How You Need to Think About Product Strategy in the Age of AI

0:00 You might accelerate output by 100 but sooner or later you will realize does any of the things we're doing make a difference for customers or the business but then it comes back to what do we want to achieve which is essentially strategy and metrics. The fundamental questions you answer in product strategy do not change. You need to be careful where you use AI and how you differentiate with it. Meet Tim Herbig, product strategy expert, a PM for eight years turned adviser, coach, and author of Real Progress. He's worked with hundreds of PMs to make sure their product strategy actually makes an impact.

0:33 >> AI by itself in your strategy. It's not a value proposition. Everyone has access to the same frontier models. You can't compete on that technology alone. >> Would there be some companies where AI could be the value proposition? >> Companies get easily lost in very machine ccentric metrics. They tell me about you know tokens used, language model efficiency. Point is tokens used is not a value exchange for your customers. It's a value exchange for anthropics. So then you haven't really made a strategic choice.

0:59 >> Yeah, but that's the thing. One of my favorite things that I look at to pressure test whatever people put in front of me is this quote from Roger Martin. And honestly, this quote, it's one of those light bulb moments that wherever I'm showing it to, you will never look at strategy the same. So here's this great quote where he says, "Before we get into today's show, please take a second to check that you're subscribed on YouTube and following on Apple and Spotify podcasts. If you want access to all of my favorite AI tools, I've gotten them to give you an entire year of their paid plans. Check out bundle.ac.com for an entire year of bolt.new, air table, speechify, descript, magic patterns, linear, dovetail, arise, and mobin. And now into today's show.

1:49 In the era of builder PMs and cloud code, everybody is focused on how do you build AI. But for my money, a much more effective use of a product manager's time than trying to become an engineer is to actually influence the strategy to make leaps on what problems we should be solving, how those impact the business, how we do things at the edge of what's technologically possible. And all of that comes back to building a great strategy. That's why I've brought in my friend for over 5 years, Tim Herbig.

2:22 I've been following his work in product practice on LinkedIn and he has consistently been putting out the most thoughtful stuff on how you actually do product strategy in the age of AI. So today we are giving you a master class filled with anecdotes from his real work with real PMs so that you can do better with your strategy work. This is one of those areas we keep hearing about. PMs, don't focus too much on execution. Focus on strategy. But how do you concretely do that? Today, we're going to walk you through everything you need to know. And if you stay till the end, you'll learn how you can get one of five free copies of Tim's book that I'm giving away. Tim, thanks for being on the podcast.

3:05 >> Thank you so much for having me. >> We've been trading emails online for years, so it is my pleasure. And I want to get right into it. What do PMs need to know about strategy in the AI era? >> I love that question and I love even more that I'm just going to show you what I think the real deal has to be these days. So I think the problem is how did we get here? Why do we even debate this question? And I think what we really have to understand is what happened over the last couple of years.

3:30 So years ago limiting factor for most of product manager work was well it takes too long to do this and we have to be really ruthlessly prioritize what we're working on to spend all those precious engineering resources. These days, as everyone probably know, like producing features get kind of cheap, especially for green field products, but even established companies can get stuff out the door much much faster. But the problem, the downside of that is when features get cheap, not having chosen the right feature, funnily enough gets more expensive because suddenly you're flooding your product with all this output, all this fluffy stuff, all these great vibecoded lovable things and everything you do to circumvent the complex engineering work or even accelerated your engineering department.

4:13 But this can come as a cost because you still have to make people use the features you produced. So that's where the expensiveness comes in. And so what we're currently seeing, what I'm observing in the work that I'm doing is that companies are excited about amping up the output 100 times. But somewhere down the line, they have to ask themselves, did any of that make a difference? And you have to look at it from DR two sides. Of course, you have to look at it from the side of did it make a difference for customers, but even more importantly, did it make a difference for the business? And so essentially when we talk about product strategy and especially strategy and AI these two terms people love so much I believe we have to actually take a step back to really think about well what is the essence what do we mean when we talk about that what we really have to come down to is do we have something in place that actually helps us say no to things and do we have something in place that allows us to measure if we succeed and you might recognize that but these fundamental practices and core questions get buried under all the shiny object stuff we these days. And upon preparing for this podcast, I stumbled upon this quote from our mutual friend Ravi Meta who has this brilliant quote where he says, "Difficulty prioritizing is often a strategy issue and not an execution issue." And I think these days more and more people are actually feeling the pain of that. And I love that because this is like four or five years old. It is as timeless and valuable as ever that it's not about execution. Execution never was the issue. So if we dive into that, what is actually the point of strategy? Why do we believe strategy is important? I believe that we have to think about product strategy like we think about a product. We have to be clear about for whom is this trying to solve a problem and how would we know it has worked. We're told to do this for the product work that we do. We rarely do it for our way of working. And I believe if you really break it down, your product strategy has to help teams and stakeholders to intentionally say yes or no to opportunities over the let's say six to 18 months, 3 to six, doesn't matter, whatever time horizon works for you. And you basically know if your strategy makes sense if the majority of your team's effort and energy is spent on work connected to strategy. And this sounds so painfully simple but believe me I've seen so many companies where first of all this understanding is not in place and second they definitely operate like that. So whatever you're thinking your strategy is whatever shiny deck it is whatever one page it is whatever framework think about does it help me say no to things.

6:40 That's all that matters. Doesn't matter if it's like in the book if it looks pretty or how much time you spent working on it. The point is did it help you say no to things. So it sounds like you can't come up with a list of 14 priorities, which was a strategy I was actually once handed when I was a product leader. You need to come up with things that allow you to say no to a lot of things.

7:02 >> Exactly. And that's kind of the hard point because this removes all the fluff, you know, all the fluff, the shiny object thing, how it looks like, what the process is. In the end, it has to withstand the test. Does whatever we're calling strategy help the teams say no to something. If it doesn't, it's not a strategy. >> Agents and assistants are browsing, shopping, and transacting alongside humans, while fosters use AI to build faster, cheaper, and more sophisticated attacks. Technical teams need device intelligence that evolves as quickly as these attacks do. Fingerprint is exactly that. Accuracy is the number one reason customers choose Fingerprint, because their device intelligence goes deeper than identification alone, resolving visitors with precision that holds up through spoofing and evasion attempts for months at a time. Fingerprint collects more than 100 signals across devices, network, and behavior to build a single identifier, then provides signals like bot, agency, proxy, and VPN detection to give technical teams a complete picture of risk. They ship hundreds of product updates a year, so they adapt first. As browsers update, privacy requirements change, and fraud tactics change. With one API call, teams can get this running in minutes. Over 6,000 companies rely on Fingerprint every day. Join them now at fingerprint.com. Here's the problem with most AI tools. They just sit there waiting for you to prompt them. You do all the remembering. They do the typing.

