Best Practices for Developing a Product Strategy

A great product strategy is the foundation of a great product, but a bad product strategy can lead you astray. Product strategies are guides to the future based on the information that you have at the time. They are living documents; as things change and more information comes to light, they should be revisited, revised, and added upon.

This document is a guide for how to build a product strategy.

Section 1 – Understand the Problem

Every product strategy starts with a clear and cogent problem statement.

  • Know what problem you want to solve and for whom.
  • Identify the opportunity and size it.

I often hear Product Managers say that the problem is winning more customers or beating a competitor. That is not why we build products. We are solving real needs in the world, and a product strategy should reflect that.

Define the problem: What problem are you trying to solve?

Think of your favorite product. Then think of the unique problem it is trying to solve in 10 words or less. Some of the following examples are the company’s mission statement, but not all of them. The most important thing is that the problem is clear.

  • Airbnb: Connecting travelers with unique places to stay
  • Amazon: Find anything to buy online at a good price
  • Coursera: Accessible quality online education for everyone
  • Facebook: Connecting with friends and family about things you care about
  • Google: Organizing the world’s information
  • WhatsApp: Private messaging for low connectivity environments
  • YouTube: Sharing videos and finding an audience

You should define the problem in a way that’s unambiguous as to what you are trying to do. A strong problem statement demarcates what you care about, but also what you don’t want to invest in.

Define your audience: Who are you solving the problem for?

Blackberry made a great product appealing to both IT professionals with security and consumers on mobile email. But when consumers moved to other smartphones, Blackberry thought their strength with IT departments would keep them in enterprises. In the end, consumer preference won out.

Ad agencies create ads not to sell products to consumers, but to sell ads to executives who in turn need to believe that these ads will sell products. Knowing whose problem you are solving, and who is deciding if you get to solve the problem is an important distinction. In consumer products, they are often the same person, but in enterprise products, they are often entirely different.

Once you know your audience, segment the market and know who your primary and secondary segments are. It will help you know who you are not serving. Choosing who you will not serve is just as important as knowing who you plan to serve. Eventually, you can choose to expand but start with a beachhead and a place you are likely to win.

Think about a few products and what audience they started with and where they are now:

  • Amazon: Booklovers
  • Facebook: College students
  • PayPal: eBay sellers and small online sites
  • QuickBooks: Small businesses
  • Snapchat: Teens in western countries on iOS

Having a clear audience means you can focus your efforts on their needs first, and then expand from there. Before you build for the world, win in one market. You can later take the capabilities you built and move to adjacent verticals or experiences.

Understand the market: What is the competitive landscape?

Understanding where you stand and what the opportunity can be is critical to a good product strategy. Defining the overall market, and then breaking down the segments help you see who else is in your space. It also helps you see if it is a prize worth winning. Assessing the market is important, so here are elements you should include:

  • Segments – define based on behavioral or needs based on segments
  • Market size – opportunity size, number of potential customers
  • Competitors – leaders in the space, the concentration of competitive strength

Having a clear understanding of the market today and where it is going in the future will help you understand your position as you build out your strategy.

Section 2 – Identify your unique value

Every company brings something different to the table when solving a problem. Understanding and using those strategic assets is what makes your approach unique. For larger companies, it could be scale, organic behavior, or industry relationships. For startups, it may be nimbleness or focus.

Think about some companies and what they bring to a new business:

  • Amazon AWS: Computation capabilities at scale
  • Apple iPhone: Human-centric design
  • Facebook Marketplace: Buy & Sell Groups and profile selling
  • PayPal Merchant Services: Fraud and risk management for small sellers
  • Uber Eats: Millions of drivers on the road with an installed base of consumers

Identify your unique assets and how they can give you the “right to win” a specific space. Understanding the best way to leverage these assets helps you build out a credible plan.

Section 3 – Outline how you will execute

I once worked in strategic consulting. We wrote detailed strategies to help companies win a specific market. But more often than not, we left the engagements knowing the companies could not execute against them. Even if they had the advantage they often lacked the ability to build what we defined.

This is the unsexy truth. Strategy is easy, execution is hard. Many companies have similar strategies, but what separates those who win from those who don’t is execution.

I worked at eBay over a decade ago and at a reunion dinner, we joked that back then, we were all newly minted MBAs at a tech company run by MBAs. The problem was that we spent a lot of time talking about the strategy, but the strategy is only as good as your ability to actually make it happen. I knew it was time to leave when we had just completed a two-year investment in a new checkout system, and we were road-mapping yet another rewrite. When I realized this next project would take nearly three years to build, I decided to leave. I joined Facebook, and in those same three years, I built two different billion-dollar businesses.

A strong roadmap is clear — and not just over the short term but the long term. Two-year roadmaps are not four six-month roadmaps attached to one another. Be clear where you want to be in two years, and then break it down into workable units. Know what you are learning in each six-month phase which will inform the next six months. You should be able to connect the dots between what you do today and where you want to be in two years and then five.

Define success: What does winning look like?

If you are successful, what does your product look like in two years and then five years? Confirm it is achievable and a prize worth winning. Understand what will change in the macro conditions if you do win. Define success as something measurable so that you continuously monitor if you are on your way there.

Identify risks: What are the pitfalls?

In any execution there are risks. Having a clear risk and pre-mortem for your strategy ensures people know you thought through the potential downsides and have plans to mitigate them. Confidence is built through assessment and clear thinking in the face of adversity, not by hiding from potential headwinds.

