Be A Great Product Leader – Amplify 2019

On October 8, 2019, I was asked to give my talk, “Be A Great Product Leader” to a huge audience at Amplify 2019, the product management conference organized by Amplitude.*

The talk is named after possibly my most famous blog post on the topic of product leadership from 2011, Be A Great Product Leader.

For those of you who have seen earlier renditions of this talk, this version was cut down to thirty minutes, and as a result has a subset of topics. All of the lessons in this talk started as blog posts:

  1. The Secret to Product Prioritization. Three Buckets
  2. Find the Heat. Don’t Be Afraid to Talk About Emotion.
  3. Einstein’s Razor. Make Things As Simple As Possible, But Not Simpler.
  4. Obsess About Your Non-Users. Growth Comes from Them.
  5. Solve the Product Maze Backwards. Think Back from the Future.
  6. Know Your Superpower. Product. Design. Engineering.

Over the past ten years, I’ve given versions of this talk at over twenty different companies and conferences, but there has never been shareable video of it. Fortunately, Amplitude captured the video and  posted full video of all of their talks, including mine.

Product leadership continues to be a hot topic in the industry, and I hope that these lessons will help inspire more people to become great product leaders.

 


* Special thank you to Melinda Byerley for making the introduction!

How Will You Measure Your Life?

Source: Deseret News, Jan 24, 2020

On January 23, 2020, Clayton Christensen passed away at the age of 67.

I found out about his passing during my commute home from work on Friday, and it left me reflecting deeply on my experiences with Clay. I enrolled in his class back in 2000 at HBS, and was fortunate enough to have him agree to be an advisor to me on an independent project on the topic of disruption. Over the years, when I would visit HBS for recruiting or for a case study, I would always try to stop by to see him. Ever gracious and thoughtful, he may have been the most influential professor in my life.

There have been some wonderful pieces written about Clay in the past couple of days, mostly reflecting on his impact on management theory or his lifelong dedication to his family and his church. The list of his accomplishments is appropriately long. However, there are a few personal details I’d like to add to the story.

First Meeting

Many people are familiar with Clay’s work on innovation and disruption, made famous by his 1997 book, The Innovators Dilemma. It’s always shocking to me when I meet people in Silicon Valley who haven’t read it – that’s how fundamental it has been in shaping my thinking about business & strategy.

However, the professor I met at Harvard twenty years ago didn’t talk about innovation, disruption or how to build a successful business. He talked about the morality of business, the ethics of leadership and about his own personal journey.

Clay was a warm and friendly person, but when I first saw in him walk into our class, it was hard to ignore just how tall he was. At Harvard, the third row of seating is known as the “Power Deck” because when seated you are eye-level with the professor. I used to joke that in Clay’s class, it was the fourth row that was the Power Deck.

In some ways, Clay’s height made his approachability and humility even more surprising and authentic.

Clay’s class was supposed to be about strategy, but he opened his first lecture with a discussion of people. He spoke about how we spend most of the hours of our adult lives  at work, and how impactful those hours are on the emotional wellbeing of people even outside of work. He asked us to think about great managers we’d had in the past who supported us and gave us energy, and terrible managers who had drained us of it.

And that’s when he told us that he believed that being a great manager was one of great moral responsibility, because your leadership would either make the people who worked for you miserable, or they could bring those people joy & accomplishment.

When Clay talked about leadership, he talked about it with a clarity and conviction that is rare. To this day, when I take on a new leadership position, I talk to my teams about the responsibility I feel to them based on Clay’s words.

Professional Journey

Clay’s professional journey also resonated with me. Most people don’t know that Clay himself was a founder, starting a company focused on advanced ceramics back in the 1980s material science boom. It’s a bit of personal trivia, but my first love at Stanford  wasn’t Computer Science. It was the Introduction to Material Science that made me decide to major in Engineering.

