Book review: “Good Strategy. Bad Strategy”

June 20, 2017 marcabrahamLeave a comment

I came across a senior executive a few months ago, let’s call him “Bob”, who talked me through his startup’s strategy. In short, Bob showed me three ‘strategic pillars’ for the business. Each pillar contained a load of specific products and initiatives. When I asked Bob about the strategic challenges that his business was looking to tackle, I got a blank stare in return. My explaining the need for having clear business and product strategies unfortunately didn’t seem to resonate much with Bob …

This experience prompted me to read “Good Strategy. Bad Strategy” which was first published by Richard Rumelt in 2011. Two main questions drove me to pick up a copy of “Good Strategy. Bad Strategy”:

Is this going to be yet another strategy book, with lots of buzz words but little tangible content!?
How can I clearly articulate what constitutes a good strategy and what makes a bad one?

Ultimately, I want to improve the way in which I take people like Bob on a ‘strategic journey’, helping them to convert their goals into proper strategies. “Good Strategy. Bad Strategy” definitely delivered on this objective. Firstly, it paints a good picture of the problem space surrounding strategy. The first part of the book is all about common misconceptions about strategy and explaining ‘why’ there’s so much bad strategy around. Secondly, the book then outlines what is needed to create good strategies, explaining what goes into the “kernel” of good strategy.

Bad strategy

“Good Strategy. Bad Strategy” starts off listing some of the hallmarks of bad strategy:

Fluff – Fluff is a form of gibberish masquerading as strategic concepts or arguments. For example, I believe that terms like “seamless” or multi-channel have become so overused that they have lost a lot of meaning.
Failure to face the challenge – Bad strategy fails to recognise or define the challenge that a company is facing. Bob’s strategy was a good example in this regard. His strategy provided a number of solutions without the underlying strategic problems or challenges they were intended to resolve.
Mistaking goals for strategy – Many bad strategies are just statements of desires rather than plans for overcoming obstacles. For example, phrases such as “entering new markets” or “becoming the leading [fill in any sector of your choice here]” leave me wondering “why?”. These high level goals fail to highlighting specific strategic obstacles or opportunities a business is facing.
Bad strategic objectives – A strategic objective is set by a leader as a means to an end. As Rumelt explains, “strategic objectives are “bad” when they fail to address critical issues or when they are impracticable.” For example, if the strategic objective is “to become a world leading furniture maker”, I’d argue that this is a vision statement and not a strategy. A related strategy would describe some of the key challenges to overcome in order to achieve the vision. Rumelt goes one step further by arguing that Google’s “vision mission strategy” template often misses the mark, as he feels it doesn’t cover true analysis of the challenges and opportunities ahead.

In short, in “Good Strategy. Bad Strategy” Rumelt makes the point that most strategies fail to acknowledge the key obstacles or problems companies need to overcome. I see an analogy with the need to engage in a constant obstacle race, and businesses competing to overcome certain hurdles first.

Fig. 1 – Strategy as an ongoing obstacle race – Taken from: https://www.pledgesports.org/2017/02/down-dirty-the-rise-of-the-obstacle-course-racing-industry/

So why is “bad” strategy such a common theme across so many businesses!?

The primary reason, as Rumelt highlights, is that bad strategy trumps analysis, logic and choice, with people hoping that they can avoid these often gnarly fundamentals and any issues in overcoming them. Rumelt stresses that “good strategy is very hard work”. I agree with this sentiment completely, as I’ve seen first hand that it can feel easier – in the short term at least – to ignore what’s happening or what could happen. Similarly, making strategic choices and deciding on tradeoffs is often very tricky and painful.

Good strategy

Rumelt describes the structure that underlies a good strategy as a “kernel” (see Fig. 2 below). The kernel of a strategy contains three elements:

A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical.
A guiding policy for dealing with the challenge. This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.
A set of coherent actions that are designed to carry out the guiding policy. These are steps that are coordinated with one another to work together in accomplishing the guiding policy.

