A Step-by-Step Guide to Opportunity Sizing for New Product Managers
Suppose you are working on an acquisition product aimed at registering as many high value users as possible. You work with six distinct stakeholder groups – each very excited about their great ideas – based on you and your team of engineers to execute. You need to balance their expectations with the other functions that are important to you, the strategy imposed by the company, correct the annoying errors and the technological debt (the heel of each product group). There is no way to do it all… so how do you decide?
What is the size of the opportunity?
Opportunity size is the best way to assess the impact an idea can have – compared to all the other ideas your team could work on.
How will the size of the opportunities help me?
It’s the best way to determine the KPI elevation of an idea it could have, relative to all the other tasks in your backlog. It is not a financial report, a dissertation or a promise of performance. Instead, it is a low-effort tool that you should use to quickly assess the impact that an idea could have compared to all the other ideas in your team. could I work on.
In addition, having a “book” (shared spreadsheet) of all feature ideas with associated opportunity sizes is a great way to show stakeholders the reasons why you prefer (or disable) their big idea without prejudice. I used to share my book at every stakeholder meeting and say, “I like Project Zeta, but because it will only affect 12 percent of our low-value user base, it is the fifth in a row for engineering work. If there is a way to expose this feature to more high value users, we may be able to put it on the roadmap. “This shows my stakeholders that I have tested their idea, given a place in the series and provided feedback on how it could have a greater impact on users.
You can also share your book with your team of engineers to show why they are working on a particular project and what kind of impact it could have. The magnitude of the opportunities is truly a victory!
Where do I start?
The most important part of the size of opportunities is that you must you have a North Star measurement that you use for evaluation all of your opportunities. If you evaluate one idea based on projected revenue and another based on projected records, you will have no way to compare the two. Consider the measurement that is most important in determining the success of your product.
The most common North Star measurements are:
- User satisfaction (as determined by feedback score or NPS)
For most e-commerce products, the North Star measurement will be revenue per session period. For most top channel products, the North Star measurement is recordings, activations, or references. For most SaaS products, the North Star measurement is user loyalty or satisfaction. Whatever the North Star measurement, make sure you can justify it to stakeholders and your leadership. It is important to reach a consensus among this group about what success means for your product, so that everyone is aligned with the size of the opportunity.
I have the North Star measurement. What’s next?
Start by recording the assumptions for each idea in your backlog. This template should follow: With [describe the project idea], [describe what will happen], leads to [describe the effect on your North Star metric].
Here are some examples:
By placing a card in the homepage carousel, a significant number of users will be interested in learning about the loyalty program, leading to more registrations.
Adding a mini-cart to the sidebar will make it easier for users to see what’s in their cart without interrupting their TOF purchases, leading to more orders per session.
By working with a third-party data enrichment API, we will make the four-step boarding process easier for our users, leading to an increase in average session satisfaction.
What data should I use and how can I find it?
Depending on your company’s resources, this can be difficult. Hopefully you have access to custom details or you can request an analyst time to help you locate some of these numbers. If you do not have much access to data, do not worry! Remember that the nature of opportunity size is directional.
Do your best to find some key numbers, which could be: monthly active users, sign-ups, revenue, clicks, etc. If these numbers are accurate, you can do a lot here. If you do not have access to an on-demand analytics tool, you need to be creative about where to find your data. When I was working on a subscription product and we did not have on-site monitoring, I had to rely on my friends in accounting to give me access to financial reporting tools so that I could find the data at the order level of my product. (Thanks again, Lex!)
Case modeling: Ensure comfort with uncertainty
This is where most product managers struggle: You need to take some approaches. Remember that the purpose of opportunity size is to assess the impact that a new project could have on the North Star measurement – by definition, there is some speculation! To compensate for the uncertainty, it is important to use relevant proxies to make assumptions about your model.
Here are some ways to think about choosing proxies:
I do not know how my card will perform on the carousel, but I know from other teams that have used this carousel that the click-through rate is usually 3 percent.
I do not know how many users will decide to interact with this new feature, but we released a similar feature last quarter that targeted the same customer base and saw 20 percent subscriptions.
I do not know how much traffic to the site will increase, but historically we have seen a 2.5% increase in traffic each month for the last year.
Let’s go back to our first example: “By placing a card on the homepage carousel, more users will be interested in learning about page loyaltyprogram, leading to more registrations. “
First, we start by collecting our known (or historical) data:
Now, we can start building our model:
Based on the data we already have, we can estimate that we could have had 469 entries if we had run a carousel reward card in the third quarter. But how do we use this information to predict the future? Suppose your homepage has historically had a quarterly growth rate of 5 percent and you expect dedicated user engagement to grow by up to 30 percent by the end of next year due to better advertising strategies. How would you change the forecast?
There you have it! Based on historical data and forecasts, you can predict that if you create the new rewards carousel card in the 4th quarter of 2020, then it will bring 2,545 new users in 2021. Will you prioritize the rewards carousel card in Q4? What about all the other ideas you have in your backlog? You need to use this size to quickly evaluate all of these.
As product managers, we must relentlessly prioritize only working with the highest impact and high value so that we can offer the best experience to our users. Without a data-driven prioritization method, you invite anyone with an opinion to understand your roadmap. From my experience working in nine product groups at three companies, the size of the opportunities is the best way to bring all stakeholders together with a common goal, to communicate with leadership what your projected impact is for the quarter – and have a work priority queue at all times that you can count on.