There are 18 Sources of Competitive Advantage. Which Ones Do You Have? Are You Maximizing Your Use of Them?

The money was there, all that latent power… something waiting to be born, something sleeping. He cradled the unformed dream in his hands and wondered who to give it to.

— Ben Fountain, Brief Encounters with Che Guevara

Sources of advantage are a major component of Step #3 of the “4 Steps to Develop a Strategy”. As I wrote there, “true sources of advantage are ones you can invest in and they become stronger over time. As you increase their value, you can then leverage them for more products, which further strengthens them.” In other words (with apologies to bank robbers), having bags of money is not by itself a source of advantage. Nor is having anything that is equivalent to bags of money, such as a gold mine, a competitive advantage. If you purchase a gold mine, it has the net present value of all likely future mining profits built into its price.

However, if you use money to invest in a gold mine you are uniquely qualified to run, then you have a source of advantage. It’s only a source of advantage if you are a natural owner of the asset.

Sources of advantage also must be something you are uniquely good at relative to competitors. And they must help you win customers.

What are the unique technologies, skills, or resources you have that allow you to help your customers accomplish something 2x, 3x, 5x, or 10x faster, cheaper, or better than they otherwise could? They are the reasons that your customers are buying from you and that’s where your advantage lies. If you can’t think of what your competitive advantage is, start with the fundamentals: why is anyone buying your product? Why are they paying you at all? Are they paying you more than an alternative solution? If so, why?

Note that, for a startup, you may have some of these already or you may simple have a plan to acquire them quickly and then build on them. The main source of advantage for a startup is the ability to see the world in a new way and innovate quickly, unencumbered with the responsibilities of running a corporate machine.
Established companies, for all the other sources of advantage they may have (e.g., a large number of customers), often also have an unhealthy arrogance. They can only see their own machine. They rarely listen to upstarts… Microsoft underestimated Google, Blockbuster underestimated Netflix, and Western Union underestimated the telephone, for example.

^^ = Common for startups

Tangible assets (can be traded or bought, potentially)

  1. Product or service model
    • ^^ Unique data from your customers – and analytics built on it. He who owns the data owns the industry … Uber and Airbnb’s business model are simply to own the data about their markets and do not to own any physical assets (e.g., cars or hotels).
    • ^^ A dedicated focus on a specific user segment / specific industry. If accounting customers in all industries are being served one accounting software powerhouse, starting a new company that focuses specifically on accountants in one industry—such as healthcare—is an advantage. Especially if the needs of that industry’s users differ from the average needs and are thus being over—or under-served by the entrenched powerhouse. And especially if unique knowledge is needed to build a product for and serve that segment of users—knowledge that the founding team have.
    • ^^ Unique production and distribution model when entrenched competitors are locked into their old models, such as Dell’s approach of built-to-order and ship-direct-to-customer model when Lenovo and others were locked into building generic models and distributing through stores.
    • Difficult-to-copy or patented product components, especially when they integrate complementary products / multiple parts of a user experience, such as Apple’s iPod look-and-feel and integration with iTunes. A unique technical achievement that powers a new product.
    • Uniquely low costs to onboard and serve a new customer, such as TurboTax’s low cost to prepare tax returns for a new customer versus a local accountant who needs to spend an intro one-hour consultation to set up a customer.
    • High switching costs, such as Facebook’s ability to lock users into a network of their friends or medical device manufacturers’ ability to lock in surgeons who need to be re-trained to use a new device.
    • Being known and trusted for high quality on attributes that customers care about, such as Toyota’s long record of the low cost of maintenance.


  2. Customers
    • Access to your users. One difference between a two-year old company that has 500 users and a brand-new company with none is that the former has 500 people to guide them. Your users and buyers rarely have all the answers, but the ability to listen to their needs, challenges, and latent opportunities is an enormous advantage.


  3. Physical asset
    • Access to unique physical resources (for which you are the natural owner), such as a physical asset like an exclusive long-term lease on a gold mine or a long-term lease on a great restaurant location.


  4. Scale
    • Size and scale, but only if you can get lower marketing costs or higher purchasing power, such as a local company buying billboard space to drive sales to ten stores versus one store (lower marketing costs) or Amazon offering much larger book inventory than a local bookstore (thus earning higher purchasing power).

Intangible assets (cannot be traded)

  1. Product or service model
    • ^^ A unique insight into what creates value for a buyer or user that the company makes so central to their product and culture such that every new product / new product feature decision is viewed in terms of whether it adheres to this insight. For example, in a software company where number of clicks to achieve a task in their product is the central rallying point, every new feature will be judged against this metric; this ultimately leads to a product so optimized against this feature that the company may come to represent the best-in-class ideal of this.


  2. Team
    • ^^ A tightly-knit team with a culture of continuous innovation and hustle. In other words, a lean / agile / fast-product-feedback-loop mindset. Startups often have this; larger companies usually cannot. A strong and positive corporate culture, esprit de corps, and a pride in a company and its accomplishments are qualities that are so rare and powerful they deserve a spot at the top of this list.
    • ^^ Access to the unique knowledge of your team, especially as it develops unique insights over time. Knowledge and experience of the buyers and users you are selling to is especially important. Also valuable are experience with similar products and business models (e.g., B2B SaaS).
    • ^^ Ability to attract and retain top talent, such as top consulting firms can do. Part of this is a corporate competency in training and continual learning, which is increasingly valuable as employees move into new roles over time.


  3. Supplies / distributor relationships
    • Distribution or sales network / customer access, including partnerships, such as GE’s sales force that can take a new product idea into just about any company in the world quickly. One reason Amazon paid $1B for PillPack in 2018 was to get access to its pharmacy distribution rights it had established in all fifty states.
    • Supplier partnerships, especially exclusive ones.


  4. Scale
    • Network effects at-scale, including products that have fast-product-feedback-loops built into the product. Like Facebook and Waze, when your product strategy makes every incremental user add new value to the product for all other users, you have a powerful source of advantage.


  5. Market
    • Being a part of a disciplined market where the leaders don’t resort to price wars, such as real estate agents consistently charging 5% of house sale price. For most of my discussions on strategy, I propose building a new market, not joining existing ones. But even new markets will be ancillary to existing players. How well behaved are they? Well behaved markets are an amazing boon to their players. Peter Thiel, founder of PayPal, and an all-round powerhouse thought leader on startups has said, “corporate profits … are eliminated by competition.” Well, not necessarily. There are thousands of fund managers and investment advisors and most of them are very profitable. As important as the existence of competitors is how well-behaved those competitors are.

The strategist is always considering how to best leverage their sources of advantage
Steve Blank (who could be considered to be the godfather of the Lean Startup methodology) wrote about a process for finding strategic partners in his book, The Startup Owner’s Manual. While I like a lot of what he shares in the book, there is a sentence that should make a red flag go up in the mind of any strategist.

Explaining a way to organize a list of potential partners, he recommends creating a three-column table and to list each partner in a row. Each column would have a heading, he explains: “The headings are: ‘partner name’ …, ‘what they provide’, and ‘what we provide’. Don’t feel bad when the word money appears repeatedly in the third column. It’s fairly typical for startups, at least in their early days.” Now I think that’s a dangerous proposition.

When he says, “what we provide”, he is referring to what we (as a startup) can give to a larger potential partner, that they don’t already have. That’s another way of saying, “What are our unique sources of advantage?”

As mentioned earlier, money is not a source of competitive advantage, but even if it were, money cannot be your only differentiator.

Startups typically have a few sources of advantage, relative to larger companies: speed and agility of product design and launch, deep and focused skills in a particular technology, the sheen of a company fully invested in a new innovation that will catch the attention of potential customers, and a laser-focused team, for example.

Your sources of advantage are the strengths that you can offer to any potential strategic partner even in the earliest days of your development.

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Should You Sign Your First Customers for Free?

It’s been my experience that you learn much more when serving your first couple of clients that any other point in your product’s or company’s trajectory.

Before we signed our first customer in a recent company of mine, for example, we had a data request with clean columns in a well-thought out layout. But when the first data came in from our pilot sites, our grand visions immediately deflated in exasperation. Whatever product connectors we had built had to be rebuilt. And further, over time, we learned that even the idea of sending a data request wasn’t the right approach for our customers; by our fifth customer we learned enough to just send them specific scripts that they just run on their databases to generate what we need.

