The Frame Game: How to Define Your Product Strategy by Gibson Biddle Foreword by Connected Great products have a way of appearing to fall out of the clear blue sky. One minute the world exists one way, then as if by Which is why we at Connected have partnered with magic the reality of daily life has been reconstructed Gibson Biddle, the former VP of Product at Netflix, by a product that you can’t imagine living without. to put together a step-by-step guide and exercise book on defining your product strategy. However, in reality, truly great products are usually designed and invented as a result of great product The guide takes you through Biddle’s time at Netflix strategy. The idea of a product might pass through with exercises designed to help you leap out of your a person’s brain in a microsecond, but bringing it day-to-day mindset and into a space of creativity. to life, refining the approach, and even creating the Much like any great strategy guide, this e-book can right space for inspiring the winning idea requires be viewed very much as a game. It stretches you to a strategic intentionality that filters product thinking reimagine what’s possible, while working within the through a funnel. reality of what you, your team, and your business can feasibly achieve with the resources, expertise, For large organizations in particular, getting and technology at your disposal. this strategy right is the difference between obsolescence and leading. However, coalescing Whether you choose to fill in the exercises as a the competing views of different business units into group or as an individual, bringing your team together a concerted, thoughtful effort is a huge challenge. to work through your ideas is a powerful way of ensuring that everyone feels a sense of ownership In the era of disruption, it is all too easy for toward the strategy. businesses to find themselves chasing too many opportunities at the same time and at random— The Frame Game works to help businesses in much like an excitable dog in a squirrel-infested their pursuit of building better products that create park. The lack of direction will simply leave heads commercial and real-world impact by giving you the spinning and pivoting, wondering which direction tools for designing the right framework for success. to invest time, energy, and resources. 2 Contents 01 “The DHM Model” .......................................................................5 02 “From DHM to Product Strategy” ...................................11 03 “The Strategy/Metric/Tactic Lock-Up” ......................16 04 “Proxy Metrics” ...............................................................................18 05 “Working Bottom-Up” ................................................................24 06 “A Product Strategy for Each Swimlane” ..................26 07 “The Product Roadmap” .........................................................30 08 “The GLE Model” ..........................................................................33 09 “The GEM Model” ........................................................................37 10 “The Quarterly Product Strategy Meeting” .............40 3 The Frame Game: How to Define Your Product Strategy Introduction Early in my career as a product leader, I learned to execute quickly, leading to success in building games and children’s software. But two things reinforced the value of strategic thinking for me. One good, another bad: The Good. I learned to accelerate progress by thinking strategically. In building children’s software, I anticipated the value of brands and signed many of them to long-term exclusives. I also learned to appreciate the value of grade-based positioning (Elmo’s Preschool, Reader Rabbit’s 1st Grade), as well as the emerging internet opportunity. The Bad. I was a co-founder of Creative Wonders, which we sold to The Learning Crisp execution and high-cadence experimentation are critical, but having a Company (TLC), and then sold TLC to Mattel for $3.5B. But two years later clear product strategy supercharges your efforts. Strategic thinking enables Mattel spun TLC back out of the company for one-tenth its value. We had you to think ahead, to effectively “skip quarters,” and to build enduring value. failed to build long-term, enduring value. Which led me to design The Frame Game and help leaders define a product Fast forward to 2005 when I joined Netflix. I shifted my focus from strategy that positively impacts both revenue and the end user. Each step satisfying customers to delighting them. I also learned about the balancing takes you through my experience to show how we at Netflix revolutionized act of delight and margin, and what makes products hard to copy. And I the entertainment and content industry. Along the way there are exercises learned to articulate a product strategy—a set of hypotheses for how to that equip you with the framework necessary for turning great product delight customers in hard-to-copy, margin-enhancing ways. thinking into impactful product strategies. 