Vision and Strategy are great. A Hypothesis might be what you need most.
How to create focus and motivate your team, while embracing the unknowns you can't escape
Product Vision and Strategy get a lot of attention in the startup space, and for good reason. We look at massively successful companies like Apple, Airbnb, Google, and Tesla and attribute much of their success to their unflinching commitment to their vision, and we want to replicate that success for ourselves.
But what about other companies like Facebook/Meta and Netflix, who have famously made major pivots in their vision and/or strategy? Zuckerberg moved on quickly from his original “hot or not” vision, and I think it’s fair to say that was a critical early move that enabled the success he would have in the future. Netflix may have stayed true to their vision, but their strategy pivot from mail-order DVDs to digital streaming is the reason they’re still around to produce a scripted series about a far less nimble failed competitor.
There’s a reason many top VCs talk about the importance of investing in people rather than vision or strategy. High-caliber people will be successful even if they haven’t landed on the right vision/strategy yet, but mediocre founders will fail even if their vision is strong.
I’m a lot more interested in what I call the “Central Hypothesis” for a company or product than its multi-year vision or strategy. In this article, I’ll outline what a Central Hypothesis is, why it’s often more useful than vision/strategy, how to create one, and how to use it to lead your team. Next week, I’ll follow up with an overview of how to use your Central Hypothesis to drive your planning process.
What is a “Central Hypothesis?”
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?
These are grouped into two statements: a customer statement and a product statement. Here are some examples of what this might look like for the last two companies I worked at, Shift and Plato.
Shift:
Customer Statement: Used car buyers hate the experience of working with traditional dealers, and are eager for an option that is less stressful and intense.
Product Statement: An online used car dealership with a customer-centric buying process, a great selection of competitively priced cars, and easy financing options with competitive rates will have high 60-day retention and conversion rates (Note for context: most people buy a car within 60 days of starting the shopping process).
Plato:
Customer Statement: Most software engineers and engineering leaders don’t get all the support and mentorship they need from within the organization they work for, and many are willing to share what they’ve learned with others.
Product Statement: A platform that connects engineers and eng leaders who want mentorship with a mentor who wants to help others grow will have a high percentage of new mentees completing a mentorship call within their first 28 days, and high 6 month retention rates for mentors and mentees who are completing regular mentorship calls.
It’s worth noting that this structure works on a product or feature level just as well as on a company level. I’ve often used this structure with my teams for quarterly planning for their products, and for planning specific features on their roadmaps. All the same principles apply, just with a narrower focus.
Why a Central Hypothesis is more useful than vision or strategy
The biggest benefit is is that a hypothesis embraces the fact that most things are unknown for a startup, whereas vision and strategy feel very high-stakes and almost sacred. If I’m a founder and my grand vision for the company turns out to be off-base, it feels like a pretty big failure. But if my hypothesis turns out to have been wrong in a few areas, that’s ok - that’s what a hypothesis is for. A hypothesis feels like it exists to evolve as new insights come to light, and that’s going to happen quite frequently for most startups. As a startup leader, organizing your own thoughts and your team around a hypothesis sets you up for the learning you’re going to need in order to succeed.
The Central Hypothesis structure also has the benefit of being inherently customer-centric. It anchors on an articulation of who you believe your customer is, and what problems/needs you believe they have that can unlock value for them. This is the most important thing to focus on and refine, not just in your early days, but for as long as your company exists. This structure helps you articulate this clearly, not “once and for all,” but “at this point in time,” because it will probably change over time. And as it changes, you and your team need to be crystal clear and obsessively focused on it, and the rest of your hypothesis (and all of your work) needs to be aligned with it. There’s just nothing more important than this.
This framework also drives focus on what you believe is most important about your product. You don’t have space to write a multi-page deep dive here - you need to boil it down to the essential elements of the solution you believe is needed to solve your customer’s problems and create value. As a product leader, you need to be clear and confident on this, and your team needs that clarity from you. And if you’re not fully confident, at least be clear - decide where you’re going to make your bets, and empower your team to make them as strong as possible.
Another strength of the Central Hypothesis is that it culminates in key metrics you can use to align and focus your team. You need to give some thought to these metrics - this does take some time and consideration. But ultimately, you need to be able to point to one or two top-level metrics that will indicate whether and to what degree your product is addressing the customer needs you are targeting.