But after that experience, Clay had decided to go back to school. It is unusual for an MBA to go back to get a PhD, but he went back because he wanted to study management and teach. His passion for a more rigorous framework on how managers make decisions led him to the insights that became The Innovator’s Dilemma, and the career that we all know him for. His fundamental belief that managers were intelligent and capable led him to frame an incredible problem: how do large companies continue to fail when they have access to so many smart people and almost unlimited strategic resources?

However, his choice wasn’t purely motivated by academic or professional interest. He talked openly about his family, his wife and his children, and the life he wanted to create for them. He talked about his faith, and how he wanted to be judged in the end.

Not everyone who is religious leads an exemplary life, but for Clay, his faith seemed to amplify and enforce his ethical rigor. In his later work, he would argue that it was easier to hold the line ethically 100% of the time than 98% of the time, because one compromise leads to another, then another.

How Will You Measure Your Life?

Over the years, when I would visit Clay at HBS, he was always warm and encouraging. We would discuss each career move I made: eBay, LinkedIn, Greylock, Wealthfront. The clarity of his strategic thinking was always a gift, and his willingness to engage and debate when we disagreed was always a bit surprising to me. But Clay loved to sharpen his thinking, and had seemingly no ego tied to defending ideas or business strategies. He just loved finding more insight; a twinkle in his eye in the pursuit of a clearer glimpse of the truth. I always left of our conversations feeling amplified by both his support and his energy.

In 2010, Clay published a piece based on these ideas that became a book by the same name, How Will You Measure Your Life.  It is worth reading, and even re-reading.

I have a pretty clear idea of how my ideas have generated enormous revenue for companies that have used my research; I know I’ve had a substantial impact. But as I’ve confronted this disease, it’s been interesting to see how unimportant that impact is to me now. I’ve concluded that the metric by which God will assess my life isn’t dollars but the individual people whose lives I’ve touched.

I think that’s the way it will work for us all. Don’t worry about the level of individual prominence you have achieved; worry about the individuals you have helped become better people. This is my final recommendation: Think about the metric by which your life will be judged, and make a resolution to live every day so that in the end, your life will be judged a success.

Rest in Peace, Clay.

Three Types of Risk: Making Decisions in the Face of Uncertainty

Image result for risk

One of the fond memories I have of my first two years at LinkedIn was coming into the office almost every Sunday to spend a couple of hours with Reid Hoffman.

Our conversations covered a wide range of topics, but the time ensured that we were fully aligned on the strategy of the company and the priorities we were pursuing.

One of the topics that I was most fond of discussing was the nature of risk, and how to best lead teams when facing the various types of risk that are commonplace at hypergrowth startups.

Here, Reid never varied, and I quickly adopted his framework as my own. In the end, most of our productive discussion involved deciding which of three types of risk a particular decision involved.

Three Types of Risk

Categorizing the type of risk you face is incredibly useful in helping teams understand how much effort and consideration to spending on making various types of decision in the face of uncertainty.

For hypergrowth startups, risk can be categorized as one of the following types:

  1. Fatal Risk
  2. Painful Risk
  3. Embarrassment Risk

Fatal risks are true bet-the-company issues. They are not that common, but they deserve clarity and focus. If you get the answer wrong here, the company is dead. These risks are unavoidable in early-stage startups, but as companies grow they become more and more uncommon. In fact, most large companies lose the ability or even recognition of these type of risks as they age.

Painful risks involve decisions that have significant repercussions if they go the wrong way. You might miss a key goal, or lose key people. They are recoverable, but there are real ramifications to getting the answer wrong.

Embarrassment risks have no significant impact if they are missed. All that is necessary is to acknowledge the mistake, change course, and move on.

Embarrassment risks are particularly difficult for smart & ambitious people, largely due to insecurity and ego. People want to be perceived as intelligent and successful, and they incorrectly map that to always being correct.

Unfortunately, most people at hypergrowth startups spend far too much time debating embarrassment risk, and they don’t take enough painful risks.

What About Type 1 & Type 2 Decisions?

