You can maximize things that don't conflict and have to satisfize everything else
5 min read
We maximize what’s most important to us.
For an organization one-way-door decisions that affect what is most important to us are most critical. It’s worth to spend a lot of resources on those. This is commonly called developing a strategy.
Our top-level purpose is to pick the item that maximizes impact, and to be able to explain why. So, first we’re going to make smaller decisions about the true impact of each item, and then we’re going to make a decision about which impacts are most valuable.
Binary materiality
No more values, no more weights, no more scores. Either an item materially contributes to that attribute, or it doesn’t. “Materially” means the effect is so large you can measure it easily:
Not just “more revenue,” but at least a 10% bump so that the curve visibly changes.
Not just “more retention,” but a 20% decrease in cancellations tied to a specific cause.
Not just “more intuitive,” but a 40% decrease in support tickets on a certain topic.
Not just “more competitive,” but sales will add it to their standard
presentation and marketing will add it to the feature-table on the
pricing page.
Not just “more profitable,” but overall gross profit margin will improve by 1%.
Not just “will pay for it,” but putting it in a higher pricing tier or add-on will cause 5% of customers to upgrade.
Not just “better UX,” but a 50% increase the success-rate for people moving through the interface.
Not just “widely used,” but 40% of customers surveyed scored at least 4 out of 5 on whether they’d use the feature.
Not just “customer satisfaction,” but moving from a 4/10 to a 8/10 on a survey related to this area of the product.
Not just “thought leadership,” but marketing commits to getting ten external articles to reference it in the next quarter.
Force people to write down exactly what the material change is expected to be. Not because the estimates are accurate, but because it forces the
person to think through the answer. Most ideas, we’ll eventually admit,
are so incremental that we won’t be able to measure the effect; that
means it is “not material.” That’s a tough fact to face,
but remember the point of the exercise is to force exactly these
conclusions, to drastically reduce the field of ideas so that only the
actually-best ideas remain. These smaller decisions will make the larger
decision easy.
Force people to write down exactly what the material change is expected to be. Not because the estimates are accurate, but because it forces the person to think through the answer. Most ideas, we’ll eventually admit, are so incremental that we won’t be able to measure the effect; that means it is “not material.” That’s a tough fact to face, but remember the point of the exercise is to force exactly these conclusions, to drastically reduce the field of ideas so that only the actually-best ideas remain. These smaller decisions will make the larger decision easy.
Stack-ranked attributes
We have to decide which attributes are most important. Currently we are treating all attributes as equally important
With a standard rubric, the fact that all attributes are not equally important drove us to reach for “weights.” But that computation confounded us with noise. Instead, we simply order attributes by importance, in a single ranked list. No numbers.
A typical ordering for a VC-backed B2B company, optimizing for
“growth is paramount, because if growth is there, we’ll be able to raise
more money,” could be:
A typical ordering for a VC-backed B2B company, optimising for “growth is paramount, because if growth is there, we’ll be able to raise more money,” could be:
Revenue growth (i.e. “the single biggest driver of equity-value”)
Number-of-customers growth (i.e. “market share”)
Product experience (i.e. “customers love of the product”)
Support cost (i.e. “a cost; more importantly, a measure of usability”)
Infrastructure cost (i.e. “a cost; should organically improve with scale”)
Net-profit expansion (i.e. “profitable business model”)
A bootstrapped company designed to create wealth for its founders and
employees, while being a place where employees genuinely love coming to
work and customers genuinely love the product, might be:
A bootstrapped company designed to create wealth for its founders and employees, while being a place where employees genuinely love coming to work and customers genuinely love the product, might be:
Cash-basis profit expansion (i.e. “wealth creation” + “mandatory to keep the business alive”)
Product experience (i.e. “the reason we get up in the morning is building a great product people love”)
Fun (i.e. “I built this business to be the place I want to work for”)
Number-of-customers growth (i.e. “stagnation is the prelude to death”)
Minimizing number of employees (i.e. “we joined a small company to avoid bureaucracy”)