Strategy

The best PMs have a clear product strategy that solves a large customer problem in a growing market. Your product strategy will detail a broad range of product details, including vision, business goals, user needs and much more. Product strategy is your most important plan. A good plan achieves the following:

• Communicates your product vision
• Who your target audience is and how you will acquire them
• Aligns stakeholders on a shared goal
• Guides the implementation process
• Inspires your team to build something amazing

During your PM interviews, you’ll be asked about your current product’s strategy and be given strategic problems/questions to solve.

Define Product Strategy with the Product Vision Board

Product strategy can be broken down into a few components. Using Roman Pichler’s Product Vision Board is a great tool to describe your strategy. It contains these components:

Vision

• Overarching goal you are aiming for, the reason for creating the product
• Product’s true north

Target Market

• Describes the market or market segment
• Who are the users or customers

User Needs

• What problem does it solve?
• Why people will want to use and buy your product
• What the product’s value proposition is

Product Principles

• The intentions and characteristics of your product

Product Features

• 3–5 features
• An unfair advantage feature

Business Value

• Why it’s worthwhile for your company to invest in the product
• The desired business benefits
• Example: increase revenue, enter a new market, reduce cost, develop brand

Business Goals

• Timelined Business Goals with specific KPIs
• Example: Increase ad revenue by 30%, reduce support costs by $30k, increase mobile adoption by 100%, reduce support tickets by 50%

Revenue Streams

• How can you monetize the product and generate revenue?

Competition

• Who are the product’s main competitors?
• How does it differ from them?
• What are its strengths and weaknesses in comparison?

Go-To-Market

• How will the customers get hold of the product?
• How will we sell it?
• Positioning

Cost Structure

• What are the main cost factors to develop, market, sell and support the product

Obstacles / Risks

• What major obstacles will you face?
• What trade-offs will you need to make?
• What risks will you encounter?

Resources

• What key organizational resources will you need?

Now, let’s take a look at an example. This is what I expect was WhatsApp’s Product Vision Board just around the time of the Facebook acquisition in 2014.

Vision

Empower people to communicate anywhere in the world without barriers.

Target Market

Anyone with a mobile phone — Windows, BB, iPhone, Android

User Needs

• SMS is expensive — SMS over traditional cellular communication is costly (per message billing). Also, SMS over international borders is way more expensive.
• Some messages not delivered — Message delivery isn’t reliable yet in 2009. (Think double-check marks)
• Messaging experience is terrible — Traditional SMS experience is cumbersome with bad UI and too many features including games, ringtones, other gimmicks.

Product Principles

• Easy and lightweight
• Fast messaging and UI
• Utility over gimmicks

Product Features

• Free messaging — No cost per message and free on Wifi
• Reliable messaging — know when messages are delivered and even read.
• Simple, not simplistic — Easy onboarding, no ads, no games, no gimmicks

Business Value

• Subscription Revenue — $1 per year per user. Imagine if you had 1B people using it that’s a 1B per year.
• Valuable acquisition — with higher messaging market share, WA will be an attractive company to acquire
• Data advantage — Even with low subscription costs, WA can leverage their breadth of customer data including user behavior, type of content being shared and internet usage across global regions.

Business Goals

• Grab 30% of messaging market share — 30% of mobile users use WA on monthly basis or 30% of all messages go through WA. (When acquired by FB they had 20% of worldwide users using WA for messaging on a monthly basis)
• Establish partnerships with top 5 smartphone manufacturers — Have WA pre-installed for top 100 devices and data bandwidth levels
• Build the world’s most highly reliable and efficient data center — Deliver 99% of messages in under 3 seconds.

Revenue Streams

Subscription Revenue — $1 per year per user. Imagine if you had 1B people using it that’s a 1B per year.

Competition

• Email — WA is faster, doesn’t require subject and formality.More personal.
• Other messaging services — FB, iOS Messages, traditional SMS — WA is faster, more reliable and free

Go-To-Market

• Ubiquity — Support all mobile, web, desktop and operating systems
• Easy login — all you need is a cellular number
• Partnerships with top 5 smartphone manufacturers
• Word of mouth — Word of mouth is a strong driver for user acquisition.

Cost Structure

• The usual operational costs — Salaries, office, technology
• Datacenter — Messaging Infrastructure to reliably send messages globally

(No acquisition costs as WA doesn’t advertise)

Obstacles / Risks

• No monetization could prevent future company growth — Talent could be recruited to more lucrative companies. Big tech companies can build a better distributed datacenters. Other services will spend a lot of money to acquire users and further taking market share. WA will overcome by building the best service and people will use it.
• Apple, Google, FB can easily duplicate — they can spend two years, 10x the resources and get immediate distribution and end WA. WA has a head start and we’ll be able to innovate faster and we’re laser-focused on just messaging. (See Google Allo or FB acquisition of WA for $19B)
• Disintermediation — Apple or Google can lockout WA or render experience poor such as developing fastest messaging protocols for their own apps, limiting the ability to message by hiding in Action menu.

Resources

• Executive team, primarily co-founders
• 40 engineers
• 5 designers
• 5 product managers
• 5 support staff

A good product strategy helps define the product, align your company around a shared goal and how to build and launch it. The Product Vision Board is an effective template to clarify your product strategy.

In addition, the best PMs are often very curious — looking to learn about their customer, market and business. They also read tech blogs, watch for new trends in technology and consumer behavior.

Bonus: Example strategy questions

These are high-level questions meant to assess your strategic thinking.

