#3 The Strategy/Metric/Tactic Lockup
How to assign metrics and tactics to each product strategy.
In 2005, Netflix explored six key product strategies. For each strategy, we had a team focused on experiments to prove or disprove each theory. Here’s the 2005 high-level product strategy for Netflix, coupled with metrics and tactics/projects:
At Netflix, the high-level engagement metric that defined the product team’s ability to improve the product was monthly retention. In the early days of Netflix’s subscription service, 10% of members canceled each month. In 2005, 5% canceled each month. Today, about 2% cancel each month. The increase in monthly retention—from 90% to 98%—is a testament to the overall product experience getting better and better.
Why do you need a proxy metric? Improving retention is hard — the progress is almost glacial. You need more sensitive, lower-level proxy metrics to see if your strategies work. The expectation was that, over time, we would eventually improve retention if we moved our proxy metric enough.
Each of our product strategies had a clear proxy metric to determine whether it worked or not. And typically, two to three projects—think of these as tactics—brought the strategy to life.
In retrospect, we know four of the high-level product strategies worked, and two failed (social and movie-finding tools). Over the years, we learned to double down in areas where we moved our proxy metrics and demonstrated retention improvements. We also learned to cut our losses when projects didn’t deliver.
Product Strategy Exercise (#5)
Using the Netflix Product Strategy as a guide, articulate your high-level strategies, the proxy metric for that strategy, and projects against each strategy.
In the following essay, I dive deeper into identifying proxy metrics. I will focus on the theory that a simple product experience improves retention. Click below to learn more:
Thanks,
Gib
Gibson Biddle
PS. NEW! Check out my cohort-based “Product Strategy Workshop” on Maven.
PPS. Here’s an index of all the articles in this series:
- Intro: How to Define Your Product Strategy
- #1 “The DHM Model”
- #2 “From DHM to Product Strategy”
- #3 “The Strategy/Metric/Tactic Lockup”
- #4 “Proxy Metrics”
- #5 “Working Bottom-up”
- #6 “A Product Strategy for Each Swimlane”
- #7 “The Product Roadmap”
- #8 “The GLEe Model”
- #9 “The GEM Model”
- #10 “How to Run A Quarterly Product Strategy Meeting”
- #11 “A Case Study: Netflix 2020”
- #12 “A Startup Case Study: Chegg”
- #13 “TLDR: Summary of the Product Strategy Frameworks”
November 2024 Update: Sign up for my new 3-hour virtual “Product Strategy Workshop” on Maven. (Monthly cohorts from 9–12 am PT.)
Click here to purchase my self-paced Product Strategy Workshop on Teachable for $200 off the regular $699 price. The course includes recorded talks, PDFs, my essays, and pre-formatted Google Slides so you can complete your product strategy independently. You can also “try before you buy” — the first two modules are free.