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8:53 If you're tired of being your own chief of staff, try Ario. Aos. That's a riso. A kh. >> What is it then? Basically just a plan or just a idea or goals. The way I would summarize it is essentially I think you have to what we're going to get to in a second is you have to make somewhat informed choices around I would call the core key questions of your product strategy. Like there are core questions the strategy has to answer and your answers to these questions have to be opinionated enough so that you can actually enforce the no. And that's what we're going to look at next. Because the problem is most of the time you look at strategy as this big monolith. You say this is the strategy. This is the deck.

9:33 This is the one pager. And I believe if you really boil it down, if you look at all the smart stuff out there that from different strategic thinkers, it all comes down to the same core movements. You want to have some kind of narrative in place. You want to have a narrative in place that allows you to express why should we do this? Why should we act on this? Now then you want to use some kind of playing field definition which is a product strategy fancy term for basically the market. So for whom are you trying to solve what problems and who else is solving these problems your alternatives your competition and then you have to decide okay in this narrative and this playing field well how do we win what how do we plan to win on this playing field so what value do we provide and how will we differentiate and especially these last two bits are most affected by AI in my experience and we're going to look at this closer later on so if we take this to heart and we say like these are the core four dimensions every strategy should answer.

10:33 It hopefully clicks a bit more for you because that means that it doesn't matter what form or visual you use to answer these questions. It is that you answer them and then you can rearrange them in whatever shape you actually enjoy it because then you have those dimensions and then you can pick whatever component you need. You can then say how do I want to describe my strategic narrative? How do I want to describe the playing field? How do I want to describe the winning moves? It doesn't matter. It matters that you answer them in a way as we just talked about. You need to answer these in a way that allow you to say no to things. So that's the important test you have to things have to have to pass.

11:16 So if we take this to heart, it gets a bit more clear to say if you look at all these fancy things, the business model canvas, a lean canvas, a strategy kernel, whatever pitch deck or glorified PowerPoint structure your boss loves. All of these are basically just all of these are basically just windows. All of these are windows into the actual work of strategy. The actual work of strategy and that's the difference. Everyone who has worked on strategy will tell you it's basically it's a messed up chaos. It's messed up chaos and it's supposed to be because the pretty structured neat kind of stuff you see at the end that's just a a very curated snapshot towards the into the actual world. That has to be clear like don't start with a polished structure like embrace the messiness like work through these questions that whatever way you have to work through them and in the end I will promise you you are always able to assemble the actual strategy work into whatever shape your strategy your boss or your your frameworks require. So the fundamental questions don't change right strategy creations there's nonlinear it's messy and these canvases allow you to look at them but they're not the strategy itself. So make sure that when you are asked about product strategy, don't fall for the trap to start with the framework, start with the template, start with the core questions that every strategy needs to answer in a way that they enforce a no and then it's just painting by the numbers. You assemble it.

12:41 >> So let's see those core questions. >> You can look at it in in more detail, right? So you can take everyone's favorite thing, the business model canvas. And I love this post from David Blonde who wanted this great post because the question is now okay Tim we have all these dimensions we have these things how to answer things how does AI fit in there like where does AI influence things the most and I talked about parts of value proposition differentiation are most affected by it so what I love here is that AI by itself in your strategy is not a value proposition and almost no technology in history has been a value proposition on its own instead technology or something like AI becomes a resource you can use It becomes a new resource you can leverage to really hopefully amplify the core value why your customers come to you. They don't come to you to see the 15th glorified chat GPT embedded window.

13:29 That's why they come to you because everyone can spin these up. Like it's not a differentiator. Everyone has access to the same frontier models or open source models. You can't compete on that technology alone. You have to make sure that what other things remain which we're going to look at later which differentiators actually remain. So, if I just try to play devil's advocate here, would there be some companies where AI could be the value proposition? Like Levels.io has this company called Photo AI that does 83K revenue per month for him as a solo operator. And I guess it's just about generating photos that look like you or maybe like chat PRD Clarvo has like that. Would you say AI is the value proposition for those tools? I think I would challenge that in a way to say like I think what's important is what is layered on top of AI as technology for example the levels IO product I mean I think his name is Peter right the the operator who runs this like he has this incredible personal branding like he's this incredibly branded soloreneur operator I think people love rooting for him people love the products he's building and I think if you are above a certain quality threshold then your brand can carry you all the way and I think by that by being this solopreneur thing he has created his own blue ocean like he's not compared with like the big companies in that space so I think that's the that's how I would see it or you mentioned CLA with a what's it called the >> chat PRD I was just talking to the president of HP and I was asking him hey what AI tools do you guys use for your PM team he said chat PRD I was like wow >> my bet is I think that would be the part like why do people choose chat PRD my bet is they choose it because of CLA's product experience that is leveraged through AI in there because in theory you can write PRDS everywhere but like CLA adds her CPO background value to that to really amplify AI as a technical resource.

15:22 >> So it's still really a resource that those people are tapping into and the strategy or the business model canvas they're filling around it is their brand, their alpha, their distribution. Those are the things that allow it to succeed. I think there was a great podcast I don't know it was a year ago or so from Brian Belffor from Reforge and he chatted to I think to Ravi Meta and they talked about what are remaining differentiators in this wild wild west and they were like look essentially it's the it's the same differentiators that have always been the only ones it's brand and its data and they just get they just get so amplified right now because nothing else is a mode anymore nothing else is a mode anymore and I think that shows even more and more like you can incredibly well-branded company like notion or all these other favorite tools we have out there. The brand is amazing.