What a Great Product Strategy Looks Like

When you read a clear product strategy all of the pieces come together like a symphony. From the first notes to the last words the strategy feels complete and actionable.

Here are the four O’s of what I look for in product strategies from my teams:

  1. Opinionated: A point of view about why this strategy is unique is important. Choosing a perspective and an audience to start with is hard, but it also defines the first phase of learning. A strong strategy makes hard calls and clearly explains them.
  2. Objective: Clearly outlining opportunity and risks in equal measure is important. Often we want to sell the upside case, but understanding and outlining the risks builds confidence and ensures that you’ve thought about mitigation.
  3. Operable: A product strategy needs to be doable without expecting lightning in a bottle. The perfect strategy that is not executable is no better than having no strategy at all. I have seen strategies that assume a series of favorable events to line up so that there is little to no chance of success.
  4. Obvious: The last test of a great strategy is how you feel after reading it. I recently shared a new strategy with my team which took me months of selling to get executive alignment. One of the first questions I was asked by an engineer was, “This is so obvious. Why didn’t we do this years ago?” The right strategy at the right time will often feel obvious, and if it doesn’t you should ask why the organization or the world was not yet ready for it and what it would take to prepare them.

A product strategy is a living document that is written at a moment in time but evolves as you build. It is your north star and your compass all in one. Having clarity of thought at the outset ensures you are leading in the right direction.

This article was originally posted on Substack. Subscribe to Deb Liu’s Perspectives here

Six Steps to Superior Product Prototyping: Lessons from an Apple and Oculus Engineer

When Caitlin Kalinowski joined Oculus as the head of product design engineering in 2014, her team was sweating on a challenge: design the controllers that would be paired with the hotly anticipated Oculus Rift virtual reality headset. At the time, VR was largely uncharted territory, with little precedence for what the hardware should look or feel like. Working with designers led by Oculus’s industrial design head Peter Bristol, Kalinowski’s team began to weigh various factors that would determine how the product would ultimately feel. For example, they wanted a broad swath of hand shapes and sizes, from the fifth percentile of females to the 95th percentile of males, to be able to hold the Touch controllers comfortably. Hands had to grip it without interfering with the connection between infrared LEDs and an external sensor. Each new parameter complicated another: the overall weight, the number of buttons, the strap on the controller, the shape and so on.

This is where the magic happened. The team iterated over and over again. Some prototypes were so ugly they were literally a tube of plastic with putty stuck on it. But by the end, they’d created a ring-shaped controller that a user could open and close her hand on in game play, with a sensor on the thumb stick that allowed users to give a thumbs-up. Even more miraculously, they’d iterated enough times that when it came time for the engineering validation test, or EVT, the physical proportions of the controller were nearly perfect. Only a tweak on the diameter of the outer ring was needed.

Kalinowski is a master of the prototyping process, with a deep understanding of where, when and how changes should be slotted in, from the first iteration to the last. It’s made her a highly sought-after engineer in Silicon Valley. Before her work at Oculus, she was the technical lead for Apple’s MacBook Air and Mac Pro. She also led and shipped Facebook’s Bluetooth Beacons, which power location-based prompts for users.

In this exclusive interview, Kalinowski discusses how and why you must define your non-negotiables before starting to build prototypes. She dives deep on specific approaches for squeezing the most iterations and improvements out of the process — the more iterations, the better the product, after all. Kalinowski also lists the warning signs for two of the three bears of this process: prototyping processes that take too long, and also ones that end too quickly. Kalinowski spells out what the just-right scenario looks like and lists the potholes to look out for before you hit the ‘ship’ button. These insights apply to every product development situation, whether you’re in hardware or otherwise. Let’s get started.

Declare Your Non-Negotiables

There is a moment before you start building your product when the deadlines aren’t yet set, the stakeholders are patient and the customers aren’t clamoring. Use this moment to get very clear about which goals you won’t bend or budge on. “Before starting design work, decide what your product absolutely must do before you’ll ship it. New companies are often under a lot of pressure. They don’t always define their non-negotiables clearly at the beginning of the product process. I see this mistake often. Unfortunately, they can get backed into a corner and be forced to ship early without having met those critical benchmarks first,” Kalinowski says. “Choose the product must-haves first. If you do get backed into a corner and you haven’t quite met them, it can be really tempting to ship anyway. Instead, start out with: ‘The product has to do these three things. Nice to have are these next two things. A bonus are these other things.’ As a team, you must agree that if you don’t hit those have-to-haves, you’re not going to ship the product.”

Finding your have-to-haves often means boiling the most critical elements of a product down to one or two key features. In the case of the iPad, the product had to be lightweight enough that customers could hold it up easily. “Apple worked on the iPad for years. Steve Jobs always said it was too heavy. They turned it into the iPhone, worked on that for years, shipped the iPhone, went back to the iPad, worked on that for years and finally shipped the iPad. There probably wouldn’t have even been an iPhone if they hadn’t had that guiding principle for the iPad. They didn’t ship the earlier iPad prototypes because they were too heavy. It was tiring for your hands. It takes a lot a lot of discipline to keep developing until you nail your key features,” Kalinowski says. “Focus on the product and the consumer experience. On the Oculus Rift, if you didn’t experience “presence,” or the feeling that you’re actually in your virtual environment, we weren’t going to ship it. If the Oculus Rift didn’t fit comfortably on a wide set of adult faces, we weren’t going to ship it. Decide at the beginning, what are the goals you must hit in order to deliver those key features? As long as you achieve those product goals, you can have discussions about other matters like secondary features and whether you’ll ship or delay your schedule. Share those must-haves with your entire organization. Get everyone on board with the non-negotiables so you’re moving together towards the same goal.”