Should you serve your first customer for free?
Because your first few customers will be so valuable in helping you shape your product, for the right early customer, a free pilot can be a win-win. The investment the customer makes is with their time, feedback, and patience. The value of their time cannot be under-estimated; it is a form of payment. People value their time most of all and they prove they value your product by spending time implementing and using it, even if they aren’t also paying.

Who comprise the right first set of customers? I wrote in a prior article, “Market leaders who are also Innovators are the most powerful first customers: be willing to invest as deeply as you need to sign them up—their reference-ability is what will allow you to sign Pragmatists up later on.” Also, because seeing how they use the product, getting their feedback on it, and filling in gaps with customer care is so critical early on, having your first customers local may be important.

Should you offer consulting as an early “product” while you are building your real product?
It seems like a good idea but hasn’t worked well in my experience. In my current company, we needed a few months to get our MVP out the door and wanted to start interacting with customers before then. We show those early potential customers paper versions of our product and built ad hoc analyses for them that were focused directionally aligned with the product we were building. Here are the pros and cons of that experience:


  • Offering consulting services before the product was ready allowed us to start talking to potential customers early in the process, before we had begun building any product
  • This may work generally if you can offer analytical consulting that matches the basic types of analytics your product will do; you can get early feedback before productizing it.
  • This allows you to get access to data early—which can help build benchmarks.



  • It’s as hard for people to sign up for and use consulting as it is for them to use your product
  • Their feedback on your paper analytics reports probably has marginal correlation to their feedback on your real product since they’d use it in a different workflow and mindset
  • People respond better to products than to consulting: they can look at a product demo and imagine it and how they’d use it; consulting requires them to figure out what to do with the output.
  • The largest “con”, though, is that doing this puts your potential customers (whether or not they sign up for your consulting project) in the frame of mind that you are a consulting company. It’s even harder to get another meeting later and re-frame that you have a product.


Converting a free pilot into a paying one
This has seemed harder than signing a new client. The challenge is a stakeholder who brings you in for a free pilot early on is an “Innovator” (discussed a few articles ago on building a sales engine), from Geoffrey Moore’s book “Crossing the Chasm”. They want to be the first to try out an apply new technologies but they may not have the ability or confidence to convert that type of pilot into a business case to win over others in their organization who are “Visionaries” (who need a clear business case for funding) or worse, “Pragmatists” (who need case studies and lots of proof points; who are never going to do a deal with a startup).

The solution is to work through your original stakeholder to create other senior relationships in their organization and, with them, adjust your messaging to better align with their priorities and their need for a strong business case.

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PayPal’s Strategy and How It Evolved Over Time

This example is from Jessica Livingston’s interviews with startup founders, Founders at Work. What her interviews reveal overall is that buyers, value pools, and approaches can change in startups’ early days as founders validate market needs and better assess their abilities to serve those needs.

It’s clear that most founders think deeply about the buyer, the value pool, their unique approach to addressing it, and make conscious decisions to evolve the elements as needed. In contrast, the technological insight and/or the source of differentiation / competitive advantage they leverage tends to remain constant throughout the evolutions.

Here’s PayPal’s strategy circa 1999, at the time they were funded by Peter Thiel. I’ve put it into the structure that I introduced in the “4 Steps to Develop a Strategy”.

PayPal’s Strategy (1999)

  1. Buyer + $ value pool. What’s the high $ pain point or unmet need?
    • Companies looking to add security to applications running on PalmPilot but who can’t build all of the crypto algorithms themselves. For example, to replace the credit-card-shaped one-time password generators or communications applications.
  2. How to unlock the $ value pool. What’s keeping the value pool from being unlocked? How unique is our chosen method?
    • Ability to create crypto algorithms is complicated, only academics know how to do it (and they have no interest in commercializing it)
  3. Why us? What are our sources of advantage? What trends will we ride?
    • Founders’ expertise in building complex algorithms, e.g., crypto libraries.
  4. User + how we will delight them. What are the two to five unique and pivotal decisions that will define our solution?
    • Making these complex crypto algorithms plug-and-play for the developer and invisible and seamlessly integrated into the developer’s product for the end user.

And here’s PayPal’s strategy circa 2000, after converting the above crypto libraries into a product that allowed PalmPilot users to beam money to each other … and then getting a lot of excitement from eBay users who started testing out a website-based version that PayPal put up as a demo:

PayPal’s Strategy (2000+)

  1. Buyer + $ value pool. What’s the high $ pain point or unmet need?
    • Individuals who want to transfer money to each other, e.g., eBay buyers and sellers
  2. How to unlock the $ value pool. What’s keeping the value pool from being unlocked? How unique is our chosen method?
    • Taking credit card / bank account payments online results in significant loss due to fraud. Other competitors were folding because they could not sustain the losses. PayPal invented a way to automate the prioritization of potential fraud and inform a human-based team that could then attempt to recover losses or turn it over to the Feds.
  3. Why us? What are our sources of advantage? What trends will we ride?
    • PayPal’s ultimate core expertise is in developing and building an algorithm that would predict the fraud risk of a transaction, determine whether to accept the risk. Also, the post-transaction fraud recovery tool.
  4. User + how we will delight them. What are the two to five unique and pivotal decisions that will define our solution?
    • Making the complex fraud prediction algorithms seamless for the end user.
    • Making the complex fraud recovery tools seamless for the inhouse fraud recovery teams. (Note these tools were apparently so useful that the Feds commissioned to use them on their own datasets).

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Do Your Marketing, Sales, and Product Materials Tell the Same Continuous Story?

From a users’ perspective, the value in having the messages they experience from your website and other places in the marketing and sales process aligned to what they experience when they use your product is self-evidently valuable. It’s one of the most powerful ways to encourage usage and adoption.

But as a business builder, thinking through the long arc of the story and making sure you are using the best ideas from each step throughout will help you organize your team’s thinking around a consistent direction.

In my current company, we built our marketing and sales materials early on. We iterated through them many times and got a version that worked well. Our marketing materials got us a first meeting and our sales materials typically won over the room and got us a follow-up meeting.

But sometimes when we presented to a room full of potential users, people were skeptical.
Users sometimes said, “this sounds too much like a problem to solve the administration’s needs. Isn’t it just one more thing I need to do?”

We debated for a long time internally whether we should tell our story from the buyers’ or users’ point of view. It was an unanswerable question until we thought about how the marketing and sales messages transitioned the customer into our client services team and their onboarding process.

And then the answer became obvious: keep the user as the constant focus.

It’s natural to want to tell two different stories

You have a buyer and users. When talking to the buyer, you may want to talk about their high $ pain point, how your product solves it, and the ROI you generate. When talking to users, you may want to talk to them about what they’re trying to accomplish now and how you help them do that faster, better, and more holistically.

In our early sales pitches, we told both stories but started with the buyer. Why not? We were often in front of the buyer and wanted to get to how we solved their problem.

A few months later, as we brought clients on to the product, we built out an onboarding function inside the product itself (such as popup boxes that greet new users to our website showing how to use it) and the client services messages we would use when reaching out. We invested in those materials because we knew adoption and utilization of our product was the most important metric that we would judge our own success by. As discussed in earlier articles, those materials were built based on the latest thinking we could find from companies like Zillow and LinkedIn and others.

Those materials were all about the user. We started reminding them of their buyer’s goal and giving them a couple of options to choose from for their personal goal as a user.

Our product could do a lot and we knew trying to teach them how to do everything right away wouldn’t work; users can’t take a complete career journey in a 45-minute training session. We wanted them to tell us how we could help them best and work with them to adopt our product to do that task.

Those options we gave users to choose from were the major use cases we solved for them. That was how we picked up from the sales process and led our users through product onboarding. For us it was an “Aha! moment” when we realized that was the story we should have been anchoring on all along through the buying process. Why would they want to see any different message when they visited our marketing website, for example? Everything should be reinforcing and consistent.

That doesn’t mean we decided not to address the value proposition to the buyer and the ROI. Just that we always led with the user and the use cases we support them on. The buyer would then have immediate confidence that users would be engaged and we could then share how usage drives the outcomes and ROI they needed to see.

Customer Success’s main role is threading the needle

…Between executives’ goals…
Every three to six months, our Customer Success team meets with the Executive team and checks in on their objectives. Not necessarily their objectives with respect to our product, but their goals overall: what keeps them awake at night? Are the outcomes that they bought us for still the most important for them? If not, what are the new ones? If they have changed, we change our coordinated goals to reflect. Usually the outcomes are stable, but the messaging and situations change.

