Reforge is better with colleagues & friends.

Share Lesson →

10:31 1x

Paused Bookmark

In the last module, we talked about our first input into overall product strategy: Feature Strategy.

Feature strategy is about how you add or extend your product's core value proposition for your existing
or adjacent users.

We talked about how product leaders can drive feature strategy by either evaluating and enhancing
existing features, or by developing new features to achieve and strengthen feature product fit.
When evaluating an individual feature, we started by thinking through the core qualitative components
of that feature, and how these components might inform how we set and evaluate feature metrics.

Then, to quantitatively think through the individual feature performance, we use the TARS Framework.
The TARS Framework helps us evaluate individual features based on adoption, retention, and user
satisfaction of the target population for that feature.

Then, to get a bird's-eye-view of how all our features are performing relative to each other, we use the
Feature Matrix to categorize features into four quadrants, based on their Satisfaction to Target Score
and Strategic Importance, in order to diagnose and prioritize features that should be optimized.
We also discussed how product leaders should play a role in new feature development. You are no
longer responsible for the day-to-day execution and development of new features, but rather your focus
should be on pressure-testing and reviewing the identification, prioritization and launch of new
features.

We now want to cover the second input into overall product strategy: Growth Strategy.

Whereas feature strategy is focused on enhancing the existing value proposition by adding or extending
the value prop, growth strategy is focused on maximizing that existing value proposition. It's about how
we get the most out of our existing product and existing target market, by removing barriers to access
and increasing product distribution.
Casey Winters, the Chief Product Officer at Eventbrite, says that "Features could help drive growth, but
growth is not about new features. Growth is about better connecting people to the existing value of the
product and capturing some of that value over time."

Still, product leaders can often struggle to incorporate growth strategy into product strategy for a few
different reasons.

First, product leaders can make the mistake of over-relying on launching new features to expand their
product's value proposition and drive growth. The source of this mistake is thinking that building a
great product is enough to create success on its own.
But the idea that having a great product will make you successful is incomplete at best. Every day, we
use products that feel terrible to us, but make billions of dollars for their companies. And on the other
hand, there are great products that haven't grown at all.

Take the expense reporting software Concur as an example. You can find plenty of unhappy Concur
customers on Twitter, and for a good reason. Concur made the simple task of filing an expense report
time-consuming and complicated for the typical end user and employee.

Yet Concur has a $7.5 billion market cap, in large part due to great distribution.

This begs the question, what does it take to be be successful?

We are all here to build and grow products that become meaningful in the world.
Having a great product is a good start, but it's only the first step. We need to pair that great product with
a great distribution strategy.

This is best explained by a quote from Peter Thiel's book "Zero to One." "Poor distribution, not product,
is the number one cause of failure."

But even great distribution paired with great product won't add up to success.

We need to pair those things with building strong user habits.

Ben Thompson, from the popular tech publication Stratechery, said it best: "Habit and user expectation
remains a stronger moat than most appreciate."

The thing here is that habits are hard to break. Switching costs once a habit has been established is
underestimated by people as a form of defensibility. When you own that habit, you own that growth,
and you can leverage it into more defensible actions, improving your overall product strategy.

And finally, successful products need to effectively generate revenue.

Taking a great product and effectively generating revenue from it helps us reinvest into our strategic
levers. This creates compounding success and more opportunities for new features and new product
launches.

We can see the importance of distribution, user habits, and revenue generation via the example of
Snap.

Snap developed a great product, Stories, but when Instagram copied it, Instagram was able to
distribute it more effectively to its existing user base of 600 million users. They also leveraged their
stronger existing user habits, and were able to generate more revenue using their existing ad platform.
The result was that Instagram Stories quickly surpassed Snap and never looked back.

Growth strategy helps take products from just great products to great products with great distribution,
strong user habits, and effective revenue generation.
It does this by answering three simple key questions.

1. How do I acquire users? 2

2. How do I retain users?
3. How do I monetize users?

As we work on Growth Strategy, we will combine these three areas into a system.

This brings us to a second mistake product leaders often make: assuming that growth is another team's
job.