Jeff Bezos has more recently popularized a different framework, based on two types of decision. This framework is often described in the context of the decision to move forward with Amazon Prime, which at the time was mostly a judgment call versus a data-driven decision.

In his framework:

  • Type 1 decisions are irreversible. Spend time on them.
  • Type 2 decisions are reversible, like walking through a door. Make them quickly and move on.

Overall, this framework is helpful. Thinking through the reversibility of decisions helps prioritize speed vs. perfection. When it comes to execution, the perfect truly can be the enemy of the good enough.

The problem is that almost every decision at a company is reversible, so it tends to not provide that much insight into why some risks feel harder to take than others.

Lessons in Execution

In some ways, you could describe painful risk & embarrassment risk as two sub-categories of Type 2 decisions. The speed of execution depends on taking these type 2 decisions quickly and aggressively, framing them as risk, and clearly articulating what the team will do if it doesn’t play out as expected.

Leaders need to embody this type of decision making, to give permission to newer employees to take risks and communicate their decision making effectively.

Otherwise, a spiral of low expectations and low-risk options will quickly put you in a vice when faced with more aggressive competitors. Worse, you won’t be taking enough shots on goal to learn fast enough to have high odds of success.

Large companies trend towards this problem because decisions become increasingly about the personal positioning of individuals for their own advancement, rather than optimizing for the best results for the company or their customers.

Ironically, taking painful risks may be the only way to set yourself up for exceptional outcomes.

The next time you see your team facing a decision in the face of uncertainty, try to quickly agree on what type of risk you are facing and what type of decision you are making. In most cases, you’ll be able to make decisions more quickly and save your time for the rare, but very real, risks that you have to navigate with your product and your business.

 

Joining Dropbox

“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever. Because believing that the dots will connect down the road will give you the confidence to follow your heart even when it leads you off the well worn path; and that will make all the difference.”

Steve Jobs, Stanford University, June 2005

In 2012, I was seriously considering becoming a full time investor.

I’ve always loved startups and venture capital, and I had been fortunate enough after leaving LinkedIn to have a chance to work for Greylock Partners, one of the most successful firms in the industry.

In May of 2012, my daughter was born. While on parental leave, I remember receiving a note about a Greylock company that was looking to add to its executive team. I had visited that company just the month before, to help advise on strategies for organizing and executing on viral growth.

The role itself wasn’t the right fit, but for some reason that company stuck in my head. Did I really want to become a full time investor? Or did I want to go help build a company?

As it turns out, the company that I couldn’t get out of my head was Dropbox.

First moments after the birth of my daughter, May 2012.

Opportunity at Scale

Over my career, I’ve had the good fortune to work at three companies that grew to reach over 100 million users. After spending the past six years focused on building new companies, I’m excited about jumping back into the challenges of designing and shipping features for the more than 500 million people who use Dropbox to get things done.

With the proliferation of devices and ubiquitous connectivity of the modern workplace, I think there is a unique opportunity, right now, to help teams unleash their creative energy and find more enlightened ways of working together.

Drew has done a great job of sharing the high level vision for Dropbox, and I’m excited to dive into a space that has so much product potential.  The era of walled gardens is over, and there has been an explosion of new applications and content types in the past few years. The challenge is to design an open ecosystem that helps bring all of those capabilities together in a way that doesn’t sacrifice simplicity in design.

Connecting the Dots

For now, I just want to say thank you John Lilly for reconnecting me to the Dropbox team, and thank you to QuentinDrew, and the entire Dropbox team for this opportunity. It is truly amazing how life connects the dots.

The Future of Drone Safety

Every time I go to the CODE Conference, I learn something new. There is something about watching some of the most prominent technology executives and founders responding to questions from talented journalists that gets me thinking.

Four years ago, I wrote about the transition technology CEOs needed to make from economics to politics. Coming back from this year’s gathering, there  is no question in my mind that this insight turned out to be true. Responsibility was a significant theme this year. As the technology industry continues to grow and mature,  more and more people are looking to investors and technology leaders to think ahead about potential issues that will happen when their creations become ubiquitous.

