A mega-thread on strategic concepts that every founder / PM should know.
1. Kernel of a Strategy: A process to create a strategy. It contains three elements: diagnosis, tenets (guiding principles), and action items. You spend half of the time on diagnosis, another 40 percent on the tenets, and 10 percent on coherent actions.
2. BHAG: It is a big, daring, ambitious goal that pushes the company beyond its boundaries defined clearly with no ambiguity. People get it right away. It has a sense of urgency. It has a purpose. When you first hear it, you will feel it’s a joke and that you’d never achieve it.
3. Objectives and key results (OKR): A goal-setting framework that helps companies set an objective, which is “what I want to have accomplished,” and the key results, which are “how I’m going to get it done.” OKRs must be specific and include a way to measure achievement.
4. Operating Plan (OP1) is an annual planning document that covers the strategy for the next 12 months, ways of executing the strategy, and the budget required. BHAG answers WHAT, OKR answers HOW, OP1 answers WHY.
5. Flywheel: There is no single action, no grand program, no killer innovation, no lucky break, no miracle moment that creates momentum. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough.
6. SMaC (Specific, Methodical, and Consistent) Tenets: A set of operating principles that is the first step in turning strategic concepts into an execution plan. SMaC guides you on what not to do in addition to what to do. SMaC tenets don’t change more than 20 percent per year.
7. Blitzscaling: An execution framework that prioritizes speed over efficiency and allows a company to go from “Startup” to “Scaleup” at a furious pace that captures the market. For a startup to move very fast, it must take on far more risk than a company going through the normal
8. FIRE BULLETS, THEN CANNONBALLS: When you see the enemy ship, you take a little bit of gunpowder and keep firing bullets until one bullet hits the ship. Now, you take all the gunpowder and fire a big cannonball along the same line of sight, which sinks the enemy ship.
9. Play-to-win canvas: Use this to explain your strategy to people who don’t have time to read our entire OP1. It contains 1. What is your winning aspiration? 2. Where will you play? 3. How will you win? 4. What capabilities must be in place? 5. What systems are required?
10. Aggregator vs Platform: Aggregators such as Google and Facebook help you get things done. Think of them like Cars. While Platforms are Bicycles. Platforms such as Microsoft and Apple are an aid to humans, not their replacement.
11. Growth Loops: User acquisition funnels are now being replaced with a system of loops. Loops are closed systems where the inputs generate output that can be reinvested in the input. Similar to flywheel but for acquisition/growth.
12. Viral Coefficient (K Factor): The number of new customers the average customer generates. The virality should cover the churn of users. In other words, if k-factor > churn, more users come than users leave, and our product is going to have exponential growth.
13. It’s AND. Not OR. The ability to embrace both extremes at the same time. Instead of choosing between X OR Y, they figure out a way to have both X AND Y.
Profit AND Growth. Great Customer Exp AND Great Margins. Great Control AND Lean Operations. It’s possible to do both.
14. Product-Market Fit: PMF is achieved when your users love your product so much they spontaneously tell other people to use it. It’s a binary test. You can always feel product-market fit when it is happening. The customers are buying the product just as fast as you can make it
15. Network Effect: The idea of a network effect is that every additional user increases the value of a good or service. The Internet is an example of the network effect. There could be “internalized” versus “externalized” network effects.
16. Moat: Like the moat that surrounds a castle to provide it with a preliminary line of defense, companies need to have moats or the ability to maintain competitive advantages over their competitors in order to protect their long-term profits market share.
17. High-expectation customer (HXC): is the most discerning person within your target demographic. It’s one who will acknowledge and enjoy your product for its greatest benefit. She is also someone who can help spread the word. Your early adopters are not always your HXCs
18. Bullseye framework: To systematically find the most promising channel. The first step is brainstorming every single traction channel. The second step is running cheap traction tests. The third step is to focus solely on the channel that will move the needle for your product.
19. Level 5 Leaders: Display a powerful mixture of personal humility and stubborn will. They’re incredibly ambitious, but their ambition is first and foremost for the cause, for the organization and its purpose, not themselves. They are often quiet, reserved, and even shy.
20. Did he say No?: Usually we pitch what we want, follow up 3-4 times more and then move on if we don’t hear anything positive. Don’t move on until we hear the affirmative “NO”. Lack of “Yes” is not good enough. We should keep knocking until we hear a strong and clear “NO”.
21. Burn Multiple: Calculated as Net Burn / Net New Revenue. How much is the startup burning in order to generate each incremental dollar of revenue? The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. Burn multiple under 1X is good.
22. Efficiency Score: This is nothing but reverse of burn multiple. It’s a catch-all metric. Any serious problem will eventually impact the Burn Multiple / Efficiency Score by either increasing burn, decreasing net new revenue, or increasing both but at disproportionate rates.