In essence, the kernel forms the bare bones skeleton of a strategy. Aspects such as visions, hierarchies of goals and objectives or timeframes are typically left out of the kernel. These aspects are treated as support layers instead.

The diagnosis

Coming to a diagnosis is about, putting it simply, understanding what’s going on. For example, as soon as Bob and I started exploring the situation that his business was in, we came to the conclusion that it was operating in a market close to reaching saturation point. As Rumelt points out, “an explicit diagnosis permits one to evaluate the rest of the strategy.” In addition, by turning the diagnosis into critical part of the strategy, the rest of the strategy can be revisited as and when circumstances change.

The guiding policy

The guiding policy outlines an overall approach for overcoming the obstacles highlighted by the diagnosis. The guiding policy doesn’t commit to a specific set of actions. Instead, it rules out a number of actions and suggests an overarching method to deal with the situation as described in the diagnosis. For example, one’s guiding policy could be to focus on improving the lifetime value of existing customers as opposed to acquiring more new customers that conduct one-off transactions.

Coherent action

Rumelt points out a common mistake people often tend to make by calling the guiding policy a “strategy” and subsequently stop there. Strategy is all about taking action to overcome obstacles or seize opportunities. This doesn’t mean that you need to outline every single proposed action in its finest detail, but at least provide sufficient clarity to help make certain concepts more realistic and tangible.

Fig. 2 – Maz Iqbal, Kernel of Strategy – Taken from: https://thecustomerblog.co.uk/2012/10/08/what-is-the-kernel-of-strategy-part-iv-coherent-action/

I felt that thinking about the kernel of strategy makes it easier to then figure out some of the strategy’s support layers:

Taking a strong position and creating options – Rumelt disagrees with strategic thinkers that feel that in uncertain and dynamic environments, companies do well to plan ahead as much as possible. In contrast, Rumelt argues, the more dynamic and uncertain the situation the more proximate a strategic objective should be. He cites President Kennedy announcing the US’ ambition to land a person on the moon by the end of the 1960s as a good example of a proximate goal. Despite not knowing exactly how or when the US could land a person on the moon, the US had done enough research and testing for President Kennedy to feel confident about taking a strong position (i.e. committing to the first moon landing) and to exploring various options to get there.
Hierarchies of objectives – In organisations of any size, high-level proximate objectives create goals for lower-level units, which, in turn, create their own proximate objectives, and so on and so forth. I really like Rumelt’s related point about proximate objectives cascading and adjusting over time, as it does justice to the uncertain and dynamic nature of most of today’s market environments.

Main learning point: “Good Strategy. Bad Strategy” is a great book for anyone slightly at loss where to begin when it comes to creating or evaluating a strategy. In the “kernel of strategy”, the book offers a very useful structure to underpin every (good) strategy.

Related links for further learning:

How PSD2 is set to shake banking up as we know it …

May 22, 2017August 1, 2017 marcabraham1 Comment

Fig. 1 – A prophetic vision by Bill Gates!? – Taken from: https://www.slideshare.net/patrickpijl/how-square-is-disrupting-banks/6-Bill_GatesBANKING_ISNECESSARYBANKS_ARENOT

“Banking is necessary. Banks are not.” Yep. Bill Gates said it. Back in 1994. And 28 years later, it’s it’s set to become reality. From the 1st January 2018, banking will no longer be the exclusive domain of banking institutions because PSD2 is going to drastically alter the way in which we bank.

The biggest consequence is that more than 4,000 European banks will need to open their legacy (mainframe) data stores to Third Party Players (‘TPPs’) and allow them to retrieve account information (‘AIS’) or initiate payments (‘PIS’). Both capabilities will be facilitated through APIs. I wrote about the scope and ramifications of PSD2 a few months ago, and I’ve been thinking ever since about the implications for existing banks and whether they’ve got reason to be scared.

It would be surprising if some of the traditional banks weren’t nervous about the extent to which they’ll have to open their kimonos under PSD2. And even if the Facebooks, Googles or Amazons of this world don’t become banks overnight, I expect the traditional, lifelong bank-customer relationship to slowly evaporate as a result of PSD2 (and subsequent versions of PSD).