It got me thinking about drones.

The Problem with Drones

The FAA projects that the number of drones will reach 7 million in just the US alone by 2020. The growth rates for both consumer and commercial drones continue to grow at a rapid rate. The FAA estimates that there will be over 3.5 million hobbyist drones in the US by 2012.

Over the past few years, I’ve made a few investments in startups in the drone space. But until last year, I hadn’t given significant consideration to all of the safety issues around drones, particularly as they fly over large crowds or critical infrastructure.

The problem is fairly simple. Large venues, like sports stadiums, and critical infrastructure are largely defenseless against drones. Whether it’s a music festival, a weekend football game or anything of that sort, most people don’t realize that event managers really have no solution to protect a crowd. Whether accidental or intentional, there is a real risk that a malfunction or crash could harm people.

The Need for Active Measures

Long term, of course, we can imagine a world where drones can be programmed to avoid these spaces, (Airmap is a great example of a company making this happen). However, We can’t just assume or depend on this to be universally true – that risks the mistake of being overly idealistic. There needs to be an active solution to protect critical areas.

There are a number of companies working on solutions that involve intercepting and disabling drones that enter space that needs to be protected. In fact, there are solutions like drone on drone capture (with nets) 🕷, projectile solutions (shoot it down) 🔫, even flamethrowers! 🔥

Unfortunately, these kinetic measures make little sense in cases where the drones are flying over areas that need protection. If the concern is a drone crashing into a crowd or important infrastructure, these solutions run significant additional risk of the drone or pieces of the drone causing damage on impact. While there is definitely a market for kinetic solutions in the military and related markets, but it seems like a bad fit for the majority of the simple but real threats out there.

A Software-Based Solution for Drone Protection

Last year, as the co-chairman of ICON, I had the good fortune to meet Gilad Sahar, the co-founder and CEO of Convexum. With the unique insight that comes from military experience with both the costs & benefits of active solutions, they have developed a non-violent, software-based active measure to help automate perimeter protection from drones.

The concept is fairly simple.

Convexum has developed a device that allows companies & governments to detect when a drone is entering a restricted space, take control of the drone, and land it safely. A cloud-based service ensures that all Convexum devices have up-to-date signatures for known drones.

Initially, they are seeing significant demand for this solution around critical infrastructure, like energy development, and sporting venues. Long term, I can easily imagine a future where a non-violent solution for drone protection would be highly desirable anywhere we don’t want to bear the safety risk (like schools).

Working with Government

Europe has already provided a clear path for companies and government entities to receive the permits & exemptions needed to deploy this type of solution. (In fact, Enel has already deployed a solution to protect power plants.) Congress & Senate debating this now in the US, but seems to be one of the few remaining areas of true bi-partisan alignment.

I’ve personally been so impressed with Gilad & Convexum, I’ve decided to help them by becoming an advisor to the company.

Let’s hope this is part of an increasing pattern of entrepreneurs and investors thinking ahead about safety and regulation, and supporting technologies early that can help solve these eventual problems.

 

 

Index Funds: Good for Corporate Governance & Good for Crypto

On March 8th, Dick Weil, co-CEO of London-based Janus Henderson Investors,wrote an op-ed in the Wall Street Journal arguing that the SEC should prevent index-funds from voting on shareholder proxies. In it, he argues that index funds “have no interest in the performance of particular companies” and that index funds “lack a strong incentive to cast informed votes.”

Unfortunately, Mr. Weil misses some of the most important incentives that drive long-term equity holders, including index funds. In fact, index funds are likely to be superior to active funds for effecting good long-term corporate governance.

Index Funds Are Long-Term Owners

In October 2017, Jack Bogle gave an interview with Morningstar that addressed this exact issue. His argument, as usual, was clear and compelling:

Benz: How about on the governance front. I know you and I have talked about this over the years, about whether passive products are more limited than active managers from the standpoint of influencing corporate governance of the companies they own. What do you say to that assertion that passive products because they can’t walk away from some of these companies altogether don’t have that ultimate weapon that active managers do have?