23. Contribution margin (CM): is a product’s net sales minus all associated variable costs. The total contribution margin represents the total amount available to pay for fixed expenses and to generate a profit. It can be further divided into CM1, CM2, and CM3.
24. CM1 is sales minus the basic cost of goods sold, discounts and coupons. This is the same as Gross margin.
CM2 is CM1 minus logistics, warehouse, CS, payment gateway fees and any other operational variable costs.
CM3 is CM2 minus Marketing. EBITDA is CM3 minus direct costs.
25. Managerial Leverage (aka High Output Management): A manager’s output is the output of all of the people and the teams that report to her. A manager’s activity with high leverage will generate a high level of output; an activity with low leverage, a low level of output.
26. Cohort Analysis: Track specific groups of users, known as cohorts, to understand how users engage with your product in the days, weeks and months after you acquire them and, in turn, understand how resilient your growth is.
27. Simon Sinek Circle (aka Golden Circle): There are three parts of the Circle: Why, How, and What.
The WHAT represents the products or services a company sells. The HOW is an explanation of why their products/ services are better. The WHY is about what a company believes in.
28. First Who, Then What: Make sure you have the right people on the bus and the right people in the key seats before you figure out where to drive the bus. Always think first about who and then about what. Great vision without great people is irrelevant.
29. Prospecting Pyramid: Arrange your list of leads with high-yield prospects on top and low-yield prospects on the bottom. Start by prospecting from the top of the pyramid.
30. Minimum Viable Product (MVP): Is a proof of concept product that validates your idea before you build a full, mature, stable product. MVP is not just a product with half of the features chopped out but a process that you repeat over and over again till you get it correct.
31. Free cash flow (FCF): measures how much cash is generated after capital expenses such as buildings and equipment have been paid. Operating cash flow is your cash flow from operating revenue minus operating expenses. If you subtract capital spending from this, you get FCF.
32. Cash conversion cycle (CCC): How long it takes your customers to pay you minus how many days it takes you to pay your suppliers. Super-efficient companies have their CCC down to the single digits. At Amazon last year, the CCC was negative 30.6 days.
33. Working Backward: A practice where you start by writing the documents you will need at launch (a Press Release and an FAQ) first and then work backward from there to the product requirements.
34. Free Parking’ Business Model: To bootstrap of the “chicken and egg problem”, give away one side of the market for free. Typically it is best to offer the free side to consumers since no one loves “free” more than a consumer. Or offer the service that has lowest marginal cost.
35. Freemium: A variant of the “free parking” model where the company transforms code into the equivalent of marketing spending and “gives away for free” service X to generate qualified leads for interlinked service Y. Freemium works best if service X has network effects.
36. Cash multiplier (CMX): Revenue generated from customer segments over limited time frames or payback window.
CMX = Total Rev / Total Customers.
Ex: Your total rev for 60 days is $140. If new customers were 1000, your CMX ( 60-day LTV) would be $1,400 in total.
37. Customer lifetime value (LTV, CLTV, or CLV): The revenue generated from the average customer over the course of an average customer lifespan. LTV is the future cash flows over her entire relationship with the company.
38. High Output Meetings: Is a medium through which managerial work is performed. It is a way to supply information and know-how, to explain the way of doing things, and to help make decisions. We need to make meetings as efficient as possible. Not fight the need for the meetings
39. Task relevant maturity (TRM): for a team member is a combination of the degree of their achievement orientation and readiness to take responsibility as well as education, training, and experience. All of this for a particular task.
40. UI Complexity Score: UI needs to be as simple and functional as possible. To calculate the complexity score, you add up a point every time you used a new font, font size or colour in the UI. The total score is the complexity score. A single page needs to stay below five point
41. Conversion rate optimization (CRO): Science behind understanding why your visitors are not ‘converting’ into customers, and then improving your messaging or value proposition to increase this rate of conversions.
42. Blue ocean strategy: Red oceans are all the industries in existence today – the known market space. Cut-throat competition in existing industries turns the ocean bloody red. Blue oceans are all the industries not in existence today – the unknown market space.
43. Productive Paranoia: You assume that conditions can unexpectedly change, violently, and fast. You obsessively ask, What if? By preparing ahead of time, building reserves, preserving a margin of safety, you handle disruptions from a position of strength and flexibility.
44. Inbound marketing: A marketing strategy that attracts customers by creating valuable content and experiences tailored to them. While outbound marketing interrupts your audience, inbound marketing forms connections they are looking for and solves problems they already have.
45. Ramen profitable: A startup makes just enough to pay the teams’ expenses. Traditional profitability means a big bet is finally paying off, whereas the main importance of ramen profitability is that it buys you time.
46. Category Management: The process of managing categories as independent business units, in a way that enables maximum consumer appeal while maximizing profits. Category Management aims to provide customers with what they want, where they want it, and when they want it.
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