Fig. 2 – PwC: PSD2 providing third party access to data and payments via APIs – Taken from: https://www.finextra.com/finextra-downloads/newsdocs/catalyst-or-threat.pdf

Facebook could easily decide to become an AISP (Account Information Service Provider – see Fig. 2 above), which would enable them to offer an aggregated view of a user’s bank accounts. As a result, they would be able to analyse spending behaviour, understand their users’ financial profiles and personalise a user’s banking experience. This isn’t that revolutionary, as virtual assistants like Cleo and Treefin have already starting offering this functionality, and I believe it’s highly likely that we’ll see it roll out across Facebook Messenger or WeChat in the near future. If you need more convincing, Facebook made their first move two years ago by appointing David Marcus, former CEO of PayPal, to head up Facebook Messenger, so watch this space. Similarly, US bank Capital One integrated with Amazon’s virtual assistant Alexa last year. This integration enables Capital One customers to pay their credit card bills and check their balances, by talking to their Alexa devices.

Fig. 3 – PwC: Six API-powered banking business models – Taken from: https://www.finextra.com/finextra-downloads/newsdocs/catalyst-or-threat.pdf

In addition, any remaining doubters about the power of APIs are likely to be converted as a result of PSD2. In the current Fintech landscape, there already are large number of banks that are either using APIs to hook into existing banking infrastructures (e.g. Varo Money) or offer additional services (e.g. N26). PwC recently conducted a study into the strategic implications of PSD2 for European banks and they listed no less than six API-powered banking business models (see Fig. 3 above).

Main learning point: It will be interesting to see what the actual impact of PSD2 will be, but if I were a traditional European bank, I’d be working as hard as I could to open up my APIs from today and start working on the creation of strong alliances with 3rd parties and their developers. As Nas once rapped on “N.Y. State Of Mind”, “I never sleep cause sleep is the cousin of the death.” If I were a traditional bank I’d follow Nas’ advice and give up on sleep completely …

Nas, lyric on “N.Y. State of Mind (Illmatic, 1994) – Taken from: https://uk.pinterest.com/MrConceptz/hiphop-101/

Related links for further learning:

Lessons learned from Uri Levine, Co-Founder of Waze

May 14, 2017 marcabraham1 Comment

Last Friday, I attended a talk by Uri Levine, Co-Founder of Waze, a community-based traffic and navigation app that was sold to Google for $1.1 billion. In a two-hour session, Uri shared some of his key learnings from the Waze startup journey; from starting from scratch to a successful exit. I felt that his talk was packed with valuable insights, and I’ve selected some key ones to share:

Focus on the problem – I loved how Uri concentrated on the problem that you’re looking to solve. He talked about problem solving being a key driver for him and the different startups that he’s (been) involved in. For example, Waze originated from Uri’s frustration with traffic jams … Uri then talked us through the “Adjusted Startup Curve” to illustrate the typical journey of a startup, starting with a problem to solve (see Fig. 1).

Fig. 1 – Knife Capital’s “Adjusted Startup Curve” – Taken from: http://ventureburn.com/2013/07/the-startup-curve-south-africa-wiggles-of-realism/

Don’t be afraid to fail – I always find it incredibly refreshing when other people speak openly about failures and not being afraid to fail. As Uri rightly pointed out, the fear to fail (and therefore not trying) is a failure in itself (see Fig. 2). He was also keen to stress that creating and managing a startup is never a linear, upward journey. By contrast, you effectively go from failure to failure, but you might win in the end – if you’re lucky that is (see Fig. 3).

Fig. 2 – Michael Jordan quote about failure – Taken from: http://www.quotezine.com/michael-jordan-quotes/

Fig. 3 – “Journey of Failures” by Douglas Karr – Taken from: https://twitter.com/douglaskarr/status/333027896241299457/photo/1

Passion for change – Uri’s points about entrepreneurs and their passion for change really resonated with me. I’m not an entrepreneur, but I feel that I’ve got some innate restlessness which is usually fed by change, learning and trying new things. It was interesting hearing Uri talk about how this passion usually doesn’t sit with well with fear of failure or loss. “Move fast and break things” was one of Uri’s mantras in this regard.

