Being able to make decisions or motivate others to make decisions is a core part of being a product manager. On a day to day basis, product managers are face with decisions in relation to the products they manage. Think about the last time you had to make a prioritisation decision or needed to decide about the features of your product. We often make these decisions on the fly, without necessarily relying on a consistent way of making these calls.
Whilst decisions are being made in the short term, the lack of an underlying, consistent decision making approach can cause issues in the long term. “Noise” is one of the main issues caused by a lack of a consistent approach to making decisions. Nobel prize psychologist Daniel Kahneman has, together with Olivier Sibony and Cass R. Sunstein, written a great book about ‘noise’ in which they study the variability in decisions and judgements. In the book, Kahneman, Sibony and Sunstein distinguish between level noise and pattern noise:
“System noise can be broken down into level noise and pattern noise. Level noise is the variability of the average judgements made by different individuals. System noise includes another, generally larger component. Regardless of the average level of their judgements, two judges may differ in their views of which crimes deserve the harsher crimes. Their sentencing decisions will produce a different ranking of cases. We call this variability pattern noise.”
A clear and consistently used decision making framework will help reduce ‘noise’. Equally significantly, I believe that transparency about decision making and any probabilities considered does improve collaboration and a sense of empowerment. In this post, I’ll therefore look at three decision making frameworks, which we can use to make (product decisions): (1) Type 1 and Type 2 Decisions, (2) Decision-Making Guardrails and (3) S.P.A.D.E.
Type 1 and Type 2 Decisions
The “Type 1 and Type 2 Decisions” framework comes from Amazon founder Jeff Bezos, who explained that “the problem comes from using the wrong decision-making process for the wrong decision type”. Bezos argues that as organisations get larger they have a tendency to use what he refers to the ‘Type 1’ decision-making process on most decisions, including many Type 2 decisions.
Type 1 — These are non-reversible decisions, where it’s important to think carefully and then act. For example, when you’re considering a change the business model of your business or are exploring a merger with a competitor. Making such decisions needs to be the result of a well informed and thoughtful process.
Type 2 — These are decisions that are reversible. It’s like walking through a door; if you don’t like the decision or things don’t work out, you can always go back. You might, for instance, decide to remove a specific product feature or change the customer onboarding journey. If these changes don’t work out, you can easily undo these them and revert back to the previous situation.
If you continuously use the Type 1 decision-making process for Type 2 decisions, the end result is slowness, unnecessary risk aversion and a failure to experiment sufficiently.
Decision-Making Guardrails
Often, companies will have a set of principles which guides their decision-making. I once heard Giff Constable — a highly experienced product leader — talk about “guardrails”. Guardrails are the decision-making principles that provide clarity to people when presented with tough tradeoff scenarios, for example:
- How do we decide between supply and demand?
- How do we decide between speed to market and accruing tech debt?
- How do we decide between optimisation, innovation and diversification?
Constable explained that having clear principles in place will help empower teams, and outline the scope of their autonomy. Often, these principles guide decision-making but also broader ways of working, with companies like Stripe and Shopify serving as great examples in this respect. Let’s look at Shopify’s operating and design principles:
- “Put merchants first”
- “Empower but don’t overwhelm”
- “Build a cohesive experience”
- “Be polished but not ornamental”
Shopify’s ‘experience values’ are closely linked to the aforementioned principles:
- Crafted — “Above all else, we show care for the people who use our tools and products. We’re here to make their day-to-day and long-term work better — no matter who they are, where they are, or what platform they’re using.”
- Efficient — “Shopify experiences should help people achieve their goals quickly, accurately, and with less effort. We value speed and simplicity, but we value productivity even more.”
- Trustworthy — “We constantly work to recharge our users’ trust batteries. We sweat the details. We’re genuine and transparent to show users that we’re always acting in their best interest.”
- Familiar — “We want people to feel comfortable using our products, whether it’s their first time using them or their hundredth. Our experiences should embody the same principles, act the same way, and fit together seamlessly.”
Whether you refer to them as ‘guardrails’ or ‘principles’, these embody the values that your organisation or team stand for and thus provide an invaluable context to make decisions against.
S.P.A.D.E.
S.P.A.D.E. is a decision-making framework that former Facebook, Google and Square exec Gokul Rajaram has developed and applied “for hard decisions only”. In this great talk, Rajaram emphasises that S.PA.D.E. is for those decisions that are ‘hard’ or urgent, because they are of great importance to the fate of your company. The framework consists of four key components: setting, people, alternatives, decide and explain.
Setting
“Setting” is all about contextualising the decision, identifying three core dimensions of each decision:
- What — Precisely defining the decision. Instead of saying “figuring out the next country to launch in”, we need to be much more specific and look at the different dimensions or axes of the decision. If you’ve got multiple products, the decision to be made isn’t just about the country to launch in. It’s also about what product to launch and in which country, aimed at what audience.