Bogle: I’d say traditional index funds are the last, best hope for corporate governance.

Benz: And why is that?

Bogle: That’s because they’re the only true, long-term investors. Corporate governance should be based on long-term factors affecting the corporation, not a bunch of traders who want you to report higher earnings, gonna try and get on your board for a minute, and in a moment … I don’t know how they’re this smart to do it, but realign the entire company and then all will be well. It just doesn’t happen. In fact, the reverse is more likely to happen.

So, I don’t see … The old Wall Street rule was if you don’t like the management, sell the stock. The new index fund rule is if you don’t like the management, fix the management because you can’t sell the stock.

The critique of index funds and corporate governance comes from the mistaken idea that it is only by buying and/or selling a security that you can influence management and the allocation of capital. While there is no doubt that individual actions in the secondary market affect the price of a security, and the price of a security can affect capital allocation decisions, it is a relatively indirect link. Activist shareholders typically use these actions, but as a means to more direct control, either influence or direct membership on the board of directors.

Unfortunately, because discretionary investors have the power to walk away and sell a security, there is a weakness in their commitment to fixing a company. While some of the best activist private equity funds might spend years working to improve the returns of a company, most active investors show no such patience.

Index funds effectively operate as permanent owners of the business, so their incentive is to work to improve the performance of each and every company in proportion to their market capitalization.

Patient Capital Has Value

Perhaps one of the most compelling aspects of index funds as investors is their reliability as a patient source of capital. There is no doubt that the short-term focus of current capital markets is a problem for public companies looking to optimize their performance for the long term. Very often, significant changes in corporate strategy take years to implement, and can often result in negative short-term performance in exchange for the potential for significant long-term upside. Unfortunately, if most investors hold securities for short periods of time, management can be pushed for making decisions that are optimized for long-term value creation.

In fact, this problem is the focus of Eric Ries’ new startup, the Long-Term Stock Exchange.

For example, as of 2013, the average active mutual fund had a turnover of over 85% (according to Morningstar). This means their average holding period for a stock was barely over one year! They are not long-term investors, and their financial interest is incredibly biased towards short-term performance. They are not going to support any solution to a corporate problem that might hurt short-term performance.

This is not just a problem for active mutual funds. Private equity buyout funds, based on their structure, predominantly look for returns often within a relatively short number of years. Because they often use debt to leverage their buying power and maximize return on capital, their playbook also includes damaging short-term actions like the payoff of significant one-time dividends that can starve a business of long-term capital.

Index funds provide long-term, patient capital that is well aligned with the desire to see companies optimize their corporate governance for maximum shareholder value. The time frames of active investors are just too short to align with management changes and strategic choices that may not pay off for years, if not decades.

This Applies to Crypto, Too

One of the most exciting developments in cryptocurrencies has been credible initiatives around index investing. Bitwise Investments (currently available) and Coinbase (available soon) have both announced crypto index products and platforms. (disclosure: I am a private investor in both.)

Over the past few years, more and more investors are convinced there is an incredible opportunity for blockchain-based products and platforms. Though cryptocurrencies have the same liquidity as public companies, they are based on far younger organizations and will take time to develop. Index funds can act as a stabilizing force amidst the volatility, especially if index funds see continued net-positive inflows like their brethren in equity and debt assets.

Amidst all of the volatility, index funds will likely also have a role to play as aggregators of long-term holders of cryptocurrency. Index funds, given their incredibly long time implicit frames, are aligned to advocate for governance and development that will maximize the long-term value of the ecosystem.

Index funds may not control the marginal price of these assets, but they can provide a structure for a large pool of investors to have a long-term influence on the direction of these platforms. Whether the future belongs to proof-of-work systems, proof-of-stake, or other alternatives, my guess is that we’ll find that, over time, that access to long-term, patient capital is a huge benefit to products and platforms in crypto.

