Place Your Product Bets
When was the last time you had an idea you were 100% certain would be a success?
Was it actually successful?
If you build products for a living you likely know that scenario above rarely happens. The reality of product management is that most of the ideas we generate fail. There are a host of reasons why failure is the most common outcome that I won’t get into now, but the crux of the matter is that developing something new involves a high degree of uncertainty.
This is where the idea of a bet comes into play. According to author Annie Duke in Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, “a bet is a decision about an uncertain future”. By that definition, any decision about what you or your team should build next is a bet.
Improve Your Odds
One of the key themes discussed in the book is the notion that humans are notoriously bad at separating inputs from outputs. When asked if a decision was a good one or not we focus on the outcome of that decision rather than the information and factors that were known at the time the decision was made. There may be cases where you make a good decision at the time but it ends up poorly, like playing a poker hand where you had strong odds to win but end up losing.
This is hard for people to do because our decision-making is often filled with emotion and unconscious bias. There are hundreds of forms of bias, but I’ll focus on three common and closely linked types of bias that cloud our ability to make sound judgments:
- Attribution bias refers to systematic errors made when evaluating ourselves or others. For example, we typically credit other’s successes to luck rather than skill.
- Self-serving bias manifests itself in our tendency to view ourselves in an overly favorable manner. We may view our own success as a result of skill rather than luck or external factors. We may also reject feedback or information that doesn’t match our own view of self-view.
- Confirmation bias results in the tendency to seek out and favor information that matches our own beliefs.
By choosing to accept the uncertainties and treating our decisions as explicit bets we can better avoid this traps and withdraw the emotion to find key opportunities to learn and seek the truth. Annie Duke wrote, “we win bets by relentlessly striving to calibrate our beliefs and predictions about the future to more accurately represent the world.”
One method Duke recommends to gaining more accuracy in our views is a ‘probabilistic approach’ to exploring and weighing your options. The world is rarely binary and there is a range of potential outcomes based on the decisions we make. Incorporating ranges or percentages of alternative solutions has multiple advantages:
- We are more likely to temper our statements and openly acknowledge the risks involved
- We are more open to incorporating new info and make adjustments because our self-view isn’t as directly connected to being right or wrong
- We are able to work better with others who may be afraid to speak up when we declare something as 100% true or false.
Duke argues that by explicitly recognizing that decisions are bets we are more to engage in ‘truth-seeking’ behavior. Truth-seeking forces us to examine and refine our beliefs by considering a wider range of possible alternatives. A truth-seeking group can be very effective in reviewing bet outcomes and incorporating that learning into future decision making. We should strive to promote exploratory thought within our groups to form a more accurate view of the world. Exploratory thought, as opposed to confirmatory thought which amplifies your existing views, promotes open-mindedness, diversity of thought, perspective and reason.
The better we become at recognizing learning opportunities the better decisions we can make. The cumulative effect of being a little better at decision making has a compounding effect.
Putting Bets into Practice
Here are a few tactics that product managers might take to think about new product ideas as bets.
- Use an Opportunity Solution Tree. Popularized by Teresa Torres this tool encourages the exploration of alternative opportunities and solutions. You can even take it one step further by adding probabilities of success for each solution.
- ‘Buy-a-Feature’ Prioritization techniques. This is a practice that Pandora used early on during their planning cycles. Each stakeholder is given a budget and each project scope has a $ figure based on engineering time. Stakeholders can then choose to allocate their budget on the projects they want to prioritize.
- Backcasting techniques. Backcasting involves envisioning a successful future outcome and then imagining what was required to achieve that result. Amazon’s ‘Working Backwards’ method of creating a press release before a project begins is a great example of this.
- Do a pre-mortem. A pre-mortem is similar to backcasting but envisioning a negative future outcome instead. The goal is to identify major risks and potential hazards before a bet is made so you can attempt to mitigate these ahead of time.
- Form your own ‘truth-seeking group’. Maybe this is your existing product team or maybe it is a group of peers, but the goal of this group is to foster diverse thinking that can help you explore alternatives and calibrate the outcomes of previous bets.