It’s the North Star because it points the way. In product development, that’s your one key product feature. Don’t waver from it.

No matter what, always solve for consumer experience. “As a designer and an engineer, I’m constantly trying to think about the customer and how much better or how much worse the product will be depending on the decisions we are making on the product level. That is how you determine your North Star. When I’m thinking about product trade-offs and feature trade-offs, I’m really thinking about the customer. I ask myself, is this change materially going to affect their experience of using this product?” Kalinowski says. “This is why we care so much at Oculus about ergonomics and weight. They affect the software experience and the customer’s sense of presence. If you can wear the device longer, you can stay immersed, play games longer and experience more fluid social VR. The calculus of consumer experience is present in every decision from the fabric we use to how heavy the device is.”

Slide into a Prototyping Plan

Map out your approach to prototyping by determining your point on a speed-caution slider. On one end is caution, and on the other end is speed. Which way you tilt depends on your company, what you’re trying to accomplish, and where you are in your development cycle. “If you’re schedule-driven and trying to beat a competitor to market, slide away from caution. If you’re making a product with a lower volume, you can slide away from caution. For example, making 100,000 of a product versus two million changes your risk tolerance. You cannot recover from problems in the design of a two million unit product the same way you can with hundreds of thousands,” Kalinowski says. “If I’m at Apple developing the MacBook Air, I’m going to be far more cautious about risk because it’s a huge, high volume product. It’s expensive to recover from mistakes. If I’m designing the first VR product, I’m going to use less caution and be more ambitious because my volumes will be manageable enough that I’ll be able to fix problems in flight. I’ll try to move faster. There’s a speed-caution slider and you have to understand where you are in order to master your trade-offs. If I’m making a medical product, my caution slider’s generally all the way to the left, because they typically take much longer to develop and achieve compliance. It boils down to the risks associated with what you’re making and how much development time you’re willing to trade to be faster to market.”

The speed-caution slider

Your management of your team should also shift accordingly. “If you’re super cautious, encourage all assumptions to be checked and double checked. Say to the team, ‘Confront each other.’ Ask, ‘Is this true? Is there enough swell space for the battery? Is this flame rating correct for this part? Are you sure? Have we tested it? Have we sent the part out to a third party and verified it? Three months into the product run, will we re-verify that the manufacturer hasn’t changed the material on us to lower their costs?’” Kalinowski says. “When speed is the top concern, only worry about the most critical issues. In those cases, I give a piece of paper to my people and say, ‘Make a list of all the design issues you are worried about in ranked order.’ Then I rip the page under their first five and hand the top part of the page back to them and say, ‘just focus on those.’’”

The Six-Step Approach to Prototyping

Once you’ve figured out your place on the speed-caution slider, you’re ready to start building prototypes. Your singular goal? To iterate as much as possible before the ship date. Kalinowski spells out her six-step approach to building strong prototypes and how to design a process that fits in as many iteration cycles as possible.

Kalinowski’s recommended approach to prototyping, compared with most typical approaches

First, frontload. Pile on the effort and focus at the beginning of your journey. “My former colleague Doug Field, who was a VP at Apple and now runs engineering at Tesla, had a very useful graph of how to think about design effort. Most people increase their effort and focus as the product develops and they find issues they need to fix or address, peaking at the moment right before you ship. Although this is sometimes unavoidable, this is not what you want to do. Making changes at the end of development is far more difficult, dangerous and costly than in the beginning,” Kalinowski says. “By the EVT [engineering validation test], your goal is to basically be done. Often it’s very difficult to achieve this, but it’s a good goal. If you have to fix major design issues after EVT, you’ll have diminishing returns on your efforts. Ideally, the phases after EVT are a scaling operation in hardware or bug fixes in software. You won’t have much ability to make big changes after this point without causing risk. Focus your effort towards the beginning, where you can squeeze in as many iterations and changes as possible. Go through crazy amounts of work right here. Put the best people on it. Do all of your grinding here.”

The more iterations, the better the product. The fewer iterations, the worse it’ll be. It’s that simple.

Start with what’s hardest. Take one thing at a time with your prototypes, and begin with the gnarliest challenge. “Iterate on the most important, hardest thing first. This seems really simple, but people often don’t actually do it. The best way to look at product development is to say, ‘I want to dedicate the most time to the hardest thing and start to layer in the easier things as I go.’ It’s usually easy to identify the hardest thing. What are you doing that nobody else has done before? This is the thing that you’re not even sure you can do at all. That’s where you want to focus your initial prototyping energy,” Kalinowski. “And momentum isn’t an issue. If you take a typical engineer, show them a problem and say, ‘I don’t know if this is possible,’ they’re usually all in. This principle serves to make sure you’re frontloading the work by putting the hardest, most time-consuming problem first — while also revving up your engineers by giving them a meaty problem to solve.”