16:12 They have a gazillion data history about you to leverage AI into a fantastic product experience. >> Very interesting. So where do we go from here? >> We go from here to take a closer look is like okay so we talk about AI as a fundamental thing. Before we dive into the case study for today, I want to lay out a few things for people to understand. What are the impact points? What are the connection points for AI and strategy? And I think it's important to say on the one of course you can use AI to create your product strategy as a tool for res for creation but of course the other part is where does AI appear in your product strategy. to what we talked about. So, and just to point out some of the obvious things like for example when we talk about using AI to create your product strategy, there are obvious things like researching markets and competitors, right? That's an obvious one. Or we can talk about synthesizing customer evidence. We can talk about generating comparing scenarios. We can talk about how do you pressure test strategic scenarios. So, we can we can use these things and they they should be part of your workflow.

17:11 would be would be stupid not to do it, right? So, don't put in your blinders and be aware of these tools being available to you for strategy creation. The thing that you can't replace that people often times might fall for is you will still be held accountable for the consequences of your strategy. You can't say, "No, Chad GPT told me this is a great strategic bet. It's not my problem that we lost 10 million in the market." Like, you can't do that these days. If you have that and of course the the thing is when we look at AI as part of your product strategy as we talked about before you have to come to these core realizations AI as a technical resource on its own it's not a mode the resource is widely available it's not it's not differentiatable you have to understand how you can use AI as a resource to amplify existing value propositions and become appealing to new audiences if that's what you want to do and you have to understand that as easy it is to spin up AI as part of your product strategy and to use it because it's so it's so widely available, the only sustainable differentiators in product strategy are the ones that take the longest to build.

18:24 We just talked about brand and data and these things you cannot speed up like you cannot speed up brand and reputation. You can destroy it incredibly quickly but you cannot build it up overnight. If you look at these things like that's what we can do like that's what we what's available to us. we can we can continue to work from here and dive deeper into how do we work through through product strategy. The fa one of my favorite things that I look at to pressure test whatever people put in front of me is this quote from Roger Martin. And honestly this quote it's one of those light bulb moments that whoever I'm showing it to you will never look at strategy the same afterwards. you you just can't. So, here's this great quote where he says, "Well, the question is, is the opposite of your choice of your strategy choice stupid on its face? If the opposite is stupid, it's you haven't made a real choice." And he uses things like if you say our strategy is to makes our sales people more efficient, well, what's the opposite of that? It's like to make sales people slower. That's pretty stupid. That's a pretty stupid idea.

19:29 That's a pretty stupid idea. So then you haven't really made a strategic choice because anything could fall in the bucket of making sales people more efficient. So you need to find something where the opposite might be stupid. Like >> we are trying to make sales people spend less time in software and more time with people. I guess the opposite of that too is stupid though. Spend more time in software and less time with people. So it's not easy to generate off the top of your head.

19:59 >> Yeah. But that's the thing. If it would be easy, then strategy would be easy. And we all know that strategy is not easy. So, I I get what you're saying. The thing is you could the you can easily tweak this. You can say we want to make sales people more efficient, but then the question is how? Like that's what strategy should answer. And you could say we want to make sales people more efficient by shortening the preparation time for meetings. Right?

20:21 For example, this could be something if you believe this is the best bet you have. You could also say an opposite would be we want to make sales people more efficient by sending more AI bots to sales calls. It's it's an alternative, right? Who knows if it's the right one, but it's one you could do. Or you could even say we want to make sales people more efficient by having every sales rep focus on fewer accounts. How do you do this? So that's the part that strategy should should should be able to answer. So, it's almost like having a point of view about not just what your product is going to accomplish, but how you're going to accomplish it.

20:55 >> Exactly. How do you want to do this? And the beauty is that the problem is we all know that strategy is not just this one sentence. Strategies never make sales people more efficient. It's much more complex. And we look at the individual building blocks of strategy. So, invite people to do this. Like, don't get frustrated about your product strategy being stupid on its face. fully like pick out what is a part of your strategy. But what is a part? What is an individual component you can do? And one person I work with in one company I showed this to she call she started calling this the stupidity flip. And I love this. It's one of my favorite exercises. So she basically says if you decompose your strategy for example a part of your strategy is you talk you want to make choices about your audience or you want to make choices about how you wanting to win the playing field. we talked about. And so she worked on a meal kit product and she said, "Okay, I can make a choice by saying the audience I focus on are people who regularly cook at home but they struggle with inspiration." I could flip this into I'm could also focus on people who never cook at home or people who are extremely proficient home cooks. Legitimate alternatives. No one knows if it's right, but I have I have made a choice that makes sense. I could also say for the winning moves, well, my value prop will be endto-end home cooking from inspiration to inventory. You could also say I'm going down the HelloFresh route.

22:18 I'm going to be a meal delivery service or I'm going to be super high-end. I'm going to say I deliver complex recipes with specialty ingredients and that's it. So, you can pick individual parts of a strategy and flip them and think about, can I make one part more tangible? Can I make one part of my strategy more no enabling so to speak that I can then work with it? >> So just to clarify because I didn't totally follow where's the flipping happening here.

22:44 >> The flip happens like some you say one part of your strategy would be you have to make a choice about what's the audience I'm focusing on. That's part of your strategy, right? You want to say for whom am I solving a problem? Like that's part of your strate. It's a strategy component you would focus on. And so you would make this choice by say, "Oh, I'm going to focus on people who regularly cook at home. What could be flips of that?" Right? So I could flip it into people who never cook or who are extremely proficient. And in this case, the sup the stupidity flip worked, right? We could say, "Yeah, these are actual choices." Like these are not stupid choices. You could focus on these, but you chose to focus on these people. So that's the part of a strategy that you're flipping. You're picking an individual component and you're flipping that. And just to play devil's advocate on this now, isn't there like I also felt this sometimes when I was a product leader implementing a strategy that I would get like one strategy I had when I was at Apollo.io from the CEO was, hey, let's only focus on paid users. And I think he was kind of going off of a similar sort of reasoning here, which is like there needs to be a stupidity flip example.