For example, improving employee engagement in hospitals is always a top priority for HR leaders. But every few months, the specific forces and challenges change. In one year, the hospital may be extremely busy or navigating a pandemic, in which case, their focus is on alleviating burnout of their team members. That ultimately rolls up under the category of employee engagement, but it is a specific theme, a specific message, and a specific focus. In other years, it may be an increase in new hire turnover that is causing them to re-imagine their new employee onboarding program and the focus may then be more on a specific demographic of employee.

…And individual users’ goals
Our Customer Success team also spends a lot of time talking to our users. What are they trying to accomplish? What are their goals? What does our product help them with? What are the top use cases that they would recommend to their colleagues that they use our product for? Listening to them explain those things, in their own words, allows us to sharpen the way our teams talk to other users.

The connection between the users’ and executives’ goals may appear different on the surface, but they are often just different levels of abstraction. Users may be focused on finding an “easy button” solution to completing the new hire check-in processes given to them by the executive team. Or they may see the symptoms of burnout (e.g. employees increasing their sick leave) and talking to them about how we can solve that may get their attention much faster than talking about how to solve the issue using more abstract terminology.

Focus on the user, their concrete needs, and the story that works with them. Then take that story and abstract it up to as examples to executives about how you’re supporting in specific ways, their more abstract objectives.

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How to Prove that Your Product is Creating Impact

This is Part 18/18 in the series “How to Build an Innovative New Product or Company” on the topic of how to measure the value and ROI that your product is having for your buyers and users

Consider a product that helps prevent patient falls in a hospital. It is bed alarm that alerts the nurse when a patient is shifting their weight so the nurse can assist the patient who may be trying to stand up, thus reducing the risk that a fall will occur.

Further, imagine that, before implementing ‘Fall Safe’, a particular hospital had 5% of patients fall during their hospital stays. Then that hospital implemented ‘Fall Safe’ in 2015 and falls went down in many of the departments. Over time, falls across the hospitals went down to 2.5% and held steady.

How do you take credit for holding the fall rate at 2.5%? If your product wasn’t in use, wouldn’t the rate go back up to 5%? What if the hospital claims they’ve done other things since 2015 that contribute to the 2.5% level? What if the hospital is set to renew their subscription with you and wants to know what improvement you’ll make beyond the current 2.5%? In other words, their expectation might be that 2.5% is now the baseline and your product will need to move beyond that to be considered a good investment.

What if the severity of patients increased during the past year and their fall rate went up to 7.5%, but you believe it would have gone much higher had it not been for your product?

If you want to impact an outcome metric, you need to communicate that outcome metric to the buyers and users of your product. Ideally, you’d compare it to a target. In this example, how many falls has the hospital avoided this year? What’s the cost avoided from doing so? For each department, how are they doing? Are they meeting their target? Can the product itself communicate this or is it better to have a monthly email or meeting where this is shared and explained?

Create an index that your customers will need to rely on you to provide, that they will refer to often, and that the use of your product is the primary mechanism they will use to improve it

You may have to create your own metric that your buyers believe is a leading indicator of the actual outcome metric; this is especially useful if the real outcome metric is rarely measured or conflated with noisy events.

Customer acquisition via marketing is a good example. Companies spend a lot of money on marketing efforts (e.g., visiting tradeshows or running magazine ads) but struggle to know whether current efforts are putting them on a path towards the future sales they aspire to. So marketing firms have created proxy metrics, such as the open rate of email advertisements that they send. It works great as marketing team members can focus on increasing it every day. They know that if they do that will, it will improve total sales, which is the ultimate outcome, but may not respond on a daily basis to their efforts.

Proxy metrics should (a) be easy to measure, (b) be concrete and stable, (c) correlate to / predictive of the main metric, (d) show you how to hone your actions and efforts in the near-term, (e) adjust as you take those actions, (f) be a clear measurement, not a “black box”, and (g) ideally be on a scale of 0-100 where 100 is best. Net Promoter Score (NPS) is a good example; it has been shown to predict lifetime customer value and renewal rates. Can you create a proxy metric that becomes the de facto standard for your industry?

Can you aspire to continuous improvement? Should you?

Continuous improvement, such as the Toyota Production System or airline safety reporting system enjoy, is a noble goal for a product. If you’re ambitious, you don’t just want your users to try your product; you want them to use it, see an improvement in their goals, then use it more, and over time see it revolutionize a major part of their lives or careers for the better. This can’t happen from a point solution; rather, only from a cultural change.

If you aspire to continuously improve a metric, I think you then need to consider how your product fits into the larger ecosystem. You may also need a larger client care team to make sure that culture and behaviors are being built and reinforced around the product.

What if your product improves outcomes … but other forces at work muddy up the outcome metric so it’s hard to tell for sure?

One thing we do at my current company is to split our user base into two or three categories at each client, based on usage: superstars vs. on-track vs. lower users. We then look at the changes in the outcomes metrics for each of the three cohorts every few months. If the overall outcome metric is improving for the highest users, is stagnant for the middle users, and is deteriorating for the lowest users, you can easily see the impact that your product is having, assuming all other forces are affecting the three groups equally.

What if your product improves outcomes … but your users revert that improvement by using the improvement as an excuse to relax other efforts?

Malcolm Gladwell shares the insight that more pedestrians are killed crossing the street at crosswalks than they are at other locations. Overlooking the mathematics of it (e.g., part of the answer is that many more people try to cross at crosswalks), part of the reason is that the crosswalks provide a false sense of security. The crosswalks reduce risk, but that risk reduction is then lost due to more careless actions by the pedestrians.

The crosswalk is a “product” and it is only half of a pedestrian safety solution. It needs public awareness and other supporting systems. For example, statistics on a signs posted at each crosswalk warning of the number of pedestrians killed at crosswalks might help reinforce the need for continued vigilance.

In conclusion…

You have a great product, you have happy users, and you’re making an impact on the world. The final major step is to document that impact and prove it to the world. Focus on the outcome metric that you want to improve. Make sure that your product and customer success team collectively can own as much of the influences on that metric as possible. Work back from that larger outcome metric to create proxy metrics that provide proof of real-time progress. Find ways to show that your highest users are making the most progress. Most of all, keep it simple: you may spend all of your life thinking about the details of these outcomes, but the impact has to be clear and unequivocal to any skeptical stakeholder taking a cursory glance.


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Can You Scale Your Company Without Losing Your Identity?

This is Part 17/18 in the series “How to Build an Innovative New Product or Company” on the topic of how to scale up a product and company that is working for its early customers

Scaling has many challenges, but they are ones you might call “champagne challenges”. Not dissimilar from diamond earrings scratching your new iPhone, scale challenges are the function of some success.

Humans do a particularly terrible job scaling things that work in small quantities. We took strawberries, tomatoes, and wheat, for example, and created harsher versions of them because we prioritized the ability of crops to withstand transport to the grocery store and create a profit above all else.

So how do you take something that works well and grow it so it will work well for many more customers, with much less human intervention, without diluting your product and service?

Scaling is the process of taking what you do today—both what (1) humans and (2) machines do—and simplifying, modularizing, documenting, and replicating so that it can be done for more customers with less effort.

On the machine front, I’ve spent a lot of my career building analytics prototypes that power the first couple of customers. Then we bring on engineers to figure out how to rebuild it for real. Platforms like Airbnb’s open source AirFlow exist to help scale and automate data flow processes.

The people front is harder. How do you figure out the exact steps, business logic, decisions, and judgment that employees make on a daily basis which result in iconic customer care—and grow it when those employees are no longer able to do the role at scale? Done poorly, bureaucracy and red tape creep in, slowing down activities and extinguishing any remaining lifeforce from your company.

The values that incur costs are the ones that will outlast you

I’ll spend an upcoming article on this thought, but the message is simple: if the founding team has values, they represent and stand up for those values, then others who join will become disciples. One test to see the values that the founding team promoted is to look at what the average employee values when you have fifty or hundred people in the company. The values that emerge can just as easily be destructive as constructive if they are not thoughtfully put in place. The values that demonstrate costs are the ones that define you. When a company is willing to part ways with a superstar but culturally offensive sales leader, every employee notices.