Braid in other hard things as you progress. “When you’re prototyping, you don’t need to do everything at once. You just need to prototype the hardest parts of the hardest things. The rest of it can be ugly and unuseful. Then as you iterate, draw in the next hardest thing and the next hardest thing, and integrate those aspects into your prototype — or put them in a separate prototype, then fork them together,” Kalinowski says. “Work forward from the hardest stuff in your prototyping. With Oculus Touch, the team started with a general shape, and once that was close, moved onto details around input, with the electrical innards and sensors split off into a separate set of prototypes. Once we got to far enough along with understanding space constraints, we braided the two prototypes together in our first integration build, proving that everything could fit.”

Make seriously ugly prototypes. No really, your early iterations should be hideous. “You’re focusing on the toughest engineering problems first. You don’t need to worry about how it looks yet. But there’s also a hidden benefit. When something is ugly, people don’t fall in love with it. Especially with influential people inside a company, if you show them something that’s physical and they see it, they will lock on it,” Kalinowski says. “This actually also happens a lot with price point. We have an inside joke at the company, because often, you put a very early estimate for product price on a slide and say, ‘It could be this.’ Then for the next year, everyone’s like, ‘Oh, it’s going to cost this.’ No! Don’t give people anything to anchor to until you’re absolutely ready for it. People do that and it’s detrimental to the process. Add polish when you’re selling something. A strategy for guarding a product’s potential is to keep your prototypes and early ideas ugly longer.”

Let each team own their best-case scenario. When developing Apple’s cylindrical computer, the Mac Pro, Kalinowski had to juggle a multitude of factors. “The industrial design team wanted the device to have a really small diameter. But that meant a small diameter on the heat sink — which was a problem, because we wanted as much heat transfer as we possibly could. When the heat sink was small, more air had to be pulled through to cool the central processing unit (CPU), making it louder. Yet still we needed the computer to be quiet,” Kalinowski says. “The way to solve this problem was to let each team completely own its best-case scenario. There were separate teams inside Apple focused on optimizing for small diameter, focusing on keeping the noise down, worried about the heat transfer — we just let each one own that and drive as hard for their goal as they possibly could. For the thermal team, since this is a high performance machine, we needed the CPU performance as unlocked as possible, and so we let them fight for that. Then the audio team made sure the fan noise didn’t cross a certain threshold. Let everyone work on the best possible outcome for the feature for which they’re responsible, and you’re likely to end up making the best product trade-offs — and that means a better product.”

Smooth the negotiations while merging best-case scenarios. Once each team has come up with their ideal solution, you’ll have to start making tradeoffs — maybe the heat sink has to be tweaked in order to make the computer quieter, for example. “I never go into a meeting where a major decision is going to be made without having pre-baked the outcome. I first do a stakeholder analysis, go to each team, and get my proposal approved by everyone. What I learned at Apple is you really have to go around and explain what you think is right to each team. If you don’t have, for example, buy-in from across the product teams for a product decision, you really aren’t going to get anything out of that meeting. Do a lot of the early upfront negotiation so that meetings are just about finalizing decisions and locking them in,” Kalinowski says. “You also have to understand technical tradeoffs. You can’t just go in to an antenna team and say, ‘We can’t put antennas there. You have to put them here,’ and not understand if that’s not going to work. Do a listening tour and learn from a technical perspective about product tradeoffs. Understand why a team wants something. Form relationships with experts in your team, listen to them, believe them, but also push on them all in different ways at the same time as you’re trying to negotiate for that feature.”

Build ugly prototypes. It’ll keep people from falling in love with ideas that aren’t fully baked.

The Three Bears of Prototyping

While you’re executing the above approach, get familiar with three bears of the prototyping process: you can go for too long, not long enough — but also just right. Below, Kalinowski details the warning signs for the first two and illuminates when you’re on the right track.

Prototyping for too long. You can sense when you’re on the wrong track when iterations start to yield tiny, incremental improvements and aren’t converging towards your goal. “If the results of your first, second, third and fourth tries at a problem land pretty close to each other, and you’re still far from your goal, that means you’ve made the wrong assumptions. You keep making changes but you can’t get there. You’ll no longer be closing on your goal in significant ways every time you iterate. At this point, you’ve got it all wrong. Either change your goal or change your assumptions. Scrap the plan. Back up to the beginning and find a different way to solve that problem,” Kalinowski says.

“Engineering teams will often iterate on one path forever and never hit their goal. It’s hard to go backwards when you’re in a product cycle and you want to ship. If you wait too long, that’s the worst. It’s so expensive that sometimes you can’t even get back to the beginning,” says Kalinowski “For the Mac Pro, we struggled to get the extrusion right. Two components, the heat sink and inner enclosure, were supposed to be made from one piece of aluminum. But it was too hard. We wound up cutting it into two pieces, even though the industrial design team really wanted it to be one. We went so far down the path trying to get it to be one piece, but in the end, it wasn’t working. That’s when Matt Casebolt made the call to stop. It’s because he had that feeling. We weren’t going to get there in time. We all wanted to make the industrial designers happy at Apple, but at a certain point, if you’re not converging, you need to make the call. They made this call. It was the right one.”