Honest validation of your ideas – As an entrepreneur, Uri explained, you need to fall in love with your idea. However, he also highlighted the importance of being able to critically assess your own idea. He suggested asking yourself “who will be out of business if I succeed?” If you don’t know the answer to this question, Uri explained, your idea probably isn’t big enough.

Iterate based on user feedback – Uri reminded me of the mighty David Cancel as David is also very focused on solving customer problems and listening to customer feedback (see Fig. 4). Like David, Uri didn’t get overly zealous about Agile or lean development methods. Instead, Uri talked about constantly iterating a product or service based on customer feedback.

Fig. 4 – David Cancel at Mind the Product conference, London 2016 – Taken from: http://www.mindtheproduct.com/2016/12/importance-listening-customers-david-cancel/

Main learning point: I found Uri Levine’s talk hugely inspiring; he was honest about the challenges involved in creating or working at a startup whilst at the same encouraging us to solve problems and try things.

Related links for further learning:

Book review: Yes To The Mess

March 5, 2017 marcabrahamLeave a comment

In May last year, I attended a great talk by Ken Norton – partner at Google Ventures – titled Product Managers: Make Yourself Uncomfortable. In his talk, Ken talked about the book Yes To The Mess: Surprising Leadership Lessons from Jazz by Frank J. Barrett, a management consultant and jazz pianist. Ken talked about feeling uncomfortable, his point being that uncertain and unstable times call for embracing uncertainty, improvising, learning and improving.

In “Yes To The Mess” Frank J. Barrett highlights the leadership lessons that can be learned from jazz music and jazz greats. These are the main lessons I learned from reading this fantastic book:

There’s no such thing as making mistakes

quote-if-you-don-t-make-mistakes-you-aren-t-really-trying-coleman-hawkins-54-15-31

Fig. 1 – Coleman Hawkins “If you don’t make mistakes, you aren’t really trying” – Taken from: http://izquotes.com/quote/81208

How often do people get chastised for he mistake(s) they’ve made!? Having to lower one’s tune because of having tried something that ultimately failed? Or trying to cover up a mistake or an error? In contrast, jazz music is all about ‘failing’. Like the great saxophonist Coleman Hawkins once said: “If you don’t make mistakes, you aren’t really trying” (see Fig. 1 above). In jazz music and in business, Barrett argues, there’s no such thing as making a mistake.

Instead, the focus is on not missing opportunities and embracing errors as a source of learning. For me, Miles Davies is the ultimate embodiment of the courage to make mistakes; “If you’re not making a mistake, it’s a mistake” is one of Davis’ famous quotes. “Do not fear mistakes. There are none” is another one (see Fig. 2 below). As Barrett points out, Davis was talking about the importance of continuing to take risks and to try new possibilities. Because when you do, something new and unexpected is likely to happen.

milesdavis

Fig. 2 – Miles Davis “Do not fear mistakes. There are none” – Taken from: http://www.ideachampions.com/weblogs/archives/quotes/

Informed risks and constructive learning

If mistakes don’t exist and we should all learn by trying, does this mean that we can just act recklessly and stop caring about what could happen!?

Absolutely not. Barrett explains how well conceived plans not always pan out as expected. “Everyone has a plan until they get punched in the mouth” as Mike Tyson once said (see Fig. 3 below). I came across an organisation once where project people probably spent a good 40% of their time drawing up great detailed project plans and 60% of their remaining time continuously adjusting timings on their project plans and “controlling the message” towards their stakeholders. Perhaps if they’d read “Yes To The Mess” they might have instead embraced unexpected factors or errors, and built on them. In jazz, the artists don’t correct mistakes as much, opting to recognise and ride with them instead.

quote-mike-tyson-everyone-has-a-plan-till-they-get-6007

Fig. 3 – Mike Tyson “Everyone has a plan ’till they get punched in the mouth” – Taken from: http://quotes.lifehack.org/quote/mike-tyson/everyone-has-a-plan-till-they-get/

What I like about this approach is that jazz players will learn by leaping in, learn from taking action and adjust accordingly. Barrett describes this approach as taking informed risks, taking action based on something that happen before and discover as you go. Jazz bassist and composer Charles Mingus once famously said: “You can’t improvise on nothing. You gotta improvise on something.” Even improvisation needs rules and some kind of order. As a result, especially in jazz bands, improvisation will lead to collective discoveries.