23:52 >> But then the strategy kind of ignored free users, right? >> But actually, as a product leader, I can't just ignore free users. >> And so I would have to make decisions like that don't just nerf the free users. So is there a component where strategy should be giving you myopic focus on certain segments of users and is that good? >> I would say it's two things like the first thing that people have to understand about strategy is that I strongly believe that strategy does not have to cover everything that you're doing right. I think it's okay that as you said the focus might be paid users that does not mean that you're turning off the product for free users right it's like okay it's that that's the first thing people have to understand and for me the second part is that it has to fit what we we talked about the strategic narrative before like it has to fit the narrative like why what is the reasoning for focusing so strongly on paid users is it because you want to because the company has a retention problem with paid users is like increasing retention the the biggest bet to improving revenue or is it like what is it like what's what's the the bigger thinking behind it. So I think the choice of a segment has to match the narrative. That's what I mentioned before. These components you have here they have to form a coherent.

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29:25 >> 100%. Makes sense. Okay. And that was actually the reasoning was they wanted to focus on retention as the biggest lever. So, it's interesting that just by knowing paid users as the focus, you were actually able to figure out what the larger narrative was. >> Exactly. And that's the beauty of strategy. It's like it's not a top- down thing. You can start anywhere. Someone could throw at you, it's focused on the segment and all you have to do is well, why why this segment? Or you could say someone might tell you, are we really trying to differentiate through instore experiences? It's like, okay, great. Who do we how will we reach through instore experiences? And is this the segment we want to focus on right now? So, because all of these things are are a web of things, you you can start anywhere.

30:11 So to make this all a bit more tangible, right? So we we already ran through some stuff so I don't have to don't have to repeat it, but essentially what you would do is okay, so the choice might be make sales people more efficient. The opposite would be make sales people more inefficient. So right make sales people more efficient doesn't make sense. Opposite people were inefficient sales people more inefficient. Obviously stupid idea. We say make sales people more efficient by being in person with clients. Right?

30:40 This could be one thing and you could say well the opposite would be make sales people more efficient by being in virtual contact with clients. It's not obviously stupid. So it could be legitimate alternative. We could focus on >> Yeah. So now you've made a real choice. So what you want to do is you want to flip it and then you want to say is it stupid? That's the simple way to validate. >> That's the simple Yeah. That's a stupidity flip. And so I want to make this a bit more tangible and what we're going to do is we're going to work through a fictional case that represents lots of the clients I'm working with and it's it's a fictional marketplace product. We're going to use it a bit as a as a run through here. So I'm calling it Fair Mile and it's essentially it's a used car marketplace. What we have here is your traditional marketplace kind of situation. You have sellers and dealers.

31:21 You have fair mile as the company in between. You have buyers. And of course sellers and dealers want what everyone want. They want qualified buyers. They want to sell the car quickly and they need low friction listings and verification of the products of the whatever they're putting up there. We as fair mile we have to facilitate all this inspection. We has to create this trust. We have to connect supply and demand. And on the buyer side, we have people who come through for search through Google or different or AI search. There might be first-time buyers who are very uncertain and of course it might be difficult to purchase a car site unseen online. So, and they don't really trust the quality of your car enough to commit remotely. So, these are some of the it's a bit of a landscape and of course they have a few interesting challenges ahead.

32:09 Of course, they could do everything what everyone says like just throw AI everywhere into the product, expand to all the countries, all the categories, accelerate growth, trying to build everything, right? And we talked about this before, but this is basically this is an all yes strategy. It doesn't say it doesn't let you say no to anything. It's just like do whatever you have to do it. Like what if there's if there's a suggestion, do it. >> Just say no to Yeah, exactly. Just say no to sleep, say no to capital, say no to margin, say no to quality.

32:40 and of course, then you could say, okay, we could also make a we could make a specific focus, right? We could say, hey, we could pick firsttime buyers. We could focus on that. You could, and this would be another example of the stupidity flip working. You could say, we focus on firsttime buyers. You could also say we flip it and we focus on second and more time buyers. So we focus on experienced car buyers. It's a it's a choice. So the question will be for fair mile okay what do we do like how what what do we do and what do we choose not to do if we would choose trust to make sure we actually focus on these first-time buyers. So that's the thing I want to use as a bit of an example for us to work through things.

33:21 And so you could you talked a little bit about what are the questions we could work through right so if you take some of the choices that fair mile has already done right they might say okay the strategy is to become Europe's most trusted used car marketplace by using AI to deliver a seamless buying experience delighting buyers blah blah blah blah blah and you could say like well again like you could flip all of that and it's obviously stupid right because you don't want to be mistrusted you don't want to well AI buy or not doesn't really matter. H you don't want to create a hard to use buying experience. You don't want to not delight buyers. Everything is there. It's like well this it's nothing. It's not it's not a strategy, right? It doesn't give you things. So we talked about this before. Europe's most trusted car marketplace. Flip it.

34:05 It's like the world's most noted used car marketplace. Well, you shouldn't do that. So we don't want to be Europe's least trusted car marketplace. so obviously stupid. right, buyers and sellers alike. Well, of course without buyers or sellers, it doesn't make sense. So, no buyers, no sellers. Also, obviously, >> obviously stupid. >> Yeah, exactly. That's not a marketplace. I think you could look at some of these things, right? You could say, okay, accelerating buyer growth through automated AI verification. Well, you could say taking our time on buyer verification through humanled call center verification.

34:48 You could do it, right? Not seems >> super stupid. Yeah, it could be, right? So, it's not not obviously stupid >> because it could be it could be a play if you really want to become trusted. It could might it might help you with your trust play, right? So, you could say, okay, this this might be actually a bet we could we could try out. yeah, improving recommendation algorithm through AI enhanced start page feed for first-time AI visitors will I don't know make the first time start page feed experience worse for SEO visitors could be one flip of course you could flip more but it's also not it's not super of course maybe it's a bit much too much devil's advocate you could also say provide a static start page feed experience for first-time SEO visitors compared to an NI optimized one. You could say like well somewhat possible.

35:42 >> Mhm. >> So I think it's something in there. And we're going to take a look at some of these parts of components of your product strategy of what you can what you can do to break things down. So one of my favorite ways to do it because we talked about audiences a lot. We talked about audiences in segments and an important part that I love is it's an exercise called audience trees. And so audience trees borrows from this idea. There's Andy Jones who's a former head of growth at Facebook and he says basically your your target audience has to be comically narrow like it has to be almost ridiculous how narrow you are. And I think you have to be between very broad and very comically narrow. So if we were to take the fair example, let's just say all buyers in all say all potential car buyers in Europe.