How to tell if you’re converging on the right solution in your prototyping process

Prototyping too short a time. Similarly, you can also sense when you haven’t spent long enough iterating. “Your engineers will be too worried. You’ll ask them ‘What do you think? How’s this going to work out?’ They’ll say, ‘I feel really uncomfortable. I don’t know if this is going to work.’ Sometimes, they won’t want to tell you. You have to really ask the right questions, like ‘What do you think we could be doing better?’ They’ll get really uneasy. That’s usually a big warning sign they feel you’re moving too fast. Ask, ‘What are you concerned about? What’s concerning to you right now?’ The answer to that is gold. It’s so valuable,” Kalinowski says. “Just because you’re not hearing about it doesn’t mean everything’s okay. You can encourage people to tell you bad news by improving your response. If you get upset or dismiss them, they won’t tell you anymore. Why would they? Even worse is to have an engineer express a concern directly and your response is, ‘cool, thanks.’ If you don’t do anything, they won’t trust you. You have to be like, ‘Oh. Shit. That’s a problem. What do you think we should do?’ Tell them, ‘Thank you so much, that’s really helpful. Tell me more. I want to fix it.’ And be sure to actually do something about it. It often means connecting people or calling a meeting and making it known that you’ll do everything you can to support your team in fixing the problem. Importantly, this goes double for your vendors.”

Prototyping just the right amount of time. Products are never perfect, but at some point you have to call it. “There are always more iterations we can do and there is always something that engineers are worried about, because it’s their job. Your engineers will never feel like the product’s done. Usually team leaders are okay with shipping with a few minor issues, but engineers will struggle with it. My strategy is to say we’ll get it right in the follow-on product. Let the engineer know that you care. You want to get it right. But this product needs to go out,” Kalinowski says. “They’ll still get to do all this cool engineering. They’ll still get to solve this problem that they’re unhappy about. Every engineer has that feeling of, “Man, I wish I did this differently. This isn’t quite where I want it to be.’ Great. Fix it, but you don’t have to fix it right now in this product. You can fix it in the next product and the next product, and make sure that it’s good forever forward. That helps a lot. Start a list of what you’re not going to fix. That doesn’t mean you’ll never deal with it. Fix it next time. Worst-case scenario, you can roll a fix after ramp, when you’re building up a bunch of product right before the sales date, or iterate off-build.”

If in each iteration you’re making smaller and smaller improvements, that’s a warning sign that you’ve spent too much time on it.

Getting to Blastoff

Under the “just right” scenario, you have to make a call to halt engineering at the right time. That time is most likely sooner rather than later. “Ending your iterations close to the ship date is really dangerous because of all the interdependencies. Be ready to fight for not fixing problems unless they’re non-negotiables. For example, you can decide to change the material a few weeks before the ship date. Then you’ll find out that the material change means the product is no longer waterfast, or it fails drop testing,” Kalinowski says. “You can screw up something else that you don’t even know about. What I see a lot with immature companies is they try to make changes up until the very end and end up causing themselves more problems than they’re solving. Those small changes could bork the whole thing.

Iterate Your Way To Success

Start your prototyping process by pinpointing your North Star. Write down your must-haves and don’t ship until you’ve achieved them. Determine your point on the speed-caution slider, and optimize for the most iterations possible by starting with the hardest, thorniest problems. Frontload your work. Make ugly prototypes and fork in additional features in order of their difficulty to engineer. Watch out for the warning signs of prototyping too long — or prototyping not long enough. Determine your stopping point by evaluating the remaining flaws you still want to address. The later you wait to make changes, the more dangerous your decisions will be. Be willing to fight for not making fixes.

“Look on the desks of your engineers. Are they littered with ugly prototypes? If so, you’re doing something right. Engineers often say they have it in their head how something is going to work. Ask for the parts. Ask to be shown. It often doesn’t work like they think it’s going to work. Push people to get to the prototyping faster. Then there’s convergence. All of your prototypes should allow you to converge, folding in more and more iterations and versions. If they’re not doing that, you might not be asking the right questions about your prototypes,” Kalinowski says. “Finally — and this is critical — prototyping is supposed to be really fun. If it’s not fun, you’re doing it wrong. If you’re over-constraining your engineers and they’re not able to come up with really cool solutions, or they do and you squash them, that’s bad. Free your engineers to come up with things — there should be an grand excess of cool ideas. After you’ve popped the champagne to celebrate your successful ship, you can pick up the next great product from your cutting room floor.”

This article was originally posted on the First Round Review.

You can read more on Caitlin’s blog

Photography by Christophe Wu.

‘Give Away Your Legos’ and Other Commandments for Scaling Startups

Molly Graham has seen a lot. Her team at Google leapt from 25 to 125 in just 9 months. During her 4+ years at Facebook, the company exploded from 500 employees serving 80 million users to 5,500 employees and over 1.1 billion users. (Her job was to sort out the culture, compensation, and performance systems to help make that possible — no big deal.) And now, as COO of productivity tool startup Quip, she’s both laying the groundwork for her team to grow, and catering to a customer base of startups (Instacart and New Relic among them) who have the pedal to the metal.

If there’s one thing Graham knows for sure, it’s that scaling comes with an utterly unique set of problems. Some of them are funny — like needing to replace everyone’s big desk with smaller ones so all the new folks can fit, or moving into an office that’s already too small for your growing team. But some of them are far more serious.

“If you’ve ever watched an extremely high performer go from killing it one year to struggling the next, you know what I’m talking about,” she says. “There’s a unique feeling of ambiguity, chaos and stress that comes with doubling or tripling your team every six months. If you don’t manage scaling proactively, you can end up in trouble.”