Why did Facebook acquire WhatsApp for $19B when the company was losing $232M in 2014?

This acquisition still confounds me as Facebook likely didn’t directly make their money back. In other words, Facebook didn’t make $19B in revenue yet from Whatsapp though I’m sure they realized a major ROI already.

To answer this question you have to know three things:

1. What is Facebook’s mission?
2. How does Facebook make money or increase valuation?
3. What’s WhatsApp’s value proposition?

Facebook’s mission is: Give people the power to build community and bring the world closer together.

Facebook makes money primarily by selling ads. Their sky-high revenue is a result of the size of their social network — 1.73B users use their products every day. Their valuation is a reflection of their value propositions including active user base, ad sales, talent and innovations.

At the time of the acquisition, WhatsApp value proposition is:

• Huge user base (500M MAUs)
• Growing user base (1.5M new users join every month)
• Highly engaged users (500M messages sent every day)

With this information and that WhatsApp doesn’t generate any meaningful revenue, you can deduce that Facebook acquired WhatsApp to grow its user base and to increase app engagement. For Facebook, user growth is the primary goal with monetization resulting later. A larger and more active user base will generate more revenue and increase the FB stock price.

Why does Starbucks sometimes have coffee shops on both sides of the road?

It’s always surprising to me when I’m at a Starbucks and then I look across the street and there’s another one. Or when I’m at airport and there are two Starbucks stores within 100 feet.

One thing for sure is that Starbucks doesn’t open stores without extensive market research to determine financial viability. The easiest answer to arrive at would be Starbucks did this to make money and that there’s enough revenue on both sides of the street to warrant this. Looking deeper it could also be to create a moat or prevent competition in a high growth area. Even deeper it could be to a major branding exercise with the intention of increasing brand visibility. So my three reasons would be:

• Revenue — There’s enough foot traffic, densification and the right demographic to support two stores on each side of the street. Also, both sides of the street have enough retail or residential establishments that a customer would never need to cross the street.
• Competitive advantage — Starbucks has data to suggest this is a high-growth area and eventually competitors like Dunkin or McDonald’s would open a location. As an economic moat, they sign long-term leases and presence preventing competitors.
• Branding — Starbucks is one of the world’s most iconic and recognized brands. Their brand power can influence an undecided coffee drinker to choose Starbucks as a safe and reliable choice. In this case, multiple stores mean multiple signs and increased brand visibility.

Why did the CEO of Zoom come out in support of the FBI investigation of Zoom calls despite the FBI suggesting to users to not to use it?

This was an odd sequence of events but here is a quick rundown:

1. During the COVID-19 pandemic, Zoom becomes wildly popular as more and more workers use video for meetings.
2. Zoombombings start to happen where an intruder interrupts a Zoom meeting and usually with offensive content (pornography, racial slurs and other uglier things).
3. The FBI then cautions people about Zoom due to its lack of security. Basically suggesting to use other conferencing services.
4. Zoom CEO Eric Yuan supports the FBI’s warning and investigation of Zoom’s security. Incidentally, competing products like Google Meet see huge spikes in usage.
5. ZM stock plunges 11%.

I would expect Eric Yuan isn’t foolishly speaking out of turn when he shows support for the FBI warning and I’m sure an option was to rebuke the FBI’s warning (a la Facebook style). The latter would likely not have hurt Zoom’s brand or trust as much as the support.

So why did he do this? One can look at precedence as a way to rationalize his decision, and a good one is the Johnson & Johnson Tylenol Crisis of 80s. Quick recap: a bad actor replaces Tylenol pills with cyanide pills and reseals bottles for sale in stores. Seven people unknowingly ingested the cyanide pills and died an agonizing death. Johnson & Johnson take swift action and remove all Tylenol pills and launch a massive ad and PR campaign to warn people not to take Tylenol. Tylenol accounts for 20% of J & J profits and owns a 35% market share. Despite the incredible business risk of losing a major revenue stream and potentially ceding market share to Advil and Aspirin, J & J saw the benefit of transparency and care for their customers and that the risk of more deaths to be harmful to its brand long-term. By doing so they lost significant sales in the short-term but engendered long-lasting trust from their customers over the long-term.

To this end, I believe Eric Yuan operated under the same model. That is to say, he had these options:

1. Deny or downplay FBI’s warning but exposing Zoombombings as an insignificant risk affecting a tiny percentage of users.
2. Recognize this is an opportunity to ingratiate Zoom with future clients in the long-term as a secure and trustworthy service. This of course would mean supporting the FBI’s warning.
3. Say nothing, do nothing.

I believe he chose option two because he has a long view of his company’s unique opportunity to build a trusted service. In fact, the increased stock price and user growth are demonstrative of his genius move. Since then Zoom has implemented a number of changes including a security feature to enhance meeting security and end-to-end encryption for their paying clients.

Tell me about a smart competitive move by a company in the past six months and what you think about it?

During COVID-19, countries were enacting shelter-in-place restrictions and millions of people were losing their jobs at an unprecedented rate. From a market opportunity perspective, this might look like a very unattractive time to build an audience. Not so much so for e-commerce platform Shopify who realized that millions of people home and without a job represented a huge opportunity to acquire more customers and build up their brand. And indeed they did — new stores selling grew by 62% and the number of stores created in jumped 85%.

What makes it even more riskier of a decision is that 90-day trials compared to 14-day are a very long period to not recognize any subscription revenue and with such high volume of new stores it represent a much higher cost. In the end, this and other decisions rocketed Shopfiy stock up by 300% and becoming the go-to platform for ecommerce.