1. Scenario Planning:
It is very important to navigate uncertainty effectively, especially in times of rapid change and a dynamic environment. Hence amidst uncertainty, the first principle is to shift your focus away from traditional forecasts and projections, and instead embrace the concept of scenarios.
Scenarios involve breaking down uncertainty into distinct possibilities or potential ways the future might unfold. By considering factors beyond your control, such as the public health response and economic policy of a country, you can create multiple scenarios to better understand the range of potential outcomes. For example, if you are a company or organization in a particular country, you might not have control over how the government handles the public health situation or formulates economic policies, but understanding the potential outcomes can help you prepare and adapt.
This principle is vital when dealing with a dynamic and rapidly changing environment, as relying on forecasts can be misleading during periods of significant shifts, and provide false certainty when the world around you is in flux. Even here is the catch, you should never get overwhelmed by generating too many scenarios, as the world can change rapidly and focus on prioritizing the most relevant and likely scenarios, typically around four to five at a time.
Once you’ve ranked these scenarios from least to most preferred, the next step is to strategize and determine the appropriate actions to take based on the scenario you find yourself in. There’s a useful framework, possibly from McKinsey, that outlines different types of actions you can consider:
a. No Regrets Move:
This involves investing more in your existing business and operations, such as hiring additional sales staff or increasing marketing efforts. It’s a low-risk, low-return strategy.
b. Options:
This type of move allows you to explore and play in new and emerging spaces. It involves giving yourself permission to hedge your current business or position for future growth. Options are low-risk with the potential for high rewards.
c. Big Bets:
As the name suggests, this move involves making bold and aggressive bets on a particular outcome that you strongly believe in. It’s a high-risk, high-reward approach that aims to shape the industry in a specific direction.
To implement scenario planning effectively, it’s essential to define markers or metrics that will help identify which scenario is unfolding at any given time. Therefore, clear boundaries for each scenario should be established using measurable metrics, and weed out the scenarios that are less likely or not feasible. This will enable you to focus your efforts on the most relevant and probable scenarios for your business.
2. Leverage Your Strengths and Bet Bold:
The second principle is relevant when one finds themselves amidst an environment of ambiguity affecting almost everyone. In such circumstances, a valuable principle comes to the forefront – identifying the company’s or product’s core strengths and leveraging them with boldness. Making bold bets on these strengths becomes an opportunity to shape the future of both the industry and the specific product or category. In a world where everyone actively seeks direction, this proactive strategy allows one to take the lead and carve a distinct path forward.
By recognizing and capitalizing on their unique strengths, individuals or organizations position themselves as pioneers capable of guiding the industry’s trajectory rather than passively reacting to external events. Embracing this principle offers a competitive advantage during uncertain times. It positions one to influence the course of the industry and chart a distinctive course toward success.
3. Experiment in Emerging Spaces:
The third principle revolves around the importance of experimentation. It encourages individuals or organizations not to fear venturing into emerging spaces, particularly in business areas adjacent to their product, or spaces influenced by new consumer trends. Engaging in active experimentation in these areas is essential, as it grants the opportunity to establish a foothold in trending spaces. By making these smaller investments, individuals or organizations secure the right to participate in potential future growth areas.
Such experiments can yield outsized effects in the long run, as certain growing categories, product features, benefits, or unmet needs may completely reshape the industry’s future. While it’s beneficial to explore diverse opportunities, it’s crucial to be discerning and prioritize the ones that align best with your objectives. Being open to experimentation beyond the core business area is a key aspect of this principle.
At the same time, it is imperative to set clear exit criteria for these experiments. This approach aims to counter the human tendency of falling into the sunk cost fallacy, where continued investment is justified merely because resources have been committed in the past. By defining specific key performance indicators (KPIs) and timelines, it becomes easier to decide when to exit an experiment if it fails to meet the desired objectives within a predetermined period.
4. Do Things Differently, Not Different Things:
During times of transformation, it’s crucial to consider approaching things differently rather than just making superficial changes, especially as a Product Manager. This point can be explained by presenting a compelling example that involves closely monitoring a new upstart electric vehicle manufacturer amidst a changing landscape. Further comparing an unnamed electric vehicle startup to an established legacy automaker. The electric vehicle startup entered the automotive industry without any prior reputation or history, which might have seemed like a disadvantage though it actually gave the startup a significant advantage.
The three distinct advantages stemming from the unique approach taken by the electric vehicle startup, include:
a. The electric vehicle startup approached automotive design with a fresh perspective, focusing on a technology-led and user-centric experience. Their flagship vehicle’s interior features a streamlined layout, incorporating essential functions such as a steering wheel, display for mileage and battery status, manual switches for mirrors and windows, brake, and accelerator. In contrast, the legacy automaker’s electric vehicle exhibits a complex layout with numerous switches, buttons, and indicators, reminiscent of an aircraft cockpit due to their adherence to traditional design principles.
b. The electric vehicle startup enables low-cost upgrades through over-the-air (OTA) software updates, continuously improving the driving experience with added features and enhanced efficiency. In contrast, the legacy automaker requires customers to physically visit dealerships for software upgrades, resulting in higher expenses and potentially leading customers to consider purchasing a new vehicle for improved features.
c. The electric vehicle startup has the potential to create a scalable recurring revenue stream. They envision an app store where developers can create apps to enhance the car’s functionality, offering improved performance and innovative features. The car manufacturer would receive a share of the revenue generated from these apps. This contrasts with the limited recurring revenue opportunities for the legacy automaker, whose upgrades and services necessitate physical visits to service centers.
The electric vehicle startup’s unique approach and looking beyond mere superficial changes allowed them to capitalize on the advantages and successfully compete in the evolving automotive industry.
5. Dont Stray Too Far From the Purpose:
The final principle, a more subtle aspect of building product strategy, is to maintain authenticity. It is crucial to recognize that consumers are discerning individuals. Whether you are fine-tuning your business strategy, introducing new product features, or venturing into uncharted business domains that seem to complement your brand, consumers can readily detect anything that deviates from your core mission, values, or the true essence of your company.
For instance, the original Superman movie gained admiration for exuding a sense of hope and optimism through its bright and humor-filled portrayal. The movie offers straightforward entertainment and carries a strong foundation of hope. However when contrasted with the recent remakes like “Man of Steel” and “Batman v Superman,” which took a darker and more realistic tone, deviating from the core purpose of the Superman franchise. The consumers discerned and advise against straying too far from a company’s core identity when making changes or adapting to new circumstances.
Hence by staying true to the company’s essence, one can avoid inadvertently entering unfamiliar or risky territories where the capability to compete successfully may be compromised.
Additionally, it’s essential to recognize that successful strategy implementation goes beyond just formulating the strategy itself. While crafting a sound strategy is important, the majority of its impact, about 90 percent, comes from executing it effectively.