A checklist for spotting bureaucracy

An early Amazon employee, John Rossman, wrote a checklist in his book The Amazon Way about the keen eye Amazon users in spotting and avoiding bureaucracy—as it has scaled:

You know that bureaucracy has crept into your business processes when …

  • The rules can’t be explained;
  • They don’t favor the customer;
  • You can’t get redress from a higher authority [or said another way: if the rules set up an unfair or sub-optimal situation and there isn’t a simple process to correct and set it right from an authority with a global perspective];
  • You can’t get an answer to a reasonable question;
  • There is no service level agreement or guaranteed response time built into the process;
  • When the rules simply don’t make sense

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Take a Lesson from Google, Intel, and Others … Use OKRs Instead of Product Roadmaps

This is Part 16/18 in the series “How to Build an Innovative New Product or Company” on the topic of using quarterly, bottoms-up, transparent Objectives and Key Results as an organizing principle

OKRs are a simple data-driven organization platform created by Andy Grove of Intel and championed by Google, among many other well-organized companies in recent years. John Doerr was the glue between Andy and the rest of us and John has been OKR’s greatest evangelist. I collected many of the ideas here from his book, “Measure What Matters”. Doerr credits the existence of OKRs as the system that allowed Intel to quickly rally around a competitive crisis against Motorola in 1980, leading to Intel’s dominance of the CPU industry for the following twenty to thirty years.

OKRs are not about adding administrative work. You can create yours in only a few hours per quarter if there is already a clear corporate direction in place. Nor are they about signing up team members for superhuman accomplishments. They are simply about making sure that everyone gets the greatest leverage from their efforts.

Progress on objectives and key results should be tracked and shared weekly as green (“complete” or “on track”), yellow (“updating or needs attention”), or red (“is this still valid? Should we drop it?”).

At the end of each quarter, progress and notes about each objective and key result are documented. Google measures progress against each item on a percentage basis at the end of each quarter: 70%-100% is green and 0%-30% is red. Notes allow teams to adjust progress beyond the numbers. If the goal was a hundred sales calls, but you had eighty calls with great follow up, shouldn’t that count as a complete success?

John Doerr has a saying, “We need teams of missionaries, not teams of mercenaries.” By giving teams a business objective (e.g., “decrease customer onboarding time by 50%”) instead of a product roadmap outcome (e.g., “deploy onboarding tutorial”), you are motivating and empowering everyone in your company to be an imaginative contributor in the pursuit of customer value, instead of deploying them as a blunt object in building what the leadership team dictates.

The connection of OKRs to strategy

In the “4 Steps to Develop a Strategy”, I outlined a process for developing a corporate strategy and gave the following example for Southwest, of which I’ll re-create Step 4 here:

Southwest Airlines’ Strategy (circa 1970s)

  1. User + how we will delight them. What are the two to five unique and pivotal decisions that will define our solution?
    • Limited passenger services
      • Such as no first class; no frequent flier miles; open seating/first-come-first-on; passengers cleaning up after themselves to speed up gate turnarounds; no meals
    • Be lowest cost
      • Such as flying one aircraft type, the 737; thus, also not needing to train and certify pilots on other aircraft; No travel agents or 3rd party travel websites—you can only book with the airline thus avoiding royalty fees.
    • Highly agile and invested grounds and air crew
      • Such as personality-infused pre-flight safety presentations; employee stock ownership; ground and flight crews well compensated; crews allowed to join unions; crews empowered on any safety issue. Let employees be our “eyes and ears” for new ways to continually improve our service to customers.

Step 4 of a strategy has several business objectives for the company. These can become company objectives in annual or quarterly OKRs. Or, more likely, the company’s OKR objectives would be the next level of operational detail behind these, evolving them over time while the strategy remains more consistent.

For example, “Let employees be our ‘eyes and ears’ for new ways to continually improve our service to customers” could be a corporate OKR objective that hangs around for a long time with evolving key results: hiring the right people, training them, providing the tools for them to perform this role.

In my experience, startups (perhaps all companies) have four objectives and so OKRs should roll up to them, even if they don’t explicitly claim to do so:

  1. Serve more customers
  2. Provide the best service we can to those customers, thus driving more usage and value; this also increases the likelihood of renewals / repeat purchases
  3. Conduct prudent cash management
  4. Be a preferred place to work, grow, and develop a career / craft

How to create OKRs

  • Should be created by each employee for themselves every quarter. At the same time, prior quarter’s OKRs should be evaluated. In some cases, quarterly and annual OKRs may exist in parallel. Annual OKRs are released a couple of weeks before the year. In the first couple of weeks of a quarter, teams develop and communicate their quarterly OKRs.
  • Should be big ideas that move the business forward and that customers will care about.
  • Exist for the company overall, every department, and every employee. Team leaders should have OKRs similar to, but not identical to, their department’s objectives.
  • Are public among other employees in the company. Post them on an employee’s office door or make them searchable online. Because your objectives are public, it can help you say no to others’ requests for your time that are outside their scope; your priorities are clear for everyone to see. (That is not to say that employees shouldn’t help each other achieve their OKRs.)
  • Are a mix of top-down (e.g., from your manager) and bottoms-up (e.g., from you or your team members)
  • Are divorced from compensation. They should be used to motivate big goals and structure a path to success, not for creating criticism and sandbagging.
  • Objectives and Key Results should all start with a verb: Establish, Deliver, Test, Get, Develop, Publish, Prove, Prepare, Recruit, Hire, …


OKRs have two components

Objective: What you are trying to achieve

  • For example: “Release the first version of our email product,”
  • Three to five objectives per quarter. What you say “no” to is as important as what you say you will focus on.
  • Most are “committed objectives” that you’re expected to achieve. Some can be marked as “aspirational objectives”. The latter are pure stretch goals that are there to push the boundaries of what may be possible. Committed objectives should consume all the team’s resources. Aspirational ones go above and beyond expected abilities and may not get completed and thus would carry over to the next quarter.
  • Only list what needs to be given emphasis. Do not include all ongoing aspects of someone’s job. For example, don’t list “conducting weekly 1-1 review sessions” or “managing daily standup meetings”.

Key Results: The measurable steps you will take to achieve the objective

  • For example: “Deliver the three new features to staging by March 1″
  • Three to five key results per objective.
  • Measurable = has a number in it. There must be evidence of completion, such as a link to a product or document created or the results of a test report.
  • Timebound = when applicable, has a target date in the quarter for delivery, or end of quarter is implied.
  • Flexible = key results can be edited/added/deleted over the quarter as new information comes in
  • Managers’ key results often become some of their direct reports’ objectives.
  • Accomplishing all the key results should trigger success for this quarter on the objective, though objectives may hang around for multiple quarters if needed.
  • Quantity goals should be paired with quality goals. For example, if having a hundred sales calls is one key result, having them lead to twenty in-person meetings could be another.
  • Identify dependencies early on: does one team’s key result require another team to contribute? If so, is completing this in the other team’s OKR?


OKRs can help keep multiple layers of a larger organization aligned to a shared strategy

I have been asked if a corporate strategy and product strategy are the same. If a company has multiple products, do they all have individual strategies? How do strategies roll up or down?

As my experience is with companies under 500 employees (and mostly thirty to sixty), I have to defer to others on what it takes to set a strategy within larger companies. P&G, for example, have a corporate-level strategy, a category-level strategy (e.g., skin care), and a product-level strategy. The individual strategies of which customer to target and the specifics of how to win will vary, but the core “2 to five unique and pivotal decisions of our solution” (which P&G refer to as “reinforcing rods”) remain consistent. P&G doesn’t use OKRs, though they use a similar process. Either way, those “reinforcing rods” can help OKRs remain consistently anchored in the corporate strategy even at lower levels of the organization.

OKRs help keep companies from falling into the waterfall product development process—and thus keep the focus on fast-product-feedback-loops

Be thoughtful and strategic about setting objectives. They can (and should) persist for many quarters, if needed, to fully realize them. Jeff Bezos, Amazon founder, says, “We are stubborn on vision. We are flexible on details.” He could have also said, “We are stubborn on objectives. We are flexible on key results.”

In other words, choose carefully what is most critical to your success and anchor your objectives on them. Then iterate your key results every quarter as you make progress and learn. No one can predict how many iterations a new innovation will require before it will work.
Marty Cagan, Founder of Silicon Valley Product Group and author of “INSPIRED: How to Create Tech Products Customers Love” gives an example that objectives should be business results, not tactics; the former are only mechanism by which a company can measure progress. For example, “implement a PayPal mechanism in our product” should not be an objective. It is a potential way to reach an objective that may or may not work. “Reach more customers outside of France” is a business result of which a PayPal integration may be a component.