Here, Graham explains why scaling companies and teams is, in her words (and she’s putting it lightly), “crazy hard” and what you can do as an early employee or a startup founder to make it easier on yourself and your team. She covers what rapid scaling actually feels like as an experience (something too few people talk about), the toughest phases of growth and how to survive them, and — most importantly — how you can anticipate the biggest challenges before they really hurt your momentum and your chances for long-term success.

In the Eye of the Storm

“I think it’s important for people to talk about what it feels like to be inside a scaling company because it helps people realize how normal their experience is — and identifying that experience as a leader can actually help your team,” says Graham. She saw so many people struggling with the same emotions during her time at Facebook that now she actually gives a talk to people on her teams about it. “I call it the ‘Give Away Your Legos’ talk,” she says.

Let her explain.

“The best metaphor I have for scaling is building one of those huge, complex towers out of Legos,” she says. “At first, everyone’s excited. Scaling a team is a privilege. Being inside a company that’s a rocket ship is really cool. There are so many Legos! You could build anything. At the beginning, as you start to scale, everyone has so many Legos to choose from — they’re doing 10 jobs — and they’re all part of building something important.”

You have so many choices and things to build during this early phase that it’s easy to get overwhelmed. There’s too much work — too many Legos. You’re not sure you can do it all yourself. Soon, you decide you need help. So you start to add people. That’s when something funny happens on a personal level and to teams: People get nervous.

“As you add people, you go through this roller coaster of, ‘Wait, is that new person taking my job? What if they don’t do it the right way? What if they’re better than me at it? What do I do now?’” says Graham. “These are some strong emotions, and even if they’re predictable, they can be unnerving.” In order to get to a really high-functioning, larger team, you have to help everyone get through this roller coaster. If you don’t, you can end up with a real mess.

If you personally want to grow as fast as your company, you have to give away your job every couple months.

That’s why her talk is about Legos. The emotions you feel when new people are coming in and taking over pieces of your job — it’s not that different from how a kid feels when they have to share their Legos. There’s a lot of natural anxiety and insecurity that the new person won’t build your Lego tower in the right way, or that they’ll get to take all the fun or important Legos, or that if they take over the part of the Lego tower you were building, then there won’t be any Legos left for you. But at a scaling company, giving away responsibility — giving away the part of the Lego tower you started building — is the only way to move on to building bigger and better things.

“Almost everything about scaling is counterintuitive,” says Graham. “And one of the foremost examples is that reacting to the emotions you’re having as your team adds more people is usually a bad idea. Everyone’s first instinct is to grab back the Legos that the new kid took — to fight them for that part of the tower or to micromanage the way they’re building the tower. But the best way to manage scaling (and one of the secrets to succeeding in a rapidly growing company) is to ignore those instincts, and go find a bigger and better Lego tower to build. Chances are if you pick your head up and look around, there’s a brand new exciting pile of Legos sitting right next to you.”

That’s one of the other counterintuitive things: Adding people doesn’t mean there’s less work for the people that are already there. It means that the entire company can do more. If one person was managing all of marketing before and then you hire someone to manage your content channels — the person who was doing marketing before is not going to have less to do. It either means that she’ll be able to do the rest of her job better, or that she’ll be able to take on new things.

“People think, ‘Oh, that person joined! Now I can finally work a little less.’ But that’s almost never what happens,” Graham says. “Adding people is the opportunity to find a new job (or the new version of your old job). But this requires individuals to freely give away parts of or sometimes all of their old job — handing over projects, programs, products, code that they probably built from scratch. It means trusting other people with something you care about.”

For high performers in really fast-growing situations, this happens all the time. Graham emphasizes that one of the secrets of people who are really successful at fast-growing companies is how rapidly they’re able to adapt to the chaos and uncertainty of adding new people. They become adept at redefining their jobs on a regular basis, and they become comfortable with the largely uncomfortable emotions that naturally happen when a team doubles or triples in a short period of time.

At Quip, Graham’s job changes every three months. This doesn’t mean her title changes, but the content of her work shifts radically. For example, she’s gone from basically being the only sales person (and the marketing person too!) to functionally operating as VP of Sales and Marketing. “Every three months, I go through a phase where I’m a little uncomfortable and certain I’m doing the wrong things or operating at the wrong level, but then it passes and I find my new job,” she says.

A week ago, someone might have told you they hate their Legos and want to get rid of them. But as soon as you hire someone else, they suddenly want to hang on to all of them.

Graham’s had the benefit of conditioning to weather these changes. At Facebook, when they were onboarding 20 to 60 people a week, she got so used to ceding responsibility every three to six months that she considered it part of her job.

Her advice to managers? “Honestly, the best thing you can do is normalize what people are experiencing,” she advises. “As a leader, you want to head it off at the pass and proactively say, ‘Hey, this is what you can expect to feel during this time of growth. It’s pretty universal. Other people are going through the same thing. I’ve been through it too. There’s no need to be scared.’”

Help them understand that the emotional chaos they feel is normal so there’s no need to overreact. And in fact, they should often do the opposite of what their instincts tell them: Don’t latch onto the Legos you had before. Give them away and move on to building the next taller, cooler tower.

“Listen to the questions people ask during your one-on-ones or in team meetings. When you start to hear a lot of, ‘So… why did we hire that person?’ or ‘Do we really need someone to do that job?’ or ‘Is Suzie going to take over this project?’ Those are the signs that either individually or collectively, you should start talking to your team about giving away their Legos.”

