[Episode 5] If you are the CEO of product X
Setting strategy is a critical part of the day-to-day job of a product manager. Strategy questions can be as ambiguous and open-ended as product design questions. To make things worse, compared to product design, there isn’t a one-size-fit-all framework to talk about product strategy. What should we do then?
First of all, the secret sauce of good strategy answers consists of two parts, clear structure and industry knowledge.
Clear structure
- Classic strategy frameworks, e.g. SWOT, Porter’s five forces, 4P marketing mix, 4C; or
- Any DIY frameworks as long as they are helpful for structuring answers so that interviewers can follow you more easily.
I am personally in favor of fluid frameworks over classic ones. As I said, no one framework can be perfectly applied to all product strategy questions. Strictly following a fixed framework can make you sound mechanical in an interview.
Industry knowledge
Below are some examples of industry knowledge, which will set the foundation for answering product strategy questions.
- Industry trends, e.g. user privacy concerns, copy from China, cloud, autonomous driving, enterprise SaaS
- Competitive landscape, i.e. key players in a specific field and their strengths and weaknesses
- Company or product insights, e.g. historical evolution, competitive advantages, latest strategy and current challenges
Here is what I have done during my interview prep.
1. Study business models and strategies of tech giants
FAANG, Uber, LinkedIn, Microsoft, Airbnb, etc.
2. Read latest tech news/opinions
- TechCrunch
- Stratechery
- Product Hunt
- The Verge
- The Information (subscription)
- 36kr (Chinese)
3. Listen to good tech podcasts
- Acquired founded by Ben Gilbert and David Rosenthal about tech IPOs and M&As
- Axios’s Pro Rata
Next, I will go through some handy strategy frameworks for various kinds of strategy questions. What you need to do in an interview is to apply frameworks to your industry knowledge and deliver structured and rich answers.
Overarching strategy frameworks
To kick off a strategy question, you can follow this nice overarching framework:
- 1 - Talk about company mission and goal.
- 2 - Identify competitive advantages.
- 3 - Discuss company’s current challenges.
- 4 - Propose strategies that can leverage the company’s strengths.
1 - Talk about company mission and goal.
When you propose product strategies, you will always tie it back to the mission and goal of the company.
2 - Identify competitive advantages.
There are different ways to look at competitive advantages. A typical framework is high perceived value (Apple) vs. low cost (Amazon). In addition, you can also go a level deeper to discuss company’s strengths from multiple aspects, e.g. product, customer base, team, etc.
Products:
- What verticals has this company already dominated? For instance, Facebook is the market leader in social media with Facebook, Instagram and Whatsapp. However, Facebook is not that strong in streaming, e-commerce, gaming, professional networking, etc.
- How does the eco-system look like? Apple has built an entire eco-system for iPhone, iPad, Mac, TV based on a closed operating system. Uber is an on-demand transportation service provider offering ride-sharing, scooter, electric bikes, food delivery, freight, etc.
- What technology is this company particularly good at? Examples can be Amazon’s cloud infrastructure and Netflix’s personalized recommendation engine.
Customer base:
- Evaluate whether the company is stronger in consumer or enterprise? Microsoft is a leader in the enterprise software space while LinkedIn as a marketplace has both strong consumer and enterprise customer bases.
- For social products, you may want to talk about network effect. The network effect raises the entry barrier for new competitors
- If this company has broad geographical coverage like Uber, you can also mention its global customer base when compare it to Lyft.
3 - Discuss company’s current challenges.
There are two common types of challenges, growth and monetization. For example,
- Pinterest’s growth has recently slowed down both domestically and internationally.
- Apple’s iPhone sale volume is not growing much and it’s also lacking hardware innovation capability.
- Facebook’s monthly active user number is dropping due to user privacy concerns and other negative media.
- Uber is still struggling to get on a clear path to profitability with its launch of Uber credit card and Uber Money.
4 - Propose strategies that can leverage the company’s strengths.
Growth
Growth strategies usually fall under the following three categories:
- Deepen existing markets (Selling existing products to existing users)
- Cross sell (Selling new products to existing users)
- Enter new markets (Selling existing products to new users)
Next, I will lay out the basic framework for each of them.
