Build Your Company Strategy Around Conversion and Innovation
In my previous post, I discussed how you can apply the balance of innovation and optimization to your product teams and product organization. In this update, I also apply that model to your larger company strategy.
Company stage can be a major determinant for how much innovation or optimization you should be doing at any given time. In the above graphic, if you start in the far right at the product market fit stage, this is a time of intense innovation. You shouldn’t be thinking a lot about optimization. You shouldn’t be thinking about all the tiny tests you can run. You should be focusing on getting to product market fit and building a product customers actually need. If that’s the case, everything should be focused on innovation. You should be talking to customers, making hypothesis-driven decisions and focusing on how you can get something in front of users that they want to use on a regular basis.
As you get that product built and get data validation that it’s working, you start to move into a growth stage. And a growth stage is where you’re going to start to see more and more optimization happening within your product organization. That’s when you start to optimize on those core flows that are really working and also at that stage you potentially have less innovation.
But it’s also a good time to start thinking about how you will build the teams that are going to innovate and create the next key feature/extension for your product that is going to create the next opportunity to grow the company. If you only do optimization at this stage, then you risk not having the next key innovation or product extension to enable continued growth.
Eventually a company gets to a point where there’s marginal growth from the original product that you built, and you need to optimize that as much as possible. But at this phase, it’s really important to double-down on some sort of new innovation or some sort of new opportunity for the organization. You really need to start thinking about, “How am I going to keep the company going? How am I going to keep my customers engaged and also find new ones? What is the next thing that I’m going to build?”
The key here is that none of these stages are just add a bunch of features or do a bunch of optimization. You should be strategically planning when to layer these different elements in as you build your company. And it also applies back to the product team for how they’re focusing as well. For a product-led organization, which is more and more common, the balance between optimization and innovation should be shifting based on the phase of the company.
If you want to use Horizon Planning, this model can also be applied. A more detailed breakdown of Horizon Planning is linked here. Horizon planning is a model that a lot of companies use. Horizon 1 are your mature businesses, Horizon 2 are your rapid growth businesses, and Horizon 3 are your emerging businesses.
You can apply the optimization and innovation framework to this quite well. Your mature businesses/products at a large company (Horizon 1) are your cash cows, and they’re optimization opportunities. You’re not going to generate a lot of new innovation, or new growth out of them. You want to optimize them as much as you can to extract profits and then move resources away to something in a phase of rapid growth.
In the rapid growth phase (Horizon 2), you’re both doing optimization on the product that’s growing rapidly and then also looking for new opportunities to innovate on that and continue growth. In this phase, you’ll need a balance of optimization and innovation for continued growth.
And then Horizon 3, which are the new companies/products, you’re looking for new, innovative opportunities. In this phase, you are very focused on innovation as you discover and create these new businesses/products.
As a wrap up, what I’ve tried to do across this series of posts is to start from the micro of the product team and the user they are focused on. In the first post and second post, I covered the balance between optimization and innovation that needs to occur. You have to shift back and forth between these as you build your product team and set clear expectations for both new and existing product leaders in the organization.
The next step (third post) is about applying these principles to building a whole product organization. You have different teams that are focused more on optimization, more on innovation, and it’s about figuring out how to properly balance those teams. And then if you zoom out one more time, how do the principles of optimization and innovation apply to the company at large?
The last point I want to make beyond is I think there’s an ethical reason to be customer-focused. As you look at a lot of companies that are very data and mission driven, it’s easy to forget about the user. It’s very easy to forget that some person in some country is having an experience with your product. When you view users as just a data point or as just a step on your growth funnel, it’s a lot easier to make product decisions that can have detrimental effects. It’s easier to conclude that taking away privacy or choice is a good decision to drive metrics. But if you actually ground yourself and ask, “Who is my customer? Why are they buying my product? Why are they using my product?” I think it’s a lot harder to build a product that actually hurts them in the end. So if for no other reason, always ask yourself if what you are building will actually help your customers.