At the end of the video of Marty’s talk, linked below, he discusses how using OKRs is the more effective antithesis of a standard product roadmap that most (non-startup) companies use today. A product roadmap is where the executive team provides ideas, put ideas through a business model prioritization process, create requirements for each item, build and test, and finally, months later (and thus far with no user input or feedback), deploy, market, and release the features. That process is all about features and is slow. OKRs re-orient teams to be about business outcomes.

For startups, consider setting up OKRs in terms of learning a set of lessons
Tom Chi, a product management rapid prototype evangelist (formerly from Google X), advocates for a culture of learning. Part of that is to test out ideas as quickly as possible and create Key Learnings from the experiment, instead of debating and choosing from within closed-door meetings. Key Learnings are actual test results of the types of decisions that otherwise would be argued about by non-users prior to building something. Why not just build it and find out the answer? In the video linked below, Tom calls these closed-door arguments a fallacy—looking for “the truth of the invention that hasn’t been invented yet.”

Setting up a key result in terms of Key Learnings can be especially powerful. A key result of “Test twenty new prototypes and generate ten new Key Learnings by Oct 1” is great, for example.

. . .

All books and other resources referenced in this article

How the Patriots Won Superbowl 51

The one chart that shows how they pulled off the greatest comeback win in sports history

A recap

The New England Patriots played the Atlanta Falcons in Superbowl LI on February 5, 2017, the final game of the 2016 NFL season. The Patriots were down 21-0 with 5 seconds left in the first half when they finally scored 3 points. The score was still lopsided at 10 minutes left in regulation time when the Patriots kicked a field goal, taking the score to 28-12.

At this point, it was reported by statisticians that the Patriots’ chances of winning were about 0.3% (though anyone who has seen Tom Brady and the Patriots play a fourth quarter should have been skeptical about those odds). I had a Boston-based colleague who was talked into flying down and buying a ticket to the game by a friend of his; a Patriot fan, he was sitting in his seat at the stadium cursing the friend and searching for earlier flights home at this point.

The Patriots, down by 16, then pulled off an incredible succession of plays: a sack on Falcons’ quarterback Matt Ryan that led to a fumble, which Brady and the Patriots then took down the field for a touchdown. They made a two-point conversion (in itself a rare event), then held the Falcons, got the ball back, drove 91 yards down the field, scored another touchdown, and capped it off with a second two-point conversion to tie the game with less than a minute left. The Patriots then won the coin toss in overtime and Brady completed one pass after another leading to a game-winning touchdown a few minutes later.

The final ten minutes was flawless execution, pass completions, and scoring… which makes the question of why they weren’t able to do anything in the first thirty minutes such a compelling one.

What struck me, as I was a Boston resident at the time and had seen many similar great comebacks engineered by the Patriots, was how typical this was for the team. It seems as natural to watch the Patriots struggle early as it is to watch them easily assemble a series of long and flawless scoring drives later in a game.

The one chart that explains it

The Falcons played man-to-man defensive coverage against the Patriots. This worked well early in the game when they were able to cover them and stop Brady’s ability to complete passes. But in a game that lasted almost four hours start-to-finish, they became exhausted chasing around fast receivers. As one commentator wrote after the game, “keep a defense on the field long enough and eventually it’ll break.”

The top chart below shows the average number of yards the six most-mobile Patriots offensive players ran during the game, the same for the six most-mobile Falcons defensive players, and below both of those, the total actual yards gained by the Patriots offense. The x-axis is in terms of actual time: from start to end, the game ran about 230 minutes, though it included interruptions, such as about 30 minutes for halftime.

What you can see is that the average Patriot offensive player ran about 1,000 yards compared to about 850 for the average Falcon defender. The Patriots picked up 543 yards as a team.

In other words, the Patriots made the average Falcons secondary defender run 56% more yards than they picked up.

In bottom chart shows the same thing for when the Falcons were on the field. They picked up 351 yards total in the game which was almost exactly how much the average Patriot secondary defender ran.

In short, the Falcons defense was tired out by the end of the game. The Patriots employed plays that made them move far more than the Falcons’ play calling made the Patriots’ defenders move.

Chart showing how much the Falcons defenders ran during the game
(original analysis by watching the game film)

At first glance, you might consider that this shows a lot of inefficiency on the Patriots’ side if you consider how much the Patriots had to move to get the yards they gained. But since the Patriots’ individual movements has a direct relationship to how much the Falcons’ defense moved, the Patriots knew they had to move a lot as well. They were likely better conditioned and prepared for it over a long game.

The Patriots systematically invested in wearing the defense down from the beginning of the game and it didn’t fluster them that the return of that strategy didn’t start kicking in until they were down by many points with only a few minutes left to go: they knew that once they had the defense worn out, the rest of the game would be close to toss-and-catch for them.

One example that shows how the Patriots got the Falcons to move

The first play in overtime is a good example of how the Patriots caused the Falcons to run. The Patriots (the ‘O’s) lined up with a running back and three wide receivers. The Falcons had two defenders in the backfield (about 20 yards behind the line) and other defenders covering the three receivers man-to-man. If Brady had thrown a 20-yard pass, these deep defenders would have run very little: they would have been ready and waiting for the ball while the Patriot receivers ran the 20 yards to get to them. But Brady threw a short pass to the left to the running back (shown in blue) who then ran a short few yards along the left sideline. This drew five of the defenders over—with the two deep defenders running at least 30 yards to get to the ball. The play ended in a five-yard gain for the Patriots and 20-30 yards run by each of five defenders on the Falcons.

What does this mean for strategists?

In football, the objective is to defeat your opponent. In business, the goal is decidedly different: to better serve your chosen customers and continue to delight and create value for them.

But the Patriots’ strategy still has relevance. I think there are two lessons.

First, play the long game. Invest today in small events and decisions that add to give you advantages months and years in the future. If you can create a platform where you are creating value for your customers 18 months from now as easily as the Patriots were picking apart the Falcons’ defense in the final few minutes, wouldn’t you? Even if that means taking actions today that may seem wasted in the near term when things don’t easily go in your direction.

Second, mobility is an offensive asset. If you consistently move fast enough, competitors will be unable to keep chasing you. Mobility is one of the greatest sources of competitive advantage. It’s perhaps a bit of a stretch to compare the Patriots’ physical mobility with a company’s ability to constantly iterate and improve its products, but both are the anti-thesis of sitting still. Spend your time finding new sources of value for your customers not building walls (e.g., patents) around immobile product features that haven’t and won’t ever evolve.

. . .

All books and other resources referenced in this article

How to Get Users to Use Your Product on a Daily Basis

This is Part 15/18 in the series “How to Build an Innovative New Product or Company” on the topic of engaging your users’ “fast systems” to transition from occasional to continual usage of your product

A recap of a point I made in Step #4 of the “4 Steps to Develop a Strategy”:

Let me be clear: no user will use your product unless it helps them solve a problem or accomplish a critical job they are trying to solve (even if it solves a buyer’s problem and the buyer is their boss). To get product usage, you need a user’s internal triggers to fire and then you want to be the reaction they have to that trigger firing. You cannot create usage by giving people a product and saying it does something new that they are not trying to do. Amazon on a cellphone does this for many people: whenever they think they need to buy something, it’s easier to open their phone and buy it than it is to write it down on a shopping list and buy it later in a store. The internal trigger fires and Amazon is the brain’s go to response…

Does your product even have a daily usage value proposition?
Talk to your users. What are the problems/actions they tackle on a daily basis? How often do they think about the problem that your product solves? If your product is solving a weekly or monthly workflow then doing any of the steps below to drive daily usage will end up annoying your users. In that case, you may need to add features that tackle ancillary daily needs.

LinkedIn and Zillow both struggled with this. For LinkedIn, people would use their website once a year when they were considering a job move. For Zillow, it was once every few years when they were considering buying a new house. LinkedIn realized they could not use their core job-matching value proposition to drive daily usage. Thus, they bought the newsfeed aggregator Pulse and recast the front end of the site to make it more focused on staying up-to-date with your professional contacts. Zillow added Zestimate, a way for homeowners to see an estimated value of their house—something many enjoyed doing on a more regular basis.

Products typically solve daily + small problems or weekly/monthly + large ones
Few problems both are large and daily. Amazon found one for making it easy to buy anything—every day someone at least thinks they need to buy something. Problems that are both large and daily typically have many alternative and competitive options.

Daily and small problems are what users must care about.