36:35 That's very broad. That's probably a bit too broad, right? And we could narrow this down to say firsttime buyers of vintage Mercedes cars in southern Germany. Like, okay, that's oddly specific, right? So that's probably comically narrow. So what you want to do with an audience tree is you want to figure out well what are the things by which I could break things down. An obvious one is of course is region. you could do something like by by income to say for cars it might be important. It might be car value like people looking for high-end cars or low-end cars where they want to go. We already established it's about first time versus repeat buying. This is another category. So we have we have these what I recommend companies do is they they take the broadest one and maybe a comically narrow one. Then you you think about by which aspects could I slice my audiences and then you can rearrange things. You could say okay let's say Europe. Europe is great but maybe we're going to go for we love we love Germany because they're crazy about cars. So we're going to have Germany and maybe you have UK and then you have rest of Europe, right? This could be a segmentation you might play. So we have region out of the way. put this up here and you say, "Look, we're going to go for Germany." Okay, so within Germany, what could I do within Germany? I could say, well, I want to make sure between first-time buying, repeat buying, because Germans love cars. They often buy new cars. So, first time, repeat buyer. This could be a segmentation question I'm using as well to break things down. I might say, well, I don't want to deal with the hassle, all the inexperience of first-time buyers. I want to go for repeat buyers. they might be easier to to convince to buy online.

38:19 Then you might say, okay, I don't I also want to make a big margin on what I'm making per transaction. I don't want to play the volume game. I want quant qual quality. So the higher the car value, let's say car value above 100K and car value below 100K, you might say, well, we're going to focus on above 100K because then every transaction makes us it's it's real fun to make facilitate each transaction. And so you could you could do the funny the beauty is of this you could rearrange these things as you want. You could start with car value and then do region. It doesn't really matter. It leads you to the same thing.

38:57 But in the end then what you land on is okay for fair mile we could say we focus on repeat buyers of cars worth more than 100k in Germany and then you have something that is something you can say no to something that gives you focus and if it fits your narrative you can have hopefully you have a narrative why you made these choices. This is for example the beauty of where AI would be really helpful to really assess these criteria like which thing like how big is the market what is the difference in in trust issues for repeat versus first-time buyers how many cars exist in competitors more than less than 100k like you can do all you can speed up all this research and so you can f but in the end you will then land on the segment that you can actually work with >> and how do you know that that segment's big enough it's not comically narrow.

39:48 Yeah. So that's what I'm saying. Of course, you have to like do this. I don't want to say sanity check sounds too easy. But of course, you still have to say, well, is like is Germany a good market or would you say, "Oh, let's say let's say Luxembourg." It was like, "Well, look, this is like I don't know. I don't want to do injustice to Luxembourg. It's like, I don't know, there's like 10,000 people." It doesn't make sense. So, of course, you still have to go through it like, okay, what does it mean? So, and that's why I'm saying this is where the acceleration of this breakdown can happen. You can easily get access to saying how many car owners in Germany, how often does a German buy a new car, what is the average value of the cars they're buying? Like you can get the data on that very quickly. You can run this decision through some AI assisted progress here to back up the data and make sure well okay this is a market of I don't know 50,000 people we could reach every year at this expected transaction size and the margin we're taking. Then you can just see well do the numbers make sense? Is this a business model or do we need to broaden it? Do we need to say it can't just be Germany, it has to be Germany, Austria, Switzerland. So you can then tweak the dial so to speak to make the choice here.

40:52 >> So AI really helps in the market sizing component. >> Yeah, exactly. And again what we what I've been banging the drum on, you have something that you can say no to, right? You can say we can we can flip this and the opposite would still make sense. We could go for firsttime buyers for lower value cars, different markets. It it allows us to say no to things and I believe getting your audience in place is such a because having your audience in place like has so many downstream consequences. If you have your audience dialed in, the problem space you're focusing on will become very focused because you focus you can only solve problems for the audience you've chosen.

41:27 In this obviously in the marketplace scenario we have another interesting component because we could also have to say we have to focus on on sellers of cars worth more than 100k. maybe not Germany, we could sell across Europe, but then we have this link, you know, we have the the buyer and the seller side clarified at the same time. So we have this lock of these two strategy components we can now use for the team working on the buyer side and the team focusing on the seller side. So we know what we focus on in acquisition, how we will measure success. You have all these things in place. So that's why why I recommend so many people to to actually get the audiences right. Don't get lost in super comically narrow one like don't don't go for vintage Mercedes cars in southern Germany but do do the run through do the slicing and focus. Another strategy part and I I I teased this a bit. I teased this already that I believe that winning moves and differentiation is is the trickiest one that's the most influenced and again I'm someone I love to go back to the original concepts that are out there. I don't believe anyone needs to reinvent strategy work. What we do have to reinvent is coming back to the fundamentals and staying true to them. And one of the most timeless concepts in differentiation of strategy is from Hamilton Helmer, seven powers.

42:47 If you haven't heard of it, I recommend you go read it. timeless stuff, really good. And so he says there essentially, if you boil it down, there are seven things you can do to differentiate from others, from your competition. And so you have to understand what each of these powers is doing in general if it's feasible for your company to execute and most importantly does it even help you differentiate from your competition. And so to give you some color on what what do some of these mean, right? For example, I mean, switching cost is probably the most painful one for everyone, you know, like the the blue bubble problem. You you can't leave the iOS ecosystem, like you don't want to leave all the iOS data behind. You have that. that's a painful one. or switching from Spotify to somewhere else, all the playlist or all the algorithm stuff. process power.

43:35 Process power like how quickly what kind of internal efficiency do you actually have? can you can you have that in place? counterpositioning one. It's a very interesting one. favorite example across history was from Netflix versus Blockbuster. But the funny thing was Blockbuster made a lot of money on the late fees of the rental of the rented movies. And when Netflix waved the late fees, Blockbuster couldn't compete on it because it was a their business model relied on it. and of course we have brand, we have network effects. And so what I said before comes true. It's the only sustainable differentiators these days are the ones that are the long take the longest to build which is for example on the one hand we talked about it right we have you have brand right hard to build you have network effects because you can't copy and paste network effects whether that's offline distribution whether it is the number of people the buyers and sellers on the marketplace so this would really work for fair mileile switching costs probably not a good one for for car marketplace place process power.