In my experience, improvisation isn’t easy. It can be pretty daunting when something doesn’t go according to plan – or when there isn’t a plan to begin with. An understandable first reaction is to try and fix the error, make sure the plan can still be executed upon. However, the results of not following this instictive response can be amazing, and can lead to new insights and approaches.

Generous listening

A key point Barrett makes is how improvisation requires jazz musicians to do lots of listening. Jazz players need to be attentive not only to the music they’re playing, both individually and as a group, but also to what isn’t being played. When Miles Davis was asked how he went about improvisation, he explained that he listened to what everyone in the band was playing and would then play what was missing.

Although I’m not yet great at it, generous listening is all about listening more then talking, or asking questions even when you might already know the answer. As a product person, it means not trying to be a rockstar or to push through your opinion. In contrast, it’s about truly listening to what someone else is thinking or might have to offer. In jazz, there’s even a term for this: “comping” – the rhythms, chords, and countermelodies with which the other players accompany a solo improvisation.

screen-shot-2017-03-05-at-07-17-11

Fig. 4 – Duke Ellington “The most important thing I look for in a musician is whether he knows how to listen” – Taken from: https://www.apassion4jazz.net/quotations4.html

Affirmative competence

Taking informed risks and listen generously leads to organisations developing “affirmative competence”, where the organisational system is no longer top down and deliberate, but much more emergent. As Barrett stresses, “an emergent system is smarter than the individual members.” Andy Grove applied this approach whilst at Intel when being faced with the challenge of Intel’s existing business drifting away. Since that experience, Grove’s advice is to “set aside everything you know.” Organisations and teams will thus learn while doing and by building up an underlying confidence in the competence of their group of people, taking the following steps in the process:

Take action
Revise assumptions
Value learning from failures
Try again
Discover as you go

Main learning point: I absolutely loved both Ken Norton’s talk and “Yes To The Mess” by Frank Barrett. The idea that well conceived plans are fallible and that that it’s ok to learn from one’s mistakes really resonates with me. Even if you’re not a jazz lover, it’s really worth reading “Yes To The Mess” and studying the lessons we can learn from jazz and its musicians.

Related links for further learning:

My product management toolkit (18): Keeping an eye on consumer trends

February 9, 2017 marcabrahamLeave a comment

As a product manager, I know how easy it can be to get trapped into the every day and lose sight of what the future could bring. We tend to get immersed in the more tactical, day-to-day stuff and forget about the bigger picture. Also, there’s a daily avalanche of new technology developments and market trends, and it can be tempting to act on the latest trend, out of sheer fear to miss out. But how do you know whether it’s worth following up on a specific trend!?

A few months ago I learned more about how to best identify and assess trends by listening to a podcast with Max Luthy – Director of Trends & Insights at TrendWatching. TrendWatching have developed this very handy framework in the “Trend Canvas” (see Fig. 1 below).

screen-shot-2016-12-28-at-16-50-02

Fig. 1 – The Trend Canvas by TrendWatching – Taken from: http://trendwatching.com/x/wp-content/uploads/2014/05/2014-05-CONSUMER-TREND-CANVAS1.pdf

The Trend Canvas distinguishes between the “Analyze” and the “Apply” stages. During the Analyze stage, you assess a trend and its underlying drivers. What are the basic consumer needs a trend is serving and why? What kinds of change is this trend driving and why? In contrast, during the Apply stage you’ll look at ways in which you and your business can best tap into a trend, and who would benefit from this trend.