Large and rarer workflows are what buyers care about: this is where ROI lives. The problem is that habits are only formed on daily usage. Infrequent behaviors never move from conscious to subconscious action and thus are always at risk that the behavior will be forgotten.

When trying to excite users, it is much easier to make something that is both high frequency and small appear important and thus gain attention around a solution (e.g., as Facebook does). Much harder is the inverse (e.g., as a faster tax preparation software). Said another way, our brains more naturally focus on what appears urgent than what is important.

If your product has daily users but no large ROI, then look for less frequent, larger problems to add in. If your product has a large ROI but no daily usage, look in the other direction: for small minor headaches that affect your users every day and solve them. In the “4 Steps to Develop a Strategy”, we discussed building a product with features that naturally align buyers and users and this is part of the art of doing that well.

Using your product to get users’ “fast systems” to take over and make your product a daily habit

In the prior article I wrote about psychologist Daniel Kahneman’s insight in Thinking, Fast and Slow that the brain alternates between two systems. One is the brain’s fast system that lets us brush our teeth and drive our car on a daily basis without having to think about every action and habit. The other is the brain’s slow system that lets you learn these behaviors initially.

Our goal here is to take a product that users are using on a semi-regular basis (e.g. linkedin or Zillow) and move them into a subconscious daily routine rooted in muscle memory.

Nir Eyal has a “Hook Model”

  • An internal or external trigger fires, causing the user to think about your product
    • An internal trigger is when a user wants to accomplish something and your product is the first to come to mind. Ideally this is a part of their daily routine: a habit. Why does a user take a frequent action? It may be for a social connection, to avoid being out of the loop, or to avoid missing out on discussions.
    • An external trigger is when the product causes the user to pay attention to it. This could be via a daily email (with a clear button showing the action to take) or an app notification on the phone.
  • An action is done by the user in response to the trigger
    • As a product owner, your goal is to make taking the action easy.
  • A variable reward is delivered …
    • The reward should be a surprise; predictable rewards don’t stimulate repeated action.
    • Users will take the action to learn what the reward will be; intrigue and curiosity are motivators.
    • For example, when you open your email inbox, it can reveal all kinds of messages—predictable spam or notes from coworkers, but also updates from friends or new ideas. Posting a Facebook post can cause reactions and likes from friends.
    • Social rewards are particularly powerful as demonstrated by the value people put in their Uber rating or Quora’s ability to encourage its users to contribute to the platform for recognition.
  • … and finally, the user makes a small investment back into the product
    • The user puts something back into the product—such as liking something, adding a new friend to the network, building a virtual house, or entering some more profile information. Over time, the investment adds up and makes it harder to walk away from the net investment. Also, the investment allows the product to continue to personalize the interactions and make them appear more meaningful; thus, the better the algorithm gets and then the more it may be used.
    • Over time, even small investments can lead to big changes in behavior.

Eyal shares a few worthy quotes. Habits, which you have to form to get to daily usage, are actions taken without thought. Those can be abused as they “can quickly degenerate into mindless, zombielike addictions.” Also: “If it can’t be used for evil, it’s not a super-power.”

Your customers can also put stage-gates and speedbumps in place that inspire the use of your product
Salesforce is a great case study. In many companies, Salesforce is a product that all salespeople use on a daily basis and keep updated with information—even when many salespeople might prefer not to.

What incentivizes sales team members to enter their sales updates consistently? There’s a natural inclination to just put a sales lead into the system when they’re about to close a deal. But doing so would skew their manager’s view of the pipeline, makes it much harder for their manager to help problem-solve active opportunities. Also, the salespeople themselves might be more likely to forget the history of interactions with a lead.

Some companies make keeping Salesforce updated a requirement to use shared resources. For example,

  • You can’t schedule a conference room without referencing the Salesforce opportunity in Salesforce that the conference room is needed for;
  • A pre-sales engineer won’t review and help support a deal unless it is in Salesforce;
  • And if you want to schedule a flight to visit a prospect, you can’t without referencing a Salesforce opportunity

For your product, what are the emails users have to send to get approval to do things on a daily basis? If you build around those workflows, then adding speedbumps like the ones mentioned above could be one way to provide a source of constant but soft pressure to ensure users reference your product often.

For managers, can you build a one-stop-shop they can reference to run their weekly review meetings from? If they can just look at your application and have no need to create PowerPoint slides then the managers will create a constant pressure on their team members to keep your platform updated.

. . .

All books and other resources referenced in this article

How to Get Users to Use Your Product

This is Part 14/18 in the series “How to Build an Innovative New Product or Company” on the topic of engaging your users’ “slow systems” to encourage usage of your product

How the brain makes decisions

As entrepreneurs and/or product owners, it’s our job to reach out to a potential user, excite them about the concept of what we’re doing, get them to use the product and like it, and then use it enough in the first few months so it becomes a habit they no longer have to think about it.

Sound easy? The challenge is that even if our product is amazing, users’ time and ability to learn new behaviors are limited. And it matters: companies are increasingly aware that the likelihood of a SaaS contract renewal two years in the future is most heavily influenced by the user adoption rate of the product in its first few weeks.

The next two articles are about the process of crossing this bridge.

Psychologist Daniel Kahneman wrote in Thinking, Fast and Slow about how the brain alternates between two systems. One is the involuntary system that acts without us asking or even wanting it to. This is the brain’s fast system. It handles the vast majority of actions we take on a daily basis.

The contrasting system, the slow system, allows your brain to address situations it hasn’t seen before. It lets you learn new skills, such as playing the piano. After many hours of practice, much of your playing then moves into the subconscious/fast system so you can play without thinking about it.

Your goal: get users to adopt your product with their “slow system” first (through the simplest set of steps) and then move those actions into the “fast system” as a subconscious routine rooted in muscle memory.

In his book “What the Dog Saw”, Malcolm Gladwell tells the example of the VCR as a case study where this was not done well. When it came out in the early 1980s, it was a revolutionary product. You no longer had to be sitting in front of your TV at the moment a show was being aired; instead, you could record it and watch it again when you wanted. But users struggled with it for many years. In short, no one explained to the users what it did and showed them how to work it.

What Napoleon, Woodrow Wilson, and One Laptop Per Child Program have in common: A similar root cause of their failures

The original story behind the One Laptop Per Child program was compelling: just by airdropping laptops into underprivileged parts of the world, kids’ lives and futures would be shaped by the pure force of the technology. This simply didn’t happen; the kids preferred their own lives to the ones we thought they should have. Napoleon and Woodrow Wilson ultimately failed because they were so focused on rebuilding a world entirely in their own image that they neglected to see the constraints of the world that already existed.

Napoleon ignored the existing landscape and its constraints and as entrepreneurs, we cannot afford to get the wrong lesson about why change management is needed with technology to have an impact.

Strategy is a mechanism to force us to balance our aspirations, ambitions, and desire to change an audience with the realities of finite capabilities, existing cultural norms, ingrained user habits, and all of the other elements of the existing topography around us. A technology product alone cannot fully mobilize this change; it has to be supported with social interventions. Luckily, as business builders, we can create those interventions.

A 9-step process for using client service teams and product onboarding tools to engage the users’ slow system on your product

The steps are based in part on Robert Cialdini’s Influence: The Psychology of Persuasion and Owain Service and Rory Gallagher’s Think Small. Neither book is specifically about how to get users to use a product, so I’ve adopted, added to, and interpreted their ideas. They also fit into McKinsey & Company’s 4-part “Influence Model” that underpins any behavioral change. I’ve put their model components as subheadings under each of the 9 steps. The 9 steps have a bit of a chronology to them; the 4-parts are not necessarily chronological.

If you believe the results of the studies they reference, and believe the results are additive, doing these steps in the first few months of a product deployment would increase by about three times—a valuable head start on the path to developing ongoing routine usage.

This step applies in B2B contexts where we have to win over users. This assumes we’ve sold our product to a corporate-level buyer and now need to get the users to adopt it. In a pure B2C context, this section may or may not apply. The next article on converting usage into habits applies in both contexts.

A precondition for all of this is that the product works for the users. That it helps them, raises insights to them in the language that they use, and in way and time that is actionable.

Earlier in my career I investigated building a product that would help reduce patient falls in a hospital. I decided not to pursue it, but it makes a good case study. In this article, I’ll refer to it as ‘Fall Safe’.

(1) Share a top-down goal and align own their goals to it
McKinsey 1/4: “Fostering understanding and conviction: I understand what is being asked of me and it makes sense.” People seek congruence between their beliefs and actions– believing in the ‘why’ inspires them the behave in support of a change.