4 The Frame Game: How to Define Your Product Strategy Step #1: The DHM Model When I join a company as a product leader, advisor, or board Delight customers member, my first action is to brainstorm the answers to three key questions: Think about how your product delights customers, both now and in the future. As an example, think about how Netflix delights you today. How 01 02 03 could it deliver even more in the future? How will the What will make What are the Here is a list of ideas Netflix explored in the past, along with potential product delight the product hard business model future experiments: customers today to copy by your experiments — Next day delivery of DVDs — 4K video with surround sound and tomorrow? competitors? required to build a profitable business? — Instant delivery via streaming — Available on all devices, “anytime, anywhere” — A large selection of movies and TV shows — Personalized choices for each family member — Easy to find and watch videos — Download videos for playback — An entertaining website experience — Interactive, branching stories The answers to these questions provide high-level hypotheses for your product strategy. — Unique movie-finding tools — Live sports Netflix has explored most of the ideas to the right. Some delighted — Movie suggestions from friends — News and current events customers, others didn’t. For your product, what’s your list of “delighters”? — Original content — 3D/VR immersive stories — Episodic TV binge watching 5 The Frame Game: How to Define Your Product Strategy Step #1: The DHM Model Creating a hard-to-copy advantage What makes it hard for companies to compete with Netflix? The answer: Eight powers. Hamilton Helmer’s book, 7 Powers, outlines the seven hard-to-copy advantages—and my own extra one thrown in makes the eight. Brand. Counter-positioning. Building trust with customers takes years of delivering value with a minimum This power is rare. In 2004, however, Netflix advertised “No Late Fees.” of “trust busters.” Today, more than 150 million members trust Netflix with their Blockbuster could not respond as late fees generated nearly all of their profits. credit cards. The Netflix brand provides a significant hard-to-copy advantage. Blockbuster could not afford to make the same offer. Network effects. Switching costs. Starting in 2008 with Xbox, Netflix built a device ecosystem. Today, nearly all This hard-to-copy advantage exists when a customer invests so much in one TVs, DVD/Blu-Ray players, game systems, set-top boxes, and mobile devices product that it’s hard to switch to another. To a small degree, Netflix customers are pre-wired to stream Netflix. don’t turn to Amazon or Hulu because it’s too much work to recreate profiles for each family member. Economies of scale. Process power. Netflix members enjoy original content, enabled by the company’s economies Netflix has many unique, hard-to-copy processes. One example: they encrypt of scale. Because Netflix can amortize content cost across 150 million tens of thousands of titles each year at multiple bandwidths for thousands of members, it can invest significantly more than its smaller rivals. different hardware devices. Unique technology. Captured resource. Helmer’s 7 Powers book does not list this attribute, but I think it’s essential. An The clearest example of this power is a patent. Another example is a close-knit example: Netflix’s personalization technology. Because Netflix knows the movie team not available to other companies. The Netflix startup trio of Reed Hastings, tastes of 150M members, they can generate accurate forecasts of streaming Neil Hunt, and Patty McCord—who all worked together at a previous startup— hours for each potential title, and spend accordingly. They is an example of a captured resource. effectively “right-size” their investment in original content. How will your product build a hard-to-copy advantage? 6 The Frame Game: How to Define Your Product Strategy Step #1: The DHM Model Margin enhancing How will your product generate margin? You’ll need profits to invest in innovation to build an even better product in the future. Below, are the many business experiments Netflix executed: — In 1998, Netflix launched a DVD site where customers could buy or rent — When streaming first launched in January 2007, Netflix placed a cap DVDs. About 90% bought DVDs, and 10% rented. Netflix stopped selling on monthly streaming hours, corresponding to the price of a member’s DVDs as they correctly anticipated Amazon would dominate online DVD plan. Members with the $23, three DVDs at-a-time service could stream sales. The initial rental model was $4 per disk, but the service attracted 23 hours/month. Netflix quickly tested an unlimited offering and switched few customers. to an “all-you-can-eat” model for streaming, too. — In 1999, Netflix bet the company on a three disk-at-a-time DVD-by-mail — The Qwikster disaster (when Netflix attempted to separate its DVD rental subscription, which cost about $25/month.