I’ve found the Trend Canvas to be very useful when exploring and assessing trends. The thing I like most about this framework is that it forces you to think about the customer and how a customer is impacted by a particular trend. Let’s take the trend of electric cars as a good example:

electric-smart-car

Fig. 2 – Smart Electric Drive – Taken from: https://cleantechnica.com/2015/07/31/11-electric-cars-with-most-range-list/

Analyse trends

Basic needs – What deep consumer needs & desires does this trend address? – I haven’t spoken to many electric car owners yet, but the ones that I’ve spoken to mention “environmental consciousness” and “cost saving” as the basic needs that drove their purchase of an electric car. The experts at TrendWatching mention some other typical types of basic of needs worth considering as part of your analysis (see Fig. 3 below).
Drivers of Change – Why is this trend emerging now? – What’s changing? – To analyse the drivers of change, it’s worth looking at ‘shifts’ and ‘triggers’. Shifts are the long-term, macro changes that often take years or decades to fully materialise. For example, a rapidly growing global middle class and increasing scarcity of oil are significant drivers of the appeal of electric cars (this report contains some interesting insights in this regard). Triggers are the more immediate changes that drive the emergence of a consumer trend. These can include specific technologies, political events, economic shocks and environmental incidents. I feel that recent improvements to both the technology and infrastructure with regard to electric cars are important triggers.
Emerging Consumer Expectations – What new consumer needs, wants and expectations are created by the changes identified above? – Where and how does this trend satisfy them? – Purchasing expensive fuel for your car is no longer a given, and consumers starting to become much aware of the cheaper and environmentally friendly alternative in electric cars.
Inspiration – How are other businesses applying this trend? – When analysing a trend, a key part of the analysis involves looking at how incumbent businesses are applying a trend. For example, the Renault-Nissan alliance has thus far been the most successful when it comes to electric cars and learning about the ‘why’ behind their success will help one’s own trend analysis.

Fig. 3 – Basic needs categories to consider when analysing trends – Taken from: http://trendwatching.com/x/wp-content/uploads/2014/05/2014-05-CONSUMER-TREND-CANVAS1.pdf

Social status
Self-improvement
Entertainment
Excitement
Connection
Security
Identity
Relevance
Social interaction
Creativity
Fairness
Honesty
Freedom
Recognition
Simplicity
Transparency

Apply trends

Innovation Panel – How and where could you apply this trend to your business? – To me, this is one of the crucial steps when exploring trends; asking yourself that all important question – how can I best apply this trend to my business? For example, how does a specific trend fit in with our current offering of products and services? Why (not)? It’s similar to when you assess a product opportunity and go through a number of questions to look at the viability of a trend for your business (see Fig. 4 below).
Who? Which (new) customer groups could you apply this trend to? What would you have to change? – How often do we forget to think properly about who this trend is for and why they benefit from it. Which demographic is this trend relevant for and why? For instance, with electric cars, one could think about middle class families who are very cost and environmentally conscious consumers.

Fig. 4 – Assessing “Innovation Panel” when applying trends – Taken from: http://trendwatching.com/x/wp-content/uploads/2014/05/2014-05-CONSUMER-TREND-CANVAS1.pdf

Vision: How will the deeper shifts underlying this trend shape your company’s long-term vision?
Business Model: Can you apply this trend to launch a whole new business venture or brand?
Product / Service / Experience: What new products and services could you create in light of this trend? How will you adapt your current products and services?
Campaign: How can you incorporate this trend into your campaigns, and show consumers you speak their language, that you ‘get it’.

Main learning point: The Trend Canvas provides a great way for anyone to assess trends and innovations, looking at a trend from both a consumer and a business point of view.

Related links for further learning:

Learning more about the Fintech ecosystem in China

February 2, 2017February 2, 2017 marcabrahamLeave a comment

In a few weeks’ time, I’ll be travelling to Hong Kong for the first time, looking to visit Shenzhen as well. I’m hoping it will be a great opportunity for me to learn more about the needs of Chinese customers and get a better feel for the Chinese Fintech scene. To start preparing for my trip, I used a recent report by EY/DBS Bank titled “The Rise of FinTech in China” to learn more about key characteristics of the Chinese Fintech space.