Finally, one of the biggest strengths of this structure compared to a longer-form vision/strategy is its brevity. Every word you put into a document creates a new opportunity for confusion, and increases the likelihood of the reader just tuning out. So you might spend weeks hammering out the perfect 4-page strategy doc, only to find that your team misinterpreted major portions of it, and simply didn’t read the last page or two. This is far less likely with a Central Hypothesis. It’s really just two sentences, maybe 4 at the most. If you get those right, your team can digest them quickly, and no one is going to tune out before the end. (I’ll concede here that a Central Hypothesis can be a great “tl;dr” for a larger strategy doc. I’ve used them that way in the past, but honestly I found that the additional words often didn’t add much value, and I found myself coming back to the hypothesis more than anything else.)
How to create and evolve your Central Hypothesis
Evaluate each assertion in order
The simplest way to create or refresh your Central Hypothesis is to walk through the four assertions I outlined previously, in order. If you’re doing it for the first time, start by writing a draft version of who you think your customer is; if you’re refreshing an existing CH, take your most recent version of this assertion. Ask yourself:
Do I still believe in this exact statement as it is worded?
What have I learned in the last few weeks/months that I didn’t know before and makes me question this assertion?
What would it look like to narrow down to something more specific, or to expand to something broader? Does either feel stronger or weaker?
If I had to reword it, how would I do that? Have I found myself articulating this differently with my team, investors, customers, etc.? If so, how and why? Is it a substantive change, or a wording change?
If I’m feeling uncertainty, where is that coming from? Should I be considering a bigger change in direction, or doubling down on where we’re currently headed? Where do I feel most confident, and how can I bring that area to the forefront while building confidence in areas where I’m unsure? What does my intuition say here?
Once you land on a target customer assertion you really believe in, move on to the second assertion about what that customer needs, and go through the same set of questions. Repeat this for the third and fourth assertions, until you arrive at a complete CH that captures your current thinking on what is most important for your business. It’s important to do this in order, because each assertion stems from the ones that precede it.
For most startups, doing this on a quarterly basis makes most sense. That’s a long enough period for you to deliver meaningful work and learn from it, while short enough for you to stay nimble and adapt quickly. In the very early days, you might do it monthly or even more frequently, but that gets hard to sustain once you have more than a handful of people on the team.
Engage your team while still leading them
It’s important to engage your team in this process, especially your exec team and any other key leaders in the organization. They’re going to have insights, experience, perspectives, and ideas that are different from yours - that’s why you hired them and you don’t want to squander that.
But it’s equally important for one person, usually the CEO or Head of Product, to “own” this and be the clear decision maker. This is not an exercise in consensus building, it’s an exercise in leadership. You need to get input from others to ensure you’re not missing key insights or ideas, or ignoring your blind spots. You need their alignment and commitment to help bring the rest of the company on board. But one person needs to steer the ship, and that should be the CEO or someone very strongly empowered by the CEO to drive this with their full backing. If there’s no one the CEO can fully trust with this, then they need to do it themself. It can also work well for the CEO to be the “approver” of the CH, with someone else driving the process of determining what it is.
How your Central Hypothesis helps you lead your team
Once you’ve arrived at a new version of your Central Hypothesis, it can help get your entire company to a place of clarity and focus.
A good starting point is to simply share it broadly with the team and let them digest it. Maybe you record a 5m Loom video where you introduce it, and talk about how and why you landed where you did. Maybe you post it in Slack and ask the team to submit questions in a thread. Maybe you do a live AMA on Zoom or in person.
Whatever the medium, the point here is to provide your team with visibility into both what the new CH is, and your rationale for it before you jump into plans and execution. Invite them to ask challenging questions, and be prepared to answer them. I don’t think it’s wise to change your CH based on the questions you get, unless you hear something that genuinely changes your mind in a significant way, or if you get a suggestion on clearer wording (this is actually really helpful).
Take note of the kinds of questions you get, and who they’re coming from. This will help you understand the pulse of your team, and what kind of support and leadership will be required from you and your exec team. It can also help you identify thoughtful, high-potential team members who might not be in a leadership role yet. You’ll want to elevate them and involve them in this process going forward.
Once your team has a chance to get clear on your new CH, the next step is to create focus for them. Each team and individual needs to evaluate how the new CH impacts their function and work, and how they need to adapt to it. This usually leads to a planning process - I’ll dive into that next week since it’s a complex topic in itself, and it really is distinct from determining your Central Hypothesis and sharing it with your team.
What’s Next
Next week, I’ll talk about how to use your Central Hypothesis to drive a planning process with your team. The CH doesn’t tell your team exactly what to build, so there needs to be a further process to determine that, and the CH lays a powerful foundation for that process.