Vickie Peng: Why the Best Product People Actually Build Less Product? | E1141

1. 0:00 – 1:10

   Intro

   1. VPVickie Peng0:00

      So pre-product market fit, the strong advice to pick a number that represents customer happiness, and I recommend not using MPS. I recommend using a metric that's specifically an action in your product. So imagine any time this user takes an, uh, this action, they're pressing a button that says, "This product is great. I love this product," or "I, I'm using this product." So it could be an API call. It could be dashboard that's created. You are almost always going to overestimate the amount that you need to build to actually learn the thing that you wanna learn.

   2. HSHarry Stebbings0:28

      Ready to go? Vicky, I am so excited for this. I have to admit, I'm not sure if I'm allowed to say this, but it's the end of the day here and I'm just feeling a little bit looser than I normally do.

   3. VPVickie Peng0:47

      (laughs) So is Harry.

   4. HSHarry Stebbings0:47

      Alfred normally sends quite curt emails. You know, he's a busy guy. And with you recommending topics, it was like an essay-

   5. VPVickie Peng0:55

      (laughs)

   6. HSHarry Stebbings0:55

      ... of your brilliance, which, you know, I, I wish he'd say such nice things about me.

   7. VPVickie Peng0:59

      Aw.

   8. HSHarry Stebbings0:59

      But, um, thank you for joining me today.

   9. VPVickie Peng1:01

      Thank you so much for having me, Harry. I'm so excited to be here.

   10. HSHarry Stebbings1:03

       Yeah. I'm excited for this, and I wanna kind of go through the different stages of your career until today, and just extract some learning.

2. 1:10 – 7:32

   Lessons from TrialPay

   1. HSHarry Stebbings1:10

      So if we start on TrialPay, much earlier in your career, I, I heard you joined when it was a social gaming, was considered a bit of a distraction there, and you turned it into this massive revenue driver. What was the single biggest product lesson from that experience with TrialPay?

   2. VPVickie Peng1:25

      Ooh, yeah. Big question. So I've actually been in product now for, uh, you know, reflecting on it, for about 15 years, which sounds like a very long time when you say that out loud. Um, (laughs) I was originally drawn, I think, to the career mostly because I love pulling order out of chaos, essentially. Um, you know in the movie, The Matrix, where you see, like, the lines of c- code floating in the air, or in A Beautiful Mind, he sees math formulas? I hear a big, kind of, like, meaty question, I see bullet points, or, like, pillars, or two-by-twos, and I just need to structure things. Sometimes people will be in meetings with me, and I just