44:44 Oh, sorry, I lost you for a second. Are you still there? Yeah. Okay, good. process power. How good how how easy do your internal do your internal wheels turnurning? Well, it's it's easy to copy to like people can catch up like companies can catch up to that, right? It might take them a while, but it's it's easy. and other things like captured resource which is an old school way of using technology. Well not sustainable. we talked about this before everyone can tap into the same models. So this is difficult. so some of these things again if we look at fair mile our our product again it's the the brand I think the network effects like getting the buyer and seller side really in place get them really locked in. switching costs again I don't see them they shouldn't focus on building on switching costs for a car marketplace because it doesn't really make sense the find the good interesting for them for economies of scale I believe would be in the case of maybe working with dealerships in Europe so can you get dealerships in place that have multiple offerings multiple locations that have that really blow up your inventory this could be a really interesting one again captured resource so just getting crazy about you are the AI market, you're the car marketplace with the AI search, it's probably not really sustainable. yeah. So, that's what I would say looking at the the winning moves, the seven powers. I think really it's about brand, it's about network effects. Maybe getting the dealership in place. don't get lo they shouldn't get lost in trying to build up a fancy AI search. I mean, you might do it. It's not painful, but it won't really help you differentiate. like no one will buy the car with you because you have an AI search on the marketplace.

46:31 >> And does seven powers come after audience? Is there a sequencing to this that makes the most sense when you're building your strategy? >> I would say it does not. it's not a sequence because if you look at it, if you look at these core questions we we talked about, essentially you can start anywhere, right? So like Joe from marketing might come in and tell you all about we now differentiate on price, right? That might be a new statement like okay thanks a that's a bit hard but okay we do not differentiate on price.

47:03 The big question is do we focus on the price sensitive audience like like what's the link? Is that a link? Is that a strategic link? Is there a link in our strategy that actually makes sense? And probably this then makes sense points out like who is our audience and even further. So once you understand that what makes our audience choose a solution these days and you can take this even further and say why do people choose our competitors? Is it not predators? Why do customers choose our competitors?

47:39 Right? if it is it price like are we in a price? I would say if you if people are choosing competitors for pricing I would say get out of this market because price is one of those other things you cannot win like you can't win on pricing you might can there are these outliers of course these days we see that you know like Google Microsoft Anthropic OpenAI they can compete on price for a while by cutting down the cost and not charging you the real AI cost they can because they can swallow it because they subsidize it but that's not no one else can do that like no one else has a business to subsidize these incredible costs that you don't have to pay for. So to come back to your question, I don't think it it doesn't have to be a sequence because again you might start on this wild differentiation guess and you can link it back up to all these other strategy components you should be able to answer. yeah, does that make sense? I dived a bit deeper into the audience and the the differentiation because again I said on the one hand audiences is most impacted by the idea to or it's most impacted by you can do a lot of AI assisted work here to really get things down and nail things down.

48:46 differentiation is the one that is the most affected by can you actually use AI to differentiate your product anymore and what does it mean for those other differentiation possibilities that you have as a fundamental layer and we talked about okay how do you how do you link all these things and we can we can link it talk about this a bit more by saying okay if we take these things aside like what can you what can you do to really articulate those things so I think For your narrative, for example, you want to use things like your vision, your mission, business model, company strategy if you have them, if you have it in place. we could do something like northstar metric. Like these are all components you can utilize to really describe the strategic narrative you're going after. So this is this is what you can use. You don't have to use all of these. Please don't use all of these, but you can use them. When we want to describe the playing field, we have to be clear on buyers. users especially in B2B buyers versus users.

49:49 of course we have to say what are the the jobs the buyer jobs the user jobs we have to get clear on these and we have to be really clear on the alternatives like be clear who are users and buyers using to get the job done today. So these are things we need to have in place to articulate our playing field. And for the winning moves, you can talk about things like value prop. You want to talk about distribution channels. You want to talk about differentiators.

50:22 So these are just some of the let's say these are things in your toolbox you should be able to pull out to articulate winning moves, to articulate playing field, to articulate the strategic narrative. As I mentioned before, all of these are linked inevitably. You can't make a choice about distribution channels without being clear on the users and buyers you're serving. You can't make a choice about differentiators without knowing who you're competing against. Like all of these things are so incredibly interlin.

50:50 You might start anywhere, but be prepared for the messy work you have to do to figure all of this out together. >> And when you were talking about strategic narrative, you mentioned don't do all of vision, mission, business model, northar, metric, company strategy. Why not? Well, I believe that you can so often get lost in them because the thing the problem my problem is that people and companies especially companies love these terms but they are rarely used the way they are intended to use. They like just a northstar metric.

51:17 Northstar metric is one of those things like people put it on the wall and they just say EBTA is a northstar metric. It's like well it's not >> it's an outcome I guess it's like a lagging metric right? Yeah, exactly. That's the problem. Like and I think the you know like again I love to go back to the to the inventors of concepts and Sean Ellis who came up with the northstar metric. He had a very clear definition like he said nostar metric is the metric that represents the experienced value your customers have from your product. Like that's what it is. And of course an increase of this metric has to lead to an increase in the business metrics of course. But the business metric itself is not the northstar metric. And I think that's so easy to forget. So coming back to your point of all of this, people love to debate, oh is this a vision, is this emission, like what is it exactly? It's not written correctly and oh this northstar metric etc. I would just say I don't really care what you use as long as you can really tell me why should we act now and why is it us who should act.