Long-Term Ownership Will Improve Governance

While there is no question that active investors can have a positive impact on the governance of corporations, it would be foolish not to see the additional advantages that index funds bring to the financial ecosystem.

Index funds may actually be the missing form of long-term, patient capital that we’ve needed in corporate governance to better align companies with the creation of long-term value for all of their stakeholders.

Every Function Has a Superpower. What’s Yours?

Over the course of my career, I’ve been fortunate enough to work in a variety of different functions.  No matter whether it is engineering, design, product, or service, every role has its own unique set of requirements and challenges.

Maybe that’s why I have always believed strongly that software is a team sport. If you want to build exceptional products, you have to find a way to harness the unique and diverse viewpoints of a team of professionals across a wide variety of functions.

Unfortunately, even at great companies, there is a repeated pattern where people in some functions feel disempowered. This doesn’t need to be the case.

Every function has a superpower. Make sure you know what yours is.

Every Function Has Value

Hypergrowth software companies are relentless in their pursuit of efficiency. Everyone who joins a new company dreams of building something new, something better than the companies that came before it. As a result, startups are always questioning the breakdown of functions in older, more established companies. In addition, resources are always tight, as companies stretch to make every dollar of funding count.

Unfortunately, this also means that many startups repeat the same mistakes over and over again when it comes to recognizing the value of different functions in a modern software company. This can be compounded by having a founding team or early employees who have never worked in those functions before.

You don’t really know a function until you know someone who is exceptional at it.

Inevitably, most startups, even when they have grown to hundreds of people, have gaps in their understanding and appreciation of some functions.

Avoiding Decision By Committee

Besides the lumpy build-out of different functions at fast-growing companies, the need for fast decision making also tends to bias the product process.

Great companies tend to be opinionated in their decision-making process around product, and those processes can vary significantly. Some companies may overweight decisions from engineering, others might look to a strong product function. There are companies that are largely sales-driven, and others that rely on general managers. There are companies where decision-making is hierarchical, deferring to the CEO or founder for key product calls, and others where decision-making is distributed broadly to the teams.

This isn’t surprising, however, because there is a direct tension at companies between the speed of execution and the exhaustiveness of a process. As a result, almost every product-centric company seeks to avoid “decision by committee” by assigning decision responsibility to a function or a hierarchy.

No matter what system exists, there are always people and functions that feel disempowered by the process.

Know Your Superpower

While you may not be the one to make the final product decision, it is a mistake to feel disempowered. Your function has unique value, and you can dramatically shape any product decision through your efforts.

The key is to know your superpower.

Every function has one. Here are just a few examples:

  • Engineering. Every engineer has the ability to take what is and isn’t possible off the table. I’ve seen product strategy discussions completely changed in a single weekend by engineers building something that no one else had even considered. The power to create is an awesome one, and the best engineers use this power to open the eyes of their teammates to what can be accomplished.
  • Design. Most people can’t visualize the different options that are possible around a given feature or product, and design has the power to reshape discussions completely based on visualization. Design can eliminate theoretical options, define the choices available, and most importantly trigger a deep, emotional response to certain choices in decision makers.
  • Product. At some companies, product managers have procedural power to make decisions. However, the most effective product managers use their power to frame the discussion with strategy and metrics to help drive decisions. The power to define the framework for a decision often is the power to control the decision.
  • Client Service. If you spend your day talking to real customers about real problems every day, you have amazing power to bring issues to the fore. Sometimes a decision is swayed by the scale of the problem, other times by the severity. Never underestimate the power of narrative, driven by real customer stories, to shape decisions on product and prioritization.

Every function has a superpower and everyone has the ability to do the extra work necessary to tap the unique capabilities and resources of their function to use that power to shape decisions. It requires work, but no matter what your function or role is, you can heavily influence critical decisions.

You just need to find your superpower.