Decision Making for PMs

I gave a talk recently on decision making to a group of product managers. Why is decision-making so important for PMs? Product managers are constantly making decisions like these:

  • Should we focus on this customer segment or use case?
  • Should we pursue this market opportunity?
  • Is this a good solution to the customer problem?
  • How should we prioritize this feature?
  • Our launch date is approaching: should we cut scope or change the schedule?
  • Is it worth holding up the launch to fix this bug?

The goal of every product manager is to launch the highest-impact product as quickly as possible. Speed is critical in order to learn faster, carve out your strategic position, and create a competitive advantage. One of the things that gets in the way of rapid execution is lack of decision-making. If you’re unable to make decisions quickly, your product is at risk of getting stalled, losing momentum, and potentially even failing.

So in this post, I’ll discuss some of the barriers to decision-making, and share some advice for overcoming these barriers. Three common barriers for decision-making include:

  1. Fear of making the wrong decision
  2. Desire to make the perfect decision
  3. Paralysis by the complexity of the decision

In order to overcome each of these barriers, I’ll discuss the following tools:

  1. Type 1 v. Type 2 decisions
  2. Satisficers v. Maximizers
  3. Day One hypothesis

Type 1 v. Type 2 decisions

One of the biggest barriers to making decisions quickly is the fear of making the wrong decision. Many PMs struggle with this, and it often leads to PMs endlessly agonizing over the decision, or proceeding in a very tentative and overly cautious manner.

One framework for looking at product decisions in perspective is the framework of Type 1 v. Type 2 decisions.

  • Type 1 decisions: major decisions that are not reversible, require great care and input in making them
  • Type 2 decisions: reversible decisions; if you don’t like the outcome, you can simply reverse and change course

A Type 1 decision is, essentially, a one-day door. A Type 1 decision is irreversible — or very, very difficult to undo.

Most decisions in high-tech product development are Type 2 decisions. You can release a product, and shut it down later if it doesn’t work. You can ramp up to 99% of your user traffic, and you can ramp back down again at a later time. Examples of Type 1 decisions would be exiting a market entirely and shutting down your product; acquiring a company (or agreeing to being acquired); or significant changes to your privacy policy that may have regulatory or PR implications.

Jeff Bezos in his most recent Annual Shareholder letter provided a good perspective about Type 1 v. Type 2 decisions:

“As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.”

The next time you find yourself tentatively approaching a decision, agonizing about whether you may make the wrong decision, ask yourself — is it a Type 1 or Type 2 decision? Is it truly irreversible? If you find that someone on your team is reluctant to make the wrong decision, you can use this as a tool to engage in a discussion with them.

Satisficers v. Maximizers

Another big barrier to making a decision is wanting to make the “perfect” decision. After all, we all care deeply about our products and we want to maximize their chances of success. So don’t we want to make the perfect choice when confronted with an important product decision? The problem with wanting to make the perfect decision is that you can burn a lot of time moving from a 90% or 95% decision to the 100% perfect decision. And you’ve only achieved a marginal improvement, but you’ve lost a bunch of time.

Gretchen Rubin, author of the “The Happiness Project,” uses the maxim “Don’t let the perfect be the enemy of the good,” which she borrowed from the philosopher Voltaire.

One framework that you can use to look at decisions with perspective is the framework of satisficers v. maximizers. According to Rubin, there are two approaches to decision-making: satisficing and maximizing.

Satisficers make a decision or take action once their criteria are met.
Importantly, this doesn’t mean they will settle for mediocrity — their criteria may be high. But they know their criteria going into a decision, and once something passes the bar (even a high bar), they move forward with conviction.

Maximizers, on the other hand, really want to make the optimal decision. 
They can’t make a decision until after they’ve examined and analyzed every option to make the best possible choice. They want to wring as much value as they can from their choices, so they spend a lot of time up front analyzing the options.

Rubin writes:

“Most decisions don’t require extensive research. In picking a girls’ summer camp, a friend got information from twenty-five camps and visited five in person. We got information from five camps and picked the one that a friend’s daughter loved. I used to think that my lack of diligence was a sign of laziness, and my resolution ‘Don’t let the perfect be the enemy of the good’ has made me feel a lot better.
“In some situations, the happier course is to know when good enough is good enough, and not to worry about perfection or making the perfect choice.”

Satisficers tend to be happier. Maximizers spend a lot of time to make a decision, then second-guess themselves afterwards whether they did in fact make the optimal decision. Satisficers decide quickly and then move on. The next time you find yourself taking longer than expected to make a decision, ask yourself whether you’re being a satisficer or a maximizer.

Day One Hypothesis

The final barrier to decision-making that I will address is one which I have struggled with throughout my own career. When you’re confronted with a new problem, you can become paralyzed by the sheer complexity of the decision. Where do we begin? You feel like it could take days, weeks, or even months to define and structure the problem, perform your analysis, and then make the right decision.

One tool that I have used in my career is something I learned at McKinsey called the Day One Hypothesis. (I’ve written about this before in “Making Decisions Under Uncertainty.”) The steps to develop a Day One Hypothesis are:

  1. Based on the high-level facts that you have learned within the first 24 hours of a new project, force yourself to develop an early hypothesis of what the solution to the product problem is.
  2. Go out and test your hypotheses with real customers. Focus your customer research on the specific hypotheses you want to test.
  3. Iterate your hypotheses based on what you’ve learned — and be willing to change them in light of new facts and information.

As I wrote in my previous post:

The reason why this approach is helpful is that after Day One, you always have a decision that you can stand behind at any point in time. You may try to gather additional data, but based on the data that you have already reviewed at that point in time, your current hypothesis is your current decision. This approach works best when you don’t know how much time you have to make a decision, but you could be called on at any time to make it.

You can convert the feeling of “I don’t know where to begin, it’s going to take me weeks or months to make a decision” to “Here’s my current thinking, if I have to make a decision right now, here’s my hypothesis” within 24 hours.

Efficient decision-making is one of the hallmarks of any great product manager, leader, and entrepreneur. We want to balance the urge to make the right decision with the reality that indecision comes at the cost of time. In this post, I’ve discussed three frameworks that you can use to overcome barriers to rapid decision-making.

  1. Type 1 v. Type 2 decisions
  2. Satisficers v. maximizers
  3. Day One hypothesis

Ask yourself whether the decision is truly irreversible, and whether your criteria have been met and it’s time to make the call. Force yourself to develop your hypotheses within the first 24 hours, and then your current hypothesis becomes your current decision if needed.

I will leave you with a great quote from Theodore Roosevelt that I recall to myself whenever I’m faced with a complex decision. Hopefully this quote — and the tools we have discussed — will help you become more efficient with your decision-making.

“In any moment of decision, the best thing you can do is the right thing. The worst thing you can do is nothing.”

If you enjoyed this article, please click “recommend” and check out additional posts in my publication PM Insights: Lessons from Being a Product Manager.