of success you’ve established, and should plausibly be able to make a significant contribution to that success if things go as planned. You’re looking for big rocks here, not pebbles or sand (though your team may work on some of these as well along the way, and that’s ok).
Think in terms of bets, because you’re in the gambling business.
I am not a gambling person in my personal life, but I find it useful to think and talk about product work in betting terms.
You’re going to pay your team to deliver some things, in hopes that those things will bring value to your customers and your company. You’re being thoughtful about what you deliver, but you’re also not certain of success in any of them. Some will surely fail, but hopefully others will be dramatically more successful and your winnings will come out positive on the whole. You only have so many chips, so you understand you can only place so many bets, and you work hard to maximize your chances of winning on the ones you make.
This comes back to the importance of focus and recognizing the limitations of your team and resources. At a casino, you can only bet with the chips you have. But many leaders operate as if this rule doesn’t apply to their team, and set the team up to fail by stretching them across too many simultaneous workstreams.
Spend most of your time and energy on execution
Once you’ve set your plan in place, almost all of your attention should be on executing that plan with maximum speed and quality. Most teams should be able to go through the process I’ve outlined above in 1 focused week per quarter for a small team, and no more than 2 weeks for a large team. Don’t let the planning process drag out too long - decision paralysis is among your worst enemies, and it will kill your team’s confidence and momentum. The other 11-12 weeks of the quarter should be virtually 100% focused on executing the plan you’ve created.
Execution deserves an article of its own, so for now I’ll focus on a few things I’ve found most useful over the years:
Velocity is the most important thing - your team must operate with a sense of urgency and move as quickly as possible
Quality is second, mainly because bugs and technical debt ultimately cost your team velocity
Ignore anything that doesn’t directly contribute to your goals in your focus area. Don’t get distracted by shiny objects or new insights that are outside your focus area.
Resist the temptation to micro-optimize your priority order. If a product team is going to deliver 3 features in a quarter, it’s far more important that they deliver all of them as quickly as possible than that they do so in any particular order.
Avoid second-guessing your plans, and keep your doubts to yourself and your leadership team. Focus on preserving and maintaining the clarity you created for your team in the planning process, and supporting them in executing with velocity and quality.
Of course, you shouldn’t follow your plans off a cliff. If it becomes clear that your plans are fundamentally flawed, you should be decisive and quick about changing them. But don’t do this lightly, because it’s extremely disruptive to your team, and will destroy the velocity they have built up. If you’re considering a mid-cycle change in plans or priorities, ask yourself if that change is worth losing weeks or months of momentum. If it seems worth it, bite the bullet and make the change as quickly as you can. If it’s not, then stick to the plan.
What’s Next
In my next article, I’ll expand on these initial thoughts on execution and discuss why my perspective on execution has changed dramatically in the last few years.