- When — Similar to the “what”, S.P.A.D.E. encourages us to be specific about the timings of a decision. How many times have you been faced with a deadline or timeframe that felt unrealistic or arbitrary?! Rajaram focuses both on the ‘why’ and the ‘when’. Why will it take that amount of time to make a decision? Why is it important that a decision is made by a certain date? How long will it take to make a choice? Questions like these effectively answer the ‘why’ of the ‘when’.
- Why — ‘Why’ encapsulates the value metric. What are you optimising for and why? What is the objective? Why does the decision matter? Understanding the ‘why’ behind the decision, brings people to the root of a choice to make and why this choice matters.
People
“People” is a critical aspect of S.P.A.D.E. as it determines the people and the roles of people in the making of a decision:
- Responsible — The key thing here is that the person responsible for making the decision is also accountable for executing the decision and for the success of the decision. Accountability and responsibility are synonymous.
- Approver — Which person approves the decision? This person can veto the decision. Rajaram describes this veto right as a super power that needs to be practised very sparingly; typically, the approver doesn’t vote down the decision itself, rather they veto the quality of the decision.
- Consulted — These are the people who need to be consulted to give input towards the decision. The people who need to be consulted are active participants in the decision-making process. They give feedback, share their opinions and help the responsible person make a high quality decision. Most importantly, these people need to be actively listened to.
Alternatives
An “alternative” is a view of the world on uncertain things and we need to have a way to evaluate the different alternatives available to us. The ‘responsible’ person, the decision-maker, needs to come up with a set of alternatives or options that are:
- Feasible and realistic — Can we implement the alternative option? What would be the impact on the customer and on the business?
- Diverse — The alternatives should be significantly different from each other, whilst still addressing the same problem space.
- Comprehensive — The alternatives considered should all cover the problem space.
Brainstorming publicly is Rajaram’s device for identifying and considering alternatives. “Gather all the folks who are in the consulted group in a room and conduct an open brainstorm, this keeps them engaged and injects new alternatives into the conversation” advises Rajaram.
Decide
After having evaluated the different alternatives, the next step is to vote and make a decision. Rajaram urges us to get this feedback privately, especially where tough decisions have big ramifications. Private voting, Rajaram argues, ensures that the feedback is impartial and unaffected by groupthink or corporate hierarchy. This suggestion feels similar to the classic ‘dot voting’, with each person getting a set number of dots to vote for their preferred choices.
Explain
The “commitment meeting” is the pivotal point of the ‘explain’ stage. The late Andy Grove introduced this meeting as one where you explain the alternatives considered and the rationale for the decision made. As mentioned above, ‘approvers’ can veto a decision at this stage, but are advised to use this superpower sparingly.
In the commitment meeting, you explain to everyone your decision. Whilst there might be doubtful expressions in the room or audible grumbles, you set out why you support a specific alternative, using data to underpin your rationale and possible implications. Then go around the room and have every single consultant say if they agree or disagree.
Main learning point: Pragmatism and ad-hoc decision-making can be fine and work out in the short term. However, you need a robust decision-making framework to make hard and important decisions.
Related links for further learning:
- https://www.businessinsider.com/jeff-bezos-on-type-1-and-type-2-decisions-2016-4
- https://duane.substack.com/p/the-difference-between-type-1-and
- https://www.inc.com/jeff-haden/amazon-founder-jeff-bezos-this-is-how-successful-people-make-such-smart-decisions.html
- https://fs.blog/2018/04/reversible-irreversible-decisions/
- https://review.firstround.com/the-6-decision-making-frameworks-that-help-startup-leaders-tackle-tough-calls
- https://www.mckinsey.com/business-functions/organization/our-insights/three-keys-to-faster-better-decisions
- https://coda.io/@gokulrajaram/gokuls-spade-toolkit
- https://fs.blog/knowledge-project/todd-simkin/
- https://review.firstround.com/to-grow-faster-hit-pause-and-ask-these-questions-from-stripes-coo
- https://principles.design/examples/shopify-principles
- https://stripe.com/en-gb/jobs/culture
- https://marcabraham.com/2019/01/11/my-product-management-toolkit-34-product-principles/
- https://review.firstround.com/square-defangs-difficult-decisions-with-this-system-heres-how
- https://coda.io/@gokulrajaram/gokuls-spade-toolkit/s-p-a-d-e-template-2
- https://tettra.com/article/directly-responsible-individuals-guide/
- https://marcabraham.com/2021/01/27/my-product-management-toolkit-42-integrative-thinking/
- https://www.intercom.com/blog/decision-making-process/
- https://www.ricklindquist.com/blog/a-checklist-for-better-decision-making