Start with an overall (e.g., facility-wide or social) goal, if possible. Think Small doesn’t propose this step, but they share the story of President John F. Kennedy asking a janitor what he was up to during a 1962 visit to the NASA Space Center. “Well, Mr. President, I’m helping to put a man on the moon,” was the supposed famous reply.

In an example specific to B2B SaaS companies, there has been a lot written about EHR implementations in hospitals and the myriad of non-technology work that is required to gain physician and nurse adoption of these complex systems. The research has shown that EHR implementations are most effective when they start with a “Tone at the Top”. This is where hospital leadership can articulate a simple message of how the technology will impact patients.

All stakeholders should reinforce this message throughout the deployment and for years following via internal branding. As a product owner, talk to the buyer and determine if there’s already an overarching goal you can connect your product to. If not, can we create a new one? For example, in the ‘Fall Safe’ example, …

  • “Together, we can reduce patient falls in the hospital by 40% by this time next year. This directly supports our overall goal of making patient safety a top priority.”

Any user needs to be able to say: “I know what the organization’s goal is and why it’s important. I know what’s expected of me. I agree with it. I want to do it.” Communicating what the goal is and why we’re working on the goal is important. And communicating how the product we’re deploying will help us with that goal.

As a customer success leader, if you’re onboarding and training new users, connect the training to their managers’, or managers’ managers’ (e.g. the CEO’s) goals. For example, “Your CEO invited us in to introduce this product to you because she really thought it could help you achieve the safety goals that the organization has set for every department.”

You can cascade goals down to users if you want, but most important is to create a simple milestone. Target an aspirational end goal, but focus on what users should do: what actions or steps should I take today? Tomorrow?

  • “Use ‘Fall Safe’ on at least ten patients a week who are a fall risk over the next six months.”

Focus on a single specific goal with a clear target. The user should not have to spend any time or energy thinking about what they’re trying to accomplish, or why, or why it matters, or how they will get there. Keep it focused and precise.

Make sure that the goal you align on with your users is a goal they are trying to achieve and that your product can help them achieve that goal 2x, 3x, 5x, or 10x faster, cheaper, or more effectively. Why should they adopt a product that helps them do something they’re not trying to do, or only helps them only marginally better?

Lessons from Simple Bank
A similar approach is to ask the user for a specific instance of the goal identified above and encourage them to use the features of your product first that allow them to reach that goal. As the co-founder of Simple Bank, Shamir Kharkal, explained to me recently, they did this by asking their users what they were saving for. Then their product helped those users reach those savings goals. By doing this, users would later tweet how Simple helped them, for example, save for a wedding they wouldn’t otherwise have been able to save for. By aligning your product to your users’ own individual goals, you can create an emotional connection with them that is very powerful. (Note that Simple Bank didn’t ask a blanket question about what the users’ financial goals were; they asked for a specific instance they had to make the single goal of achieving saving money more real.)

(2) Onboard them so they have used it at least once… and help them transition from their current systems to your product
McKinsey 3/4: “Developing talent and skills: I have the skills and opportunities to behave in the new way.” You can teach an old dog new tricks–our brains remain plastic into adulthood.

The initial screens with a product that the user sees (and/or the initial discussions the user has with a client care team) should focus them on one goal: the activation event. The user may have to take a few steps in the product, but the steps all move towards a single goal—a goal which is already important to the user. This is called the “onboarding process”: getting the user to complete a single, important goal on your product as quickly as possible.

In my current company, I believe the best method we’ve found for increasing user engagement and usage levels was to insist that we digitize the users’ current paper files and put them on our platform. It took time to do it, but once it was done, the user didn’t have a choice to go back to their prior ways of doing things. I say “insist” because the user will often say it’s not needed or not want to burden you or themselves with that moment of transition. But once you’ve done it, it makes a major difference to them. If you’re able to automate that transition moment and build it into the product, all the better. Firefox, for example, on first opening, will offer to copy over and import any bookmarks you may have saved in your current internet browser. This is sometimes called the cold start effect.

Lessons from AppCues and Weight Watchers
A user experience company, AppCues, recommends mapping this journey out, step-by-step. How many actions (e.g., creating a profile page or username/password) do you require your user to do before they can complete a goal? How does your user get to an emotional “Wow!” moment after the activation event? Is the “Wow!” moment the activation event (e.g., they completed an action) or days later when they’ve completed a few such actions or seen some response from the initial action?

By analyzing data or talking to your users, you can see where in the onboarding process users drop off. Do we give them enough quick wins? Do we overwhelm them with choices? Do we ask for too much upfront to get started? Do we make the to-do steps clear? Is there a lack of a clear progress bar (or checklist) showing the user where they are in the onboarding steps? Is the product design too unusual such that the user doesn’t have immediate familiarity with it? Do we follow up by email with users who don’t complete their onboarding?

If the onboarding process is a mix of product and client care team, they should both reinforce each other. Onboarding inside your product is a powerful approach. If your product is smart enough to know where the individual user is in their journey and inject tips and small just-in-time training as overlays to your website, for example, you can completely personalize the experience.

As Shamir explained, based on his experience at Simple Bank, “it takes some people weeks and other months, but once people start using your product as their core transactional platform, they start to discover the other features and benefits that you offer.”

Can you set a goal for a user for a product they’ve never used before? Perhaps not. But by setting a realistic overall goal for the organization, we can set aspirations for each user and adjust over time based on what’s realistic. In contrast, if there’s no goal, we lose out on the value that pressure from the top and the inspirational value of rallying around a shared goal has.

On the initial step of working as a team on a goal, Weight Watchers has found that individuals lose twice as much weight when they are working together on their own individual goals. AppCues has analyzed hundreds of user onboarding experiences and found good onboarding increases long-term user retention by 2.6x.

(3) Leverage the power of “Habit stacking”; Create a personalized plan with the user about how + when + where they will use the product each week; set up notifications to help them meet their process milestones
McKinsey 2/4: “Reinforcing with formal mechanisms: I see that our structures, processes, and systems support the changes I am being asked to make.” Associations and consequences shape behavior–though all too often organizations reinforce the wrong things.

To achieve their goal, the user will have to change their daily routines. Once the personalized plan is in place, you can help remind them, at a time and place that fits them best, of the daily changes needed.

Ask your users when, where, and how they plan to use your product to achieve the goals they committed to. What will happen right before you act? Where will you be? (For example, do they imagine using it over breakfast or look at it every morning when they open their email?) Thinking in this way creates a causal link in their brain between that event and using your product. Call it habit-stacking: tacking on a new habit onto an existing one is easier than building a habit anew. In President Obama’s campaign, they saw much great voter turnout when they asked potential voters to visualize when/where/how they would vote, such as “I will vote at the polling place on Main Street on Tuesday morning after breakfast.”

For example,

  • Ask the user to schedule on their calendar an appointment with themselves, for example, “every Friday at 12:30, after lunch, when you’re back at your desk, you spend thirty minutes checking on the usage and patient feedback for ‘Fall Safe’.”—based on their feedback of where and when works best for them.
  • Every morning, ‘Fall Safe’ texts the nurse leader the number of patients it is being used by. This will help the leader of the nursing floor make sure he/she is staying on top of their goal of using it on ten patients a week. “What time of the day would be best for ‘Fall Safe’ to reach out to you? Is there a time in your day when this would be most helpful to receive?”


Lessons from the Vietnam War and the movies
Habits are a function of environmental triggers. Service and Gallagher share a study of opioid-addicted veterans upon returning from Vietnam, according to the study; with no explicit treatment, the vast majority of returning veterans never used opioids again. Their usage of opium was connected to a particular time and place and once that was removed from their lives, so too went the habit it was connected to. Moviegoers eat popcorn in a movie theater because of the environment. Watching a movie at home, for example, will not fire the same trigger.

As with setting goals, keep the plan and its rules simple and predictable. Your brain doesn’t have the time to figure out complexities. Don’t make the plan complex such as, “log in on the weekend if your overall product usage has dropped in the prior week.”

The overall goal is to establish repeated behaviors early on that allow the brain’s fast system to take over.

Research has shown this step alone to increase adherence to a goal by 15-100%, depending on the study.

(4) Build in commitment mechanisms, such as a 1-1 coach and a personal desire to be consistent
McKinsey 2/4: “Reinforcing with formal mechanisms: I see that our structures, processes, and systems support the changes I am being asked to make.” Associations and consequences shape behavior–though all too often organizations reinforce the wrong things.

