What is this question about?
This product strategy interview question tests whether you use sound analysis to make decisions that involve tradeoffs.
What is the interviewer looking for?
The interviewer is evaluating you on the following:
- Is your answer structured and logical?
- Can you identify the key issues that will affect your decision?
- Can you articulate the process you use to evaluate problems and arrive at a decision?
How to structure your answer?
We suggest structuring your answer in the following way:
- Identify what the decision problem is. For example, is it a feature-prioritization problem or a cost-benefit problem?
- State which issues or inputs to the decision problem to consider.
- Analyze each input and explain how they affect the decision-making process.
- Formulate a framework (e.g., flowchart or other) that takes these inputs, evaluates them, and outputs a decision.
- Wrap up
INTERVIEWER: How would you prioritize between a new product feature versus an internal tool that would build this feature quicker and easier in the future?
INTERVIEWEE: Okay, is this a feature for a product or platform?
INTERVIEWER: Does it make a difference?
INTERVIEWEE: I think so. A platform supports a line of products by providing shareable core technologies or components. So a change in a platform feature will impact other product roadmaps, while a single product does not have these issues.
INTERVIEWER: Okay, I agree. I would like you to consider both cases.
INTERVIEWEE: At the outset, this seems to be a cost-benefit analysis problem: Is it worth spending investment on a new tool given the cost? But first, I would like to analyze strategic parameters that can also affect this decision. The following come to mind: state of market maturity, reusability of the feature, time to build the tool, and level of improvement the tool would bring to speed development. Does this sound like a reasonable approach to you?
INTERVIEWEE: Let me start with the market.
If the market for the product is in the emerging or growing state, then it makes sense to invest in a tool. Speeding up product releases would enable the company to capture market share faster than competitors. However, if the market is in a mature or declining state, it would not make sense to invest in a tool when the market is shrinking.
Let’s move on to reusability of the feature. If future products in the roadmap use the feature, then it makes sense to build a tool. Implementing the tool will speed up the release of multiple products.
Time to build
If the market has entered a mature state by the time the tool is built, then the tool would not be worth investing in because the market is not growing and competition would be the hardest at this stage. Instead, I would consider investing in developing a product for a new emerging or growing market.
Speed of development
And, regarding the improvement in development speed that a tool would bring, I think it is important to set a target number for the desired speed improvement. If the tool delivers beyond this target number, then it is a go, otherwise not. The engineering team can help set that target number.
These four parameters are prerequisites to moving on to a cost-benefit analysis. To summarize, they are:
- The market needs to be emerging or growing,
- The feature must be highly reusable,
- The tool should be ready before the market enters a mature state, preferably a couple of years before,
- And the tool should improve development speed by a target multiple specified by the engineering team.
If the proposition of building a tool has passed these four prerequisites, then I would continue with a cost-benefit analysis. Since money would be needed to invest in developing the tool, the question is, whether this is a good investment? Is this better than putting the money in the bank? A net present value (NPV) calculation is useful here. I would make sure the the net benefit of making the tool is positive before making the decision to build the tool.
Okay, so the tool would be expected to speed up development of a feature, and thus would save money in engineering labor costs. Assuming that quarterly savings are S, then the present value of those savings can be estimated as Σ S / ( 1 + r ) ^ t, where r is the quarterly interest rate, and t is the number of quarters during the lifetime of the product. And, assuming that the cost of building the tool is C, then the net benefit of making the tool is:
NPV = (Σ S / ( 1 + r ) ^ t ) – C
If this value is positive, it would be a good investment, and I would proceed with it.
A flowchart is a good way to visualize my decision process.
(The interviewee proceeds to draw the following chart.)
So to summarize: if the market is emerging or growing, then check if the feature is reusable. If the feature is reusable by future product releases or other products, then proceed to check if the tool speeds up development. If the tool speeds up development by the target number, then calculate the net benefit. If the net benefit of using the tool is positive, then go ahead with building the tool.
One final thought is to consult with multiple teams during this decision-making process. Several stages of the flowchart require expertise from engineering, marketing, finance, and sales, so these teams should be involved. And if the tool is for a platform, then all product managers of the teams that will use the tool should also be included.