52:25 If you whatever you use up here, you can only use the northstar metric only the vision. I don't care because the problem is your users don't care about your vision your strategy. Your colleagues, your teams care about your strategy. So if you can inspire them to think about yeah this is why we should act now just with a vision be my guest. I'm not going to police your strategy framework. >> Makes sense. >> We talked a little bit about strategy and we have to talk about has strategy worked. The beauty is I mentioned this honeymoon period like many of my clients have it. It's like yeah let's have so much output and so much you know everything everything is happening now and all the everyone is more efficient but I have so many clients who told me a year ago they have issues with feature adoption. They have issues getting the customers to use the features. So tell me exactly how 10 or 100 times more features helps you with adoption from your customers. I haven't heard a good answer on that to be honest. So you might throw more things out but you don't really know what happens. Now the problem is people then say yeah you know let's write more OKRs or let's let's get lost in the metrics frameworks whatever and just like with every framework I think it's important to let's go back to the basics and if we go back to the basics of saying hey explain to me if our strategy has worked and how do we know the strategy has worked I don't tell people let's write OKRs let's write northstar metrics I don't do that because then people focus on the framework what I have them do is okay plain plain English first tell me what you want to do differently in the next quarter or 6 months just tell me what you will do differently which is the essence of strategy what will you do differently don't talk to me about business as usual don't talk to me about bug fixing what will you do differently >> and differently from what you have been doing >> yeah what will change like because you cannot expect an a revenue increase of 20% by continuing to do this do the thing you did before like you have to do something differently probably so and this applies to B2C to B2B to customerf facing to internal teams it doesn't matter everyone needs to have an answer to the question what will I do differently in order to achieve the the business results the business goals that I that I've been given so once you're able to say that to me in plain English then we can talk more then we can talk about okay now tell me how will you know it has worked how will you measure that what you did differently has worked.

54:55 Tell me how you did, how you will measure it. And once we had this conversation, then we can talk about okay, now we can translate that into whatever metrics framework your boss wants you to fill out. Whether it's a a dashboard, whether it's OKRs, whether it's balance scorecard, I don't care. But it's like with a strategy template, filling out the template doesn't make it a strategy unless you get the fundamentals right. And for metrics and OKRs it's always what's differently how will you measure it and then translate it and if you if teams struggle with that which especially in the AI concept they are these days companies get easily lost in very machine centric metrics they tell me about you know tokens used language model efficiency blah blah blah blah blah the point is that's no value exchange like tokens used is not a value exchange for your customers it's a value exchange for anthropic like they they make more money of you using their tokens. So you still have to go back to the core question is well we're building a product ultimately for now humans maybe agents in the future but still explain to me whose behavior do you want to change like whose behavior has to change to tell you that this idea you had has worked whose behavior do you want to change by how much? and this should be at the core question like even if you tell me you know we want to increase AI feature output by 20x next quarters like okay what should change for whom as a result of that like what why do you want 20 20 times more is it about an internal metric do you want people to be more AI fluent AI this or that or do you actually want customers to be more effective more efficient more or faster in the problem solving make that the actual goal how you measure the success of your strategy and not a random AI output metric.

56:45 >> So, is it better to have a metric that's more of like a leading product usage sort of metric? >> That's a good question and I think the let me see if I have something. What I like to go back to there's this great quote I don't know who has it before. There's this great quote is there are no solutions only trade-offs. The problem is there is no this one not this one perfect metric. I think ultimately you have to decide okay let's say you pick a most customer- ccentric metric but it takes you nine months to figure out if the metric has changed well that's not that's not great that's not a good metric so then you have to reverse engineer you have to go from lagging to leading indicator okay what is the earliest signal I can detect and it's a little bit like what we did with the audience tree you might have this comically narrow metric where you say it's like number of tokens used per day might be comically narrow and it's super leading. You can track it every day, but it doesn't tell you anything about the value you have produced. And so that's the balance you have to strike ultimately to say, okay, we have a very lagging on the one hand of the scale, you might have very lagging customer change in behavior and the other hand you have this very leading work output indicator.

58:00 And the thing is, the thing is there might be a time where you might have to work with this leading work output indicator. But honestly, my biggest pain is always why do we do all this AI stuff if it doesn't lead us to faster products in the hands of customers and therefore measuring things faster? If it still takes you nine months to measure customer behavior changes, but you're burning through all these tokens, what exactly is the point of that?

58:30 >> So, how do you create the right strategy and metrics loop then? >> So, the way you do it, we we're going to revisit now. We're going to package things up. We're going to revisit some of the components, some of the things we talked about before. So, we have this fundamental idea of what we do and we can go through the full picture. So, we put it here and we say this is what our strategy should answer. It needs to give us some context on why us, why now, for whom, which problem, etc. Then you would say okay, let's say our narrative is or let's give the narrative for now. Where are we going to use these the first time buyers of these ones? We use the strategy choice for example. It's something you would do. Okay, we have these as our our playing field, part of our strategy. So what we want to do now is okay the core question to answer is which metrics will tell us that this strategy choice has worked. So of course the second part we still need to put in place just having the segment doesn't really make it a strategy. We still need to make a choice of how we will serve this market. How we will will we win this market. Maybe let's say let's take a bold bet and say how do we what's the value we provide?

59:37 We provide white glove onsite inspection and car delivery services. Right? So you might say this maybe this is the winning move we believe will help us win this market. Who knows if it's right. So if we have this in place the question is then still okay which metric would tell us that the strategy has worked and the last thing we have to put into place is okay why do we want to focus on repeat buyers of cars?

60:01 Essentially the narrative might be in this case coming back to the example you gave is grow company revenue without losing margin by focusing on high-end markets. Right? So maybe these are the three things that we have in place and we have a somewhat coherent strategy. Now if we have this in place, okay, what kind of metrics could we set up here that tell us if this strategy has worked? Of course, on the one hand, we might it's something simple. It's something like share of cars sold larger 100k. This would be an obvious one. We would also have something like average profit margin per transaction from German buyers. could be another one. This should go up as well. Like we don't just want to have more cars. We want to sell them at a certain profit. we want to have let's say and to prove that the white glove thingy has worked.

60:54 Recommendation score larger eight among German buyers of cars larger than 100k. So that's how we know we were we able to wear su to we were able to be successful in the high-end market. These are some metrics we could put into place here to see okay has has this strategy worked? What we want to avoid is we don't want to use generic metrics. We don't want to say something like increase in revenue or increase in inventory. These are great KPIs, but these are not great OKRs you would use to execute the strategy because they could change through all kinds of stuff. You want metrics that are specifically tied to those strategy choices that you made. The strategy choice to focus on repeat buyers, the strategy choice you made on providing white glove on-site inspection and car delivery. and you want metrics that really tie to that because if these metrics don't go up, if they don't improve, then well then you make the wrong strategy choices and then you have to course correct and the game begins again.