I’ve looked at the ‘current state’ of Fintech in China, both from a customer and a market perspective, and these are my main takeaways from the EY/DBS report:

Fintech activity in seven vertical markets – EY/DBS’ report outlines the seven key verticals in which Chinese Fintech businesses are active (see Fig. 1 below). At a first glance, that the lion’s share of innovation by Chinese Fintech players thus far has been in the payments and e-wallets space. I’ve written previously about the absolute rise of alternative payment methods in China, mostly via mobile and predominantly driven by Alipay and WeChat.
Chinese customers are embracing alternative payment and insurance methods – The EY/DBS report contains a useful diagram that outlines the percentage of customers per Asian country using specific Fintech services (see Fig. 2 below). Based on this diagram, it looks like both payments/remittances and insurance are already quite established in China, with opportunities for lending and personal wealth management to truly take off soon.
Customer focus on online experience and functionality – A recent study by EY explored the appetite of Chinese consumers for non banks over traditional banks. It was interesting to read about the value placed on “better online experience and functionality”, as a key reason for using non banks over traditional players. One of my assumptions here is that Chinese consumer prefer banking services which are fully integrated into their daily lives, thinking about how WeChat seamlessly integrates payments into its messenger app.
Alternative payment methods; disruption hasn’t finished yet – I had never given that much thought to low credit card penetration rates across China, but the stats in the EY/DBS report speak volumes in this regard (see Fig. 4 below). The report offers a pretty straightforward explanation for this phenomenon; a strong adoption of alternative payment methods and e-wallets. Unionpay Quick is a good example of a contactless payment method that is becoming more and more ubiquitous in China, particularly in so-called “first tier cities”.

Main learning point: Having read the EY/DBS report, I do feel that China is quite far ahead of the Western world in certain areas of Fintech, particularly in the payments and e-wallet space. In the west, Fintech has been responsible for a lot of ‘unbundling’ of traditional banking services. In Asia – in China in particular – my feeling is that things are moving in the opposite direction: seamlessly integrating financial activities with people’s day to day activities. Alipay, WeChat and, in India, Paytm are leading the way in this regard.

Fig. 1 – Chinese FinTech activity in seven key vertical markets – Taken from: “The Rise of FinTech in Asia – Redefining Financial Services” by EY / DBS

Payments and e-wallets A mobile payments ecosystem facilitated by e-commerce and social media players, of which Alipay (of Ant Financial) and Tenpay (a Tencent company) dominate the market. Other notable players include UnionPay, ICBC e-wallet, JD Pay/Wallet (of JD.com) and 99bill (of Dalian Wanda Group).
Supply chain and consumer finance E-commerce players lend to underbanked or unbanked individuals and small medium enterprises (SMEs) by leveraging users’ merchant data on the platform. Key participants include Ant Financial and MyBank (Alibaba), WeBank with WeChat (Tencent), JD Finance (JD.com) and Gome Electronic Appliance, which recently ventured into providing financial services for individual customers and suppliers.
Peer-to-peer (P2P) lending platforms P2P platforms create a marketplace for peers to lend to individuals and SMEs underserved by the traditional lending sector. Market leaders are Lufax (Ping An Insurance), Yirendai (CreditEase), Rendai, Zhai Cai Bao (Alibaba) and Dianrong (the co-founder of Lending Club).
Online funds Funds linked to payment platforms that offer ease of access and more competitive returns than the historically low deposit rates. Primary participants are Yu’e Bao of Ant Financial, Li Cai Tong (Tencent) and Baifa (Baidu).
Online insurance E-insurance sold through e-commerce and online wealth management (WM) platforms. Notable brands are platforms by the People’s Insurance Company of China (PICC), Ping An, and Zhong An (in partnership with Ping An).
Personal finance management Recently developed mobile-centric finance solutions providing access to mutual funds though stock trading apps. These platforms offer offline-to-online activity, with online brokers accounting for over 92% of new clients. Key players include Ant Financial (Alibaba), Li Cai Tong (Tencent), Baifa (Baidu), Wacai, Tongbanjie, Zhiwanglicai (CreditEase) and JD Finance (JD.com).
Online brokerage Investment, social network and information portals for investors in China, providing thematic investing via websites and mobile apps, and offered by FinTech firms such as Snowball Finance, Xianrenzhang and Yiqiniu.