For example,

  • Very early in the implementation process, identify a “peer coach” for each nursing floor. Let the coach test out ‘Fall Safe’ as early as possible. Have them trained on all the features. Let them give any configuration feedback. Ask them to check-in with other nurses on how things are going, especially for those nurses with low usage.
  • Early on, have each manager pledge that they will make falls a priority. If falls are a priority for them and ‘Fall Safe’ is the easiest way for them to manage falls, then usage will follow. When they take actions that are consistent with their pledge, recognize it to continue to build the sense in themselves that they have “taken a stand” on this topic.
  • Every week, ‘Fall Safe’ will email each nurse leader their usage numbers. It will show them their usage versus the top quartile. Celebrate if they’re in the top quartile of usage. If not, give them social proof to convince them they’re falling behind others.


Introduce them to a “coach” from your client service team. Someone who will check-in as needed to help them achieve their goals. Technology products, especially B2B ones that require behavior change, rarely exist on their own. Such products need a client care team, to help users make the most of the product.

Cialdini underscores the principle of consistency, that we “…desire to be consistent with what we have already done. Once we have made a choice or taken a stand, we will encounter personal and interpersonal pressures to behave consistently with that commitment.” This is most powerful when the commitment has been made for others to hear. It’s one reason very few people change political party affiliations.

People with a “commitment referee” are 70% more likely to stick with their goals, according to one study.

(5) Add in scarce rewards along-the-way for achieving process milestones
McKinsey 2/4: “Reinforcing with formal mechanisms: I see that our structures, processes, and systems support the changes I am being asked to make.” Associations and consequences shape behavior–though all too often organizations reinforce the wrong things.

For example,

  • Send users a note of recognition from their manager when they get halfway to their goal?


Rewards should focus on the users’ effort and progress against their process milestones—not their impact on the ultimate goal. There have been studies that show rewarding your children for high test scores is less effective than rewarding them for working hard. The latter implants the idea that even if they don’t do well sometimes, continuing to work hard will give them a shot at doing better next time.

Cialdini discusses the power of reciprocation. If you email a user saying, “I found this insight for you” or give them some other item of value, the user will often repay it, such as by using your product.

Be careful with rewards. Offering rewards, especially making a big deal about rewards (e.g., large cash prizes) can crowd out a user’s intrinsic motivation to succeed, thus backfiring. If you do it, make the reward a small private event.

Professor Cialdini notes that scarcity is a major form of influence. If the rewards you offer appear scarce, they will be more valued. Scarcity can create (friendly) rivalries. It also provides creative approaches to rewards such as “offer only available today” that create a sense of urgency in your product purchase or usage.

(6) Make seeing and discussing progress a social activity
McKinsey 4/4: “Role modeling: I see my leaders, colleagues, and staff behaving differently.” People mimic individuals and groups who surround them–sometimes consciously and sometimes unconsciously.

For example,

  • Build a discussion about group progress into a monthly meeting with all the users. With ‘Fall Safe’, usage could be discussed monthly among all the nurses on a unit. But perhaps more powerfully, all the nurse leaders could discuss their own units’ progress when they get together as a team once a month. Or share audio clips from other managers discussing stories of impact.
  • Identify power users. Who is using the product the most? Get them to talk and share success stories.
  • Another approach to social proof is one like what Venmo does: you can see all of your activity on one tab and certain activity from your friends (or everyone in the world) on another tab—filtered only to actions that those users have allowed to be made public.


Think Small has a quote which they attribute to Richard Thaler, “The purely economic man is indeed close to being a social moron.” In other words, classical economists who believe the world operates by logic and pure cycles of supply and demand is blind to the real source of motivations and shortcomings of humans: the influence of those around us who inform our behaviors and habits.

User adherence has been shown to increase 11% by this step alone.

(7) Give users feedback on their progress and leverage sources of authority, if possible
McKinsey 2/4: “Reinforcing with formal mechanisms: I see that our structures, processes, and systems support the changes I am being asked to make.” Associations and consequences shape behavior–though all too often organizations reinforce the wrong things.

Tell users what their progress is in relation to their goals. The most compelling example given in Think Small was about the “Your Speed” signs that tell you how fast you are going (and that blink if you are over the speed limit). There is no penalty associated with them, but they are they are one of simplest and most effective speed control mechanisms. The reason: they are easy to understand and actionable. You can do something immediately to course-correct.

Another feature of the signs that the authors don’t mention, but I think relevant to goal-setting for product users, is that the sign allows you to immediately get back in compliance with your goals. They don’t say “you’ve been going too fast for the last five minutes, even if you slow down now, it’s too late to meet your goal”. The goal it measures is reachable in the moment. For product users, consider measuring, reporting, and rewarding usage based on actions taken in the past week—not the cumulative actions taken over a six-month window where a change in short-term behavior will have little observable effect.

Dr. Cialdini includes sources of authority as one of his six force of influence. Obviously having a manager hold their team members accountable to a certain type of action or product usage is a very powerful motivator, but other sources of authority exist. Who is the source of authority on the topic that your users look up to? Are they celebrities or well-known researchers in a field?

Lessons from Fitbit
Fitbit is a well-known pioneer in this space as well, with an app that shows you the number of steps you’ve taken relative to your friends. This creates a transparent public forum for healthy competition. The authors warn, though, of creating too much transparency if overall product usage is low. Showing the individual user their progress against their goal for the week plus their progress against the top quartile is one way to avoid socializing low progress as a social norm.

Adherence to goals has been shown to increase by 10% in studies, such ones looking at the efficacy of the “Your Speed” sign.

(8) Make it stick by showing them the long-term impact of their efforts—and reminding them of how far invested they already are
McKinsey 1/4: “Fostering understanding and conviction: I understand what is being asked of me and it makes sense.” People seek congruence between their beliefs and actions– believing in the ‘why’ inspires them the behave in support of a change.

For example,

  • Remind users of the investment they made and celebrate their progress. Send a paper letter of that progress to them or a photo of the impact they collectively made, if possible. A physical document will make this “reward” feel different from the rewards-along-the-way and perhaps something they will pin on their wall—which will then keep reminding them of the investment made.


Show users the long-term impact of their efforts—something people rarely get to see. Celebrate success on the initial goal. Move them into a steady state (hopefully habit-forming behaviors have been established in these initial few months). Test new ideas and learn; no one knows in advance what will work best for a specific set of users in a specific context.

Users, once they’ve invested a lot of time into doing something, are less likely to abandon it. This is because of a cognitive bias in the brain: to make a lot of investment in something implies you found it valuable and the brain doesn’t like to admit it was wrong. Thus, in our minds, if a product was valuable then, it is still valuable now.

(9) Role model the behaviors you want your users to do themselves
McKinsey 4/4: “Role modeling: I see my leaders, colleagues, and staff behaving differently.” People mimic individuals and groups who surround them–sometimes consciously and sometimes unconsciously.

For example,

  • “As you can see, I’m using this product and have been for some time. I really find it valuable. Let’s get you on it too!”—your manager


This step also isn’t explicitly called out in Owain and Gallagher’s book but there’s a lot of other research on behavior change that highlights the importance of users seeing role-modeling by peers and their managers.

In a B2C environment, having a celebrity role model product usage is a standard marketing approach.

In a B2B environment, why would a nurse use our ‘Fall Safe’ product when their supervisor doesn’t use it? It’s not unheard of for users to “wait it out” assuming that, over time, this initiative will be replaced with another priority. If they see that their managers and managers’ manager are not only using it, but have been for a while, the impression is instead that there is a lasting investment which will help them overcome the initial hurdles to adoption.

Lessons from the high seas

For this last point, we can turn to Captain James Cook from the mid-1700s for inspiration [emphasis mine]:

The sauerkraut the men at first would not eat until I put in practice a method I never once knew to fail with seamen, and this was to have some of it dress’d every day for the cabin table, and permitted all the officers without exception to make use of it and left it to the option of the men either to take as much as they pleased or none at all; but this practice was not continued above a week before I found it necessary to put everyone on board to an allowance, for such are the tempers and dispositions of seamen in general that whatever you give them out of the common way, although it be ever so much for their good yet it will not go down with them and you will hear nothing but murmuring against the man that first invented it; but the moment they see their superiors set a value upon it, it becomes the finest stuff in the world and the inventor a damned honest fellow.

. . .

All books and other resources referenced in this article