The Balance Between Conversion and Innovation
What I’ve started to see over time is that two key focus areas for a company are conversion and innovation. If you are looking at the growth curve of a company, the big jumps tend to represent moments of innovation. Then, as there’s incremental growth after that step, that’s usually accomplished through conversion optimization of the new innovation. Those represent different parts of the life cycle of a company. They also form the basis for the different types of teams that work in your product or in your growth organization.
How do you apply those principles to product teams as you build out an organization? I’m a believer in the efficient frontier for portfolio investment and it provides a model for how I think product teams should think about building out the plans they’re going to work on as a product organization. For example, if all your team is doing is optimizing, then you’re making a lot of very small bets with low upside and there’s a higher probability that you are going to get marginal return over time. If you’re making lots of big innovative bets, then you have a number of really large investments that have a low probability of success. You might get lucky, but you’re not balancing your portfolio of bets enough.
A good product organization and a good product team figures out the right way to balance the number of bets it’s making. Some bets that are long, some bets that are short, some that are optimization, some that are innovation. And it’s not to say that product teams don’t need OKRs and KPIs and goals. That’s not actually the point at all. Actually, the OKRs, KPIs and goals help you define what that portfolio should look like for each individual team.
This is a simplified version of how my team at Showmax looked. We had a growth team, a core product team, an infrastructure/content team, and a personalization team. The growth team focused on improving funnel conversion. Core product was really focused on how do we add new platforms, how do we innovate on our product? We were very focused on Sub-Saharan Africa, so we spent a lot of time thinking about how do we help people in low bandwidth environments get streaming video.
We had an infrastructure and content management team, which was focused on making sure our content got effectively uploaded to and in front of our customers by building the right platform. And lastly, we had a personalization team, which was focused on recommending the next movie or show a customer would most likely be interested in. Each one of these teams had a fairly clear KPI: funnel conversion, retention rate, rapid upload of content/satisfaction of internal users, and an internal metric we called time to view. With each of those KPIs you could actually create the portfolio approach for the teams.
This next section I also highly recommend reading Andy Johns’ post on a very similar topic. He wrote it around the same time I did this talk initially and we share a lot of the same points. It’s great and linked here: https://medium.com/swlh/a-balanced-approach-to-growth-ad1e1bc2c038.
A growth team is very optimization-focused. It’s all about optimizing core flows, getting people in quickly, getting them to convert quickly, with a small amount of innovation there for larger bets that might help you get more people in more quickly. But most of the effort is focused on, “How do I quickly test,? How do I quickly get you through the funnel?”
Core product is very focused on innovation. Lots of our time was spent on how do we add new platforms? How do we make it easier for users to download content, how do we improve bandwidth, how do we make streaming easier? How do we deal with that in environments where bandwidth is actually quite bad? We spent a lot of time, as I said, in countries like South Africa and Kenya and there’s a lot of time spent thinking through how to solve fairly unique problems there in innovative ways.
Infrastructure, content management is very innovation-focused. You’re thinking about, “How do I make sure my content can scale to other territories? How do I make sure that I’m able to scale in different languages? How do I make sure that the internal teams are getting what they need from my product?” You’re not spending a lot of time optimizing.
And then personalization might even be more of a 50/50 split, but the idea is that the team is both implementing machine learning algorithms and then optimizing those algorithms to drive toward the right outcome for the customer.
The idea is to empower teams to take the different KPIs, OKRs, or measures and translate that into the right portfolio for that particular metric. If you give the team a portfolio allocation, then it makes it easier for them to build a strategy with the right percentage of short and longer term bets. It also helps them to focus how much of their effort should be on conversion and how much on innovation.
You can also use this framework to aid in team building. For example, if you have a very optimization growth-focused team, you definitely need a product manager, an analyst or data scientist, a UX designer and some front end resources to rapidly iterate and drive on conversion funnels. You might not need a visual designer. You might not even need a lot of backend resources depending on the product.
Compare that to a more innovation-focused team. You also need a product manager. However, you likely need more visual design and UX design resources to think about the customer and the problem you are solving. You might also need a user researcher to actually go and talk to customers and understand their problems and why the solutions that you’re building might help. And last but certainly not least, frontend and backend resources.
For internal innovation teams, you might not need any design resources at all. You might just need a product manager, a project manager and some back end resources. These teams might be lighter than others.
So if you’re going to approach product as a portfolio, structure your teams so that you can get to a place of how much innovation versus optimization you need within your product teams. Then, use that as a model for what resources you need to go and hire for each of those product teams.