Many product leaders view these things as a silo, where acquisition is about distribution, retention is
about habits, and monetization is about generating revenue.

PRODUCT STRATEGY
Growth Strategy

Material Bookmarks SHAR E

Oftentimes, it's easy for them to assume that acquisition is marketing's job, retention is either sales or
customer success's job, and monetization is some other team's job, like finance.

However, this is not how growth works. Acquisition, retention and monetization do not work in silos.
Instead, the three components work as a system to drive these outcomes.

If you change one part, it's going to influence the other parts. And product sits at the center of all three
of these parts, so we need to understand all three of them as a system to drive growth strategy
effectively.
Effective growth strategies connect an acquisition strategy, retention strategy and monetization strategy
to collectively expand distribution.

For example, by being freemium, Slack is able to expand quickly through viral loops and improve
retention due to internal network effects and notifications. Internal network effects lead to more paying
users within an organization over time.

In addition, Slack's Fair Billing policy, which charges customers for active users, encourages internal
growth because customers don't worry about paying for seats that are not used, resulting in lower
friction to expand.

Each of these parts affects the other parts, and each of these decisions changes the nature of the
product without actually changing the features.

Similarly, good growth strategy connects acquisition, retention and monetization strategy to reinforce
user habits and keep them using the product.
Instacart Express, a monthly subscription for unlimited local Instacart deliveries, is an example of a
product that reinforces a habit through acquisition, retention and monetization.

Some new users are drawn to Instacart by the subscription, often through free trials. Subscribers to this
membership use Instacart more frequently and become more engaged users, thus improving retention.
And monetization is directly impacted, as there's a monthly or annual membership fee, in addition to
more frequent orders. Each of these parts affects the other parts, and Instacart Express sits at the center
of a product.

Finally, great growth strategy combines acquisition, retention, and monetization to collectively improve
revenue generation.
For example, acquisition, retention and monetization helped drive Pinterest's revenue generation. 1
Increased acquisition leads to more new content. More new content drives more acquisition through
Pinterest SEO loops, and increases retention, as there is more content to recommend and deliver to
existing users, bringing them back. As both of these grow, there are more users to monetize via their ad
system, which is fed back into acquisition.

The point is that each of these parts affects the other parts, and product sits at the center of how to
influence each of them.

Growth is part of product's job.

The misbelief that growth is not product's job primarily stems from not understanding how a product
actually influences and drives growth. But that misbelief creates your opportunity as a product leader.
There's often enormous opportunities to solve meaningful distribution, retention and revenue problems
for the product leader that understands how to connect it to the rest of their work.

Improving your growth strategy over the long term boosts your ability to launch new successful features
and products into new markets.
The third way product leaders can get growth wrong is by overly focusing growth strategy on hacks and
optimization.

When growth teams started to take hold across tech companies, the misbelief that more growth was
equivalent to more features quickly swung to the opposite end of the pendulum, that growth was just
about optimization. This has led teams down a path of local maximums, dark patterns and making
decisions exclusively with quantitative data.

Casey feels strongly about this. He says, "A lot of advice suggests that growth stems from ruthless
optimization, but optimization is only one of many, many strategies to create growth, and we need to
understand all of them so that we can map the right ones to the right constraints."
Successful product leaders know how and when to invest in growth to maximize a product's value
proposition.

So the approach we propose addresses these common mistakes, and is based on three foundational
things.

1. Growth is part of product's job.

2. We use multiple strategic levers to improve growth, optimization being only one of
them.
3. We approach growth as a system, rather than just viewing it in silos.

In this module, we're going to go through how to do this by looking at how to build an acquisition,
retention and monetization strategy.

Most importantly, we're going to look at these three as a system, and the key to viewing growth as a
system is through the concept of growth loops, which we'll cover in the next lesson.

Lesson Summary
Whereas feature strategy is focused on enhancing the existing value proposition by adding or
extending the value prop, growth strategy is focused on maximizing that existing value
proposition. It's about how we get the most out of our existing product and existing target market,
by removing barriers to access and increasing product distribution.

Copyright © 2021 REFORGE. Sharing of content and user accounts is strictly prohibited.