A. Deepen existing markets (Sell existing product to existing users)
- First, lay out the competitive landscape by identifying key players in this market
- Then summarize strengths and weaknesses of each key player
- Identify relevant industry tailwind or competitive advantages of the company under discussion
- Lastly, come up with ideas to differentiate your company’s product from its competitors. Those ideas can be new product features or marketing efforts, including adjusting pricing, offering promotions, expanding distribution channels. Hey, have you noticed that I just used the 4P marketing mix?
B. Cross sell (Sell new products to existing users)
- Identify the existing customer base of the company
- Brainstorm potential adjacent product lines that are relevant to this group of customers
- Cross check those ideas to make sure that the company has the right capability of entering those areas, and perhaps prioritize ideas or eliminate the less feasible ones
Amazon is a perfect example of cross-selling. Amazon started off as an online bookstore in 1994. After achieving early success in the book business, it expanded to all e-commerce verticals. Their next step is to cross sell digital contents to existing users, including movies and music. Recently, Amazon has also tapped into offline shopping through its acquisition of Whole Food.
C. Enter new markets (Sell existing product to new users)
The definition of new users is multi-folded. It can be users in another country, e.g. “Should Lyft go global?”. It can also be migration from enterprise to consumer or vice versa, e.g. “Launch Uber for business”. It can also be a different user segment, e.g. “Launch Uber for the elderly”.
For any questions above, you may follow the following framework:
- Quick estimation of market sizing, growth rate and margin
- Discuss competitive landscape as well as strengths and weaknesses of key players
- Identify potential synergy, including existing customers of other product lines in the new market, data, technology, team, capital, market knowledge, brand name & trust, etc.
- Discuss ease of operations, e.g. economies of scale, local user behavior, access to distribution channels, partnerships, regulation, internet infrastructure, payment, etc.
- Is there any cannibalization with other product lines?
Monetization
When we talk about monetization or business models, the first question to ask is who to monetize. In general, it’s more challenging to monetize consumers than enterprises due to their lower willingness to pay and less sophisticated needs. 2B products usually have a clearer path to monetization, but it’s important to highlight that 2B model requires companies poured significant resources into building a dedicated sales team or customer support team.
Below is a good list of monetization models you can start with in a PM interview.
Ads: Ads model is suitable for products which have a large user base or collect high quality user demographic or behavioral data. Ads can be categorized into display ads or search ads. Most products can put up display ads while search ads are only relevant for products with search features, e.g. search engines, marketplaces like App Store and Amazon.
Freemium: Users can get the basic version of the products for free with an option to make in-app purchase for premium features or subscription. The free product will keep the growth flywheel running and get users in the door. After users understand the full value proposition, there is a higher likelihood for them to be converted to paying users.
Slack and Zoom are good examples of freemium model. It’s worthwhile to note that since it’s not easy to determine the right premium features, many freemium products struggled with buyer conversion. Slack and Zoom have found their own magic metrics as a proxy for best conversion timing, which are 2000 messages sent and calls over 40 minutes, respectively.
Subscription: The subscription model is suitable for products or services that users use repeatedly over a relatively long period of time, such as gym membership, LinkedIn Premium, Amazon Prime or all enterprise SaaS products. Additionally, content products are also a great fit with the subscription model. This is because the content library cannot be consumed all in once, either because the content is massive or updated frequently. Examples of content products include Spotify, Netflix, Audible, Podcast… and Medium! Lastly, it’s usually a good idea to incorporate free trials into the selling process for subscription products.
Paid model: You will see more iOS apps pursue the paid app route compared to Android apps. In general, the paid apps model is less adopted than other monetization models because of its high cost of user acquisition and low LTV.
Summary
Clear structure and industry knowledge go hand-in-hand in product strategy interviews.
You can use either classic strategy framework or create your own.
An overarching strategy framework can be:
- 1 - Talk about company mission and goal
- 2 - Identify competitive advantages
- 3 - Discuss company’s current challenges
- 4 - Propose strategies that can leverage the company’s strengths
There are three common types of growth strategies…
- Deepen existing markets (Selling existing products to existing users)
- Cross sell (Selling new products to existing users)
- Enter new markets (Selling existing products to new users)
… and four typical monetization models.
- Ads
- Freemium
- Subscription
- Paid apps
Read more:
[Episode 1] How to land a PM job without PM experience
[Episode 2] How to activate your creative brain in a PM interview?
[Episode 3] Five secrets about “Your Favorite Product” question
[Episode 4] DANGEROUS questions to ask interviewers