Fig. 2 – Percentage of banking/financial services customers using FinTech services – Taken from: DBS Bank, 2016

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Fig. 3 – Reasons for using a non-bank rather than traditional bank – Taken from: EY Global Consumer Banking Survey 2016

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Fig. 4 – Payment method used most regularly the past 3 months – Taken from: FT Confidential Research survey, May 2016

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Source: Survey of 1,000 urban consumers conducted by FT Confidential Research, a unit of the Financial Times18, May 2016

My product management toolkit (17): Assess market viability

January 21, 2017 marcabraham2 Comments

Whether you’re a product manager or are in a commercial or strategic role, I’m sure you’ll have to assess market viability at some point in your career. For that reason, I wrote previously about assessing markets, suggesting tools that you can use to decide on whether to enter a market or not.

A few weeks ago, I listened to a podcast interview in which Christophe Gillet, VP of Product Management at Vimeo, gave some great pointers on how to best assess market viability. Christophe shared his thoughts on things to explore when considering market viability. I’ve added my sample questions related to some of the points that Christophe made:

Is there a market? – This should be the first validation in my opinion; is there a demand for my product or service? Which market void will our product help to fill and why? What are the characteristics of my target market?
Is there viability within that market? – Once you’ve established that there’s a potential market for your product, this doesn’t automatically mean that the market is viable. For example, regulatory constraints can make it hard to launch or properly establish your product in a market.
Total addressable market – The total addressable market – or total available market – is all about revenue opportunity available for a particular product or service (see Fig. 1 below). A way to work out the total addressable market is to first define total market space and then look at percentage of the market which has already been served.
Problem to solve – Similar to some of the questions to ask as part of point 1. above, it’s important to validate early and often whether there’s an actual problem that your product or service is solving.
Understand prior failures (by competitors) – I’ve found that looking at previous competitor attempts can be an easy thing to overlook. However, understanding who already tried to conquer your market of choice and whether they’ve been successful can help you avoid some pitfalls that others encountered before you.
Talk to individual users – I feel this is almost a given if you’re looking to validate whether there’s a market and a problem to solve (see points 1. and 4. above). Make sure that you sense check your market and problem assumptions with your target customers.
Strong mission statement and objectives of what you’re looking to achieve – In my experience, having a clear mission statement helps to articulate and communicate what it is that you’re looking to achieve and why. These mission statements are typically quite aspirational but should offer a good insight into your aspirations for a particular market (see the example of outdoor clothing company Patagonia in Fig. 2 below).
Business goals – Having clear, measurable objectives in place to achieve in relation to a new market that you’re considering is absolutely critical. In my view, there’s nothing worse than looking at new markets without a clear definition of what market success looks like and why.
How to get people to use your product – I really liked how Christophe spoke about the need to think about a promotion and an adoption strategy. Too often, I encounter a ‘build it and they will come’ kind of mentality which I believe can be deadly if you’re looking to enter new markets. Having a clear go-to-market strategy is almost just as important as developing a great product or service. What’s the point of an awesome product that no one knows about or doesn’t know where to get!?

Main learning point: Listening to the interview with Christophe Gillet reinforced for me the importance of being able to assess market viability. Being able to ask and explore some critical questions when considering new markets will help avoid failed launches or at least gain a shared understanding of what market success will look like.

Fig. 1 – Total available market – Taken from: https://en.wikipedia.org/wiki/Total_addressable_market

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Fig. 2 – Patagonia’s mission statement – Taken from: http://www.patagonia.com/company-info.html

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