61:51 >> And so that's why it's a loop. After you come up with your strategy, you figure out what are these right metrics, you use those metrics to feed back into your strategy. >> Exactly. Because and you mentioned the point of leading lagging is exactly the point. If I only look at generic metrics like increase in revenue, the problem is with these metrics, there's there's too much noise and too much delay for these metrics to tell me actually if if this particular strategy has worked.

62:18 and that's the difference between something like OKRs and something as generic as KPIs. >> Makes sense. >> That's why how would bring things full circle like we talked about what is the point of strategy. We talked about why it's important to say being able to say no to things as a result of your strategy. What are the different core questions you have to be able to answer? What kind of components? What kind of tools can you utilize to answer all of these potential parts of your strategy?

62:44 How easy then is to really distribute them into different strategy frameworks and templates and whatever you want to use and how vital it is to being able to flip them and do the stupidity flip to make sure they allow you to say no to things. how you can break things down like audiences or differentiators using very simple but incredibly effective tools and ultimately how you have to make sure that strategy execution happens through specific metrics tied to those concrete choices of your strategy.

63:14 >> What should some PM who has strategy work they need to define the strategy for their next half in their product area? What should they go do on Monday after this episode? What they should do on Monday is if they have an existing strategy, I think the first important thing I would remind them to the first thing I would encourage them to do is to do the stupidity flip and whatever they have in place at their strategy like what am I what are my choices about audienc's value proposition differentiation and are the opposites obviously stupid? So have I essentially not made a choice? That would be my first thing. the and then depending on the result I would encourage you to think about can I break down the audiences much more. Can I create can I provoke focus through the audiences of my product strategy and how does that influence the parts of value proposition and differentiation.

64:08 And the third thing I would recommend to do is okay do I if my current strategy has me believe that people come to me because of AI please think again and think about people won't just come for AI to my product instead what is it actually that makes people come choose my product and how can I use AI to leverage that reason much much more to have people keep coming back. So let's say we're at fair mile and there's three people working on strategy at three different levels, right? There's the CEO probably defining a lot of these seven powers and core user groups. Then there's like the head of product, whatever they are, VP of product or chief product officer kind of defining some of the more nuanced elements. And then maybe let's say there's a PM who's sitting group product manager on buyer and then there's a individual ICPM within the buyer experience who's focused on okay this is what the delivery experience is. So if we think about those four, these are four different people who probably can't all make these choices. Like if you are just that PM on buyer experience, how do you think about building your strategy? What do you inherit versus what do you kind of create yourself?

65:29 >> Yeah, I love that. So a great concept that I always keep coming back to in this multi level multi-level thing of product strategy of course is also from Ravi Meta is the product strategy stack. right where he talks about at the top you have your mission your company strategy you have your product strategy in between you have your road map below you have your goals and what you have to really think about is when you look at these levels and you I love that you use the word inherit you have to think about each of these levels of strategy to as like funnels it's like a funnel you have to narrow down each level so you might you mentioned you might have the company level you might have the product strategy maybe you have a level below and you want to think about which choice always from the level above, can I just inherit the way it is? Like if the company says we're betting big on brand or SEO, I can probably inherit that very easily. if you if the company just says you know car people in Europe, if you're the head of on the buyer side, you have to break it down. You would say, okay, what is the biggest leverage on the buyer side? The biggest segment we should focus on to to to really choose down here. And yeah, I think that's the that's the core message I would give like which look at the choice you have you have from the level above.

66:42 Does it allow you to say no yet already or do you have to break it down one level further? And the the best concept I've heard about this, a friend of mine works at Personio, which is like Europe's largest HR software operating system. And when I talked to him for my book, he talked about an idea at Personio, where people are encouraged when they think about product strategy to think about something that they call evergreen benefits. And evergreen benefits is essentially well what is something the company is already incredibly good at and how will you leverage it for your product. And that's why it's a great example for me how things have to carry through through those different levels by saying what is the company already pretty good at and how do you leverage it because you don't have to reinvent the wheel on the product level or feature level if your company has mastered a certain distribution channel or has tech available or integrations in place.

67:37 So, it sounds like we kind of go back to that first fill-in-theblank statement slide that you had and you look at what of this have I inherited already? Where have people already made decisions? >> And then you apply the stupidity flip and you apply the does it allow me to say no for my area. And if you need more specificity, those are the places you're working in and figuring out this is our strategy. Exactly. And yeah, you can always run it back. Does it help me say no? If it doesn't, I have to narrow it down further. I have to make a more opinionated choice. And once you have an opinionated choice that really works, then you translate it into metrics to ensure it will actually be executed.

68:22 >> So there's some component then I guess of strategy work where you might want to have an idea of what your road map choices are so that you can really sort through and say, "Oh, does this allow me to say no to these certain items?" I think the the beauty is essentially I mean we all know it's an imperfect world but ideally I would say after you are clear on how does my strategy look like if I translate it into metrics the question you should be able to answer is what things you maro the thing you have to answer is okay which solutions and road map items will help me achieve these goals So you should be able to map whatever is on your road map to the metrics that have resulted from your strategy. So you want to be clear to saying okay I'm going to build this I don't know I'm going to build a new detail page with a larger photo view of new of cars. And you might say okay does this help me get people on board who want to sell expensive luxury cars? And then the question is well what's the evidence for that? Do I have evidence that this is a problem of sellers of larger than more than 100,000k cars? So, you want to be able basically the metrics are your proxy link of your road map items back into your strategy to make sure that you have a narrative for does the work I'm doing fit the strategy I set out to achieve.

69:54 >> Amazing, Tim. We could probably go another two hours on this topic. This has been so insightful. If people want to get more of you, where should they go online? >> The easiest way is to say hi on LinkedIn. You will find me there as Tim Herbik. and alternatively, you can check out my my weekly newsletter, herbic.co/newsletter, where you get all the good stuff every week in your inbox. >> It's one of the few newsletters I have been reading for years and years, guys.

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70:51 It's a lot of work, but the first five people who do that, I'll reply and say, "What's your address?" And we will send you the book. Tim, >> amazing. >> Thanks for being here. >> Thank you so much for having me. It was a real pleasure. >> See you guys in the next episode. I hope you learned as much from today's episode as I did. If you can do one thing that's totally free that would help the show, it would be to check that you're following on Apple and Spotify podcasts.

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