One thing you can encourage people to do is not fixate or act on their emotions right when new people come aboard. Instead, tell them to ride it out and see how they feel in three weeks or a month — that’s when they should be coming out the other side and feeling better. Maybe set a meeting up to chat after that time has passed to see how things are going. That’s a good way to keep an eye on how scale is affecting your team, says Graham.

The next best thing you can do is point to the new bright, shiny tower that needs to get built. At Facebook, one of her closest co-workers had built the beginning of a big project and their manager asked Graham to take it over. They wanted her co-worker to move on and focus on a new area that was even more important to the company, but she had a tough time letting go. “This was actually a very good friend, so it wasn’t that she didn’t trust me, she was just uncomfortable with giving away something she had started building,” she says.

“That’s when our boss did this brilliant thing — he gave her a huge goal. He basically said to her, ‘We need you to do the same thing over here only five times bigger.’ Immediately, my co-worker let go of every single Lego she was holding and ran to the new project because she was so scared and excited. It was like someone had flipped a switch and she was suddenly like, ‘Good luck, peace out!’”

One of the best techniques for getting people through job-change anxiety is to help them picture the reality of their next job and the size of the opportunity.

People get lost when they’re overly focused on the job they used to have and they can’t see what awaits them on the other side of these emotions.

“If you want to be one of these type of people who started at Facebook at 25 people and ended up running a huge department, you have to get really good at giving away your Legos,” says Graham. “If you hold on to answering customer support queries yourself or writing all the blog posts yourself, you’re never going to run customer support or product marketing.”

The Phases of Scale

Graham says she sees this pattern again and again on teams she’s led, with people she’s coached, and with startups she works with at Quip. It seems like a fairly universal experience.

“At Quip, we hear from a lot of startups as they grow past 50 people, and as they grow through the 300 to 500 phase. They’re looking for new ways to communicate, organize, and increase transparency in their organizations. They start looking for new tools in those moments in part because things are breaking. Those are very uncomfortable moments for scaling teams. It’s when teams start to experience a lot of the growth challenges, and when you can start to see problems if you haven’t proactively managed your scaling process.”

Just as the personal experience of scaling comes with a separate, unique set of emotions, the phases a company goes through each have a character all their own. As either an employee or a partner, Graham has experienced each of these phases in turn, has absorbed the challenges that come with each, and has seen these changes handled both well and poorly.

What follows is a definition of each of these movements in a company’s life, with one caveat: Like people, companies are distinct in how they work, look and feel. One startup may still feel like a “chaosfest” (Graham’s word) at 150 people, while another might feel bureaucratic and static at the same number. It all has to do with the unique character of the company — how it was founded, who its founders are, its product, etc.

Graham claims that for the majority of companies, the true chaos of scaling (and also the formation of most of your company’s identity) happens roughly between 30 and 750 people. After that milestone, the scaling emotions are more team-oriented rather than company-oriented — like “Wow, now engineering is growing so fast!” vs. “Facebook is growing so fast!” These phases and how to handle them apply to team scale as well.

30 to 50 Employees

“There’s something really interesting that happens when a company can’t fit around one table anymore — things just start to get a lot harder,” says Graham. “Where it used to be simple to communicate, people suddenly complain that they don’t know what’s going on anymore. They don’t know why you’re making certain decisions. They don’t know each other as well. They don’t know what they should be doing. I’ve seen so many companies really struggle in this phase.”

30 to 50 people is where you go from being a family to being a company, and everything starts to get really hard.

With under 30 people, everyone knows each other well enough to walk up and strike up a conversation with practically anyone. You don’t even need to invest that much in communication. People can turn around in their chairs and talk to each other, and the priorities are clear because everyone’s talking about them all the time.

“When things start to change at this tipping point, it’s the CEO who feels it most,” says Graham. “I’ve talked to a number of people who are experiencing this and they say it’s like night and day. At 50 people, everything that used to come naturally is now a struggle. And as a new leader, you start getting difficult questions that you’ve never had to answer before. I had a CEO tell me that someone asked them about their career path at the company, and they were like ‘I don’t know! Why are you asking that? We have so much to do!’ Or you have someone ask, ‘How do I do XYZ?’ and you want to say, ‘How do you not know that?!’ But it’s not their fault. Things have changed. You’re a company now — not just a team — and you have to start acting like one.”

The best remedy here is to start writing things down — especially the stuff that’s never needed to be formal or official before, like mission, values, philosophies. (You can see more of Graham’s advice on how to approach writing these things down here.)

“Who we are and how we do things — write that down as fast as you can before you hit rapid growth (ideally),” says Graham. “Yes, that might seem like a nuts thing to do at 25 people when you have so many competing priorities, but it’s beyond worth it. At 750 people, you can tell the difference between the companies who did take the time to be thoughtful and record these things and those who didn’t.”

You also need to over-communicate. Once you’ve written down who you are and what you’re doing in the world, you should always be talking about it constantly. It’ll feel like you’re repeating yourself every day and every All Hands meeting, but that’s probably when you’re communicating just enough.

Success at this stage isn’t coming up with a bunch of bloated or premature process — it’s about developing the right principles. This was Graham’s focus when she was helping Facebook solidify its culture. “Before we came up with a compensation system, we created a compensation philosophy that would guide how we’d think about paying people going forward. The philosophy helped us evolve our system as we grew. It more or less still guides the way Facebook does compensation today as far as I know.”

Philosophies can answer a host of questions about an organization: What does a high performer at the company look like? What role does feedback play? What is the role of a manager at our company? How can someone fail here?

“Too many founders have this tendency to take a really elaborate process they see working somewhere like Amazon and then just grafting it onto their company — like some huge complex performance management system or engineering roadmap process,” says Graham. “At the end of the day, what early startups really need are design principles that tell them who they are, what they like, what they want to select for, and who they want to be. That is what helps you scale.”

50 to 200 Employees

“If we’re talking about child rearing, this phase correlates to those years right before adolescence,” says Graham. “This is an incredibly formative stage where you’re still small enough to change major things, people are still able to listen to you and hear what you’re saying fairly easily. If we use the metaphor of building a house, this is the foundation — and craftsmanship is incredibly important. This is not where you want to rush things. If you want your team or company to have certain values, to care about certain things, to have diversity (of thought, of identity), the time to do it is in these first 200 people — or the first 100 if possible. After that, a lot of other stuff takes hold.”

Hiring is a network effect. The first 100 people you hire will define the next 200.

Google, Facebook and others have all conducted studies about what predicts the performance of a new hire. The single biggest indicator is who they were referred by. If you have high performers referring people, you’ll hire high performers. If you let low performers stay on staff because you’re too scared or insecure to fire them, then you’re building your future company in that mold. Early hires plant seeds. And what ends up growing depends on their character and commitment. That also makes this phase the most critical one for firing people (as unpleasant as that can sound).

“The biggest favor you can do yourself, the other people who work for you, and really even the person you’re firing, is to just do it,” says Graham. “Otherwise you have really great people sitting next to low performers wondering why you’re paying them money. It really erodes confidence and has long-term ramifications. Really it should only take a couple months to assess whether someone is a good fit, and one of the healthiest things you can do for your company is — if the answer is no — part ways quickly. It doesn’t take a year to get to this answer.”

200 to 750 Employees

A company of this size has the temperament and biases of a teenager — and the growing pains to prove it. The personality and habits of the organization are pretty much molded. Now it’s all about scaling them as more and more people join. “You’re literally going through a growth spurt, and you have to really focus on getting your maturity to match your big feet,” says Graham. “A lot of how this phase feels has to do with how good of a ‘parent’ you were earlier on.”

That’s not to say you can’t make changes at this size. It’s just that everything is much harder — and gets increasingly so as you grow. Facebook was able to shift its personality away from moving fast and breaking things to thoughtful, rapid innovation after 700 people. But it was only possible, Graham says, because Mark Zuckerberg was so good at articulating what he wanted the company to do and feel like. After 200 employees, any shift in culture needs to be undertaken very deliberately and with a lot of work by the leadership of the company — the CEO, of course, but also the leader of every major department.

“Think about parenting an average teenager — you have to decide how to handle the bad habits they spontaneously develop. You catch them drinking or doing drugs, for instance. How do you handle it? Maybe it’s just the one time, or maybe it’s a sign of something you actually need to address. It could be bad later on if you ignore it completely but you also can’t overreact.”

At an organization, you can see bad habits like people acting like assholes and getting away with it, and you have to decide how to respond. Netflix’s famous culture deck declares that they won’t accept brilliant assholes. Sounds reasonable, but Graham would assert that there are many companies who do. “So the question is, what do you want your company to be like? When you see a trend over time that you don’t like, you need to aggressively manage it. Otherwise you can end up with some really bad habits as a company.”

You have to pounce on any bad habits that could become part of your company’s DNA. Whatever your company looks like at this stage is how it will be, floor to ceiling, when you’re older and bigger.

Over 750 Employees

Typically around this point, individual people’s identities shift away from the company and toward their team. They become Facebook engineers, for instance, not just Facebookers. CEOs may start to hear questions like, “What does the marketing team even do?”

This is also where politics start to emerge, gradually at first and then with greater momentum. Graham defines politics as the moment when people start to act in their own self interest rather than the best interest of the company. It’s often shocking when it first shows up. It can be a sign that you hired too quickly or aren’t communicating proactively enough about what behaviors will be rewarded, and about what you’re doing in the world. Strong, constant communication with the leaders of teams is the only way to keep things healthy. Everyone has to feel that they and their work are clearly tied to the broader goals of the organization. Everyone has to own calling out bad behavior when they see it.

This is also when team leaders should look back at advice for CEOs to survive initial company scale. They can use most of the same tactics to keep their teams humming along without people feeling disillusioned or falling prey to the wrong priorities. You can also find great advice on team scaling from other experts herehere and here.

If Graham had to distill all of this advice into a simple checklist for founders eyeing rapid growth, here’s what she’d say:

  • Make a list of the qualities you want your company to embody. Who do you want to be? How do you want it to feel to work there?
  • Write down what you’re doing in the world. What’s your vision for the change you want to make?
  • Communicate these things again and again and again. Through all the channels. All the time. You can’t overcommunicate these ideas.
  • Focus on hiring quality people rather than speed. Don’t lower your bar because you need to grow faster. It will come back to bite you.
  • Fire people. Just do it!
  • Hire amazing leaders as early as you can and help them grow their capabilities as the company grows.
  • Prioritize principles over process.
  • Keep giving away your Legos! And tell everyone around you to do the same. It’s going to be okay.

This article was originally published in the First Round Review. Molly is currently the COO at Lambda School and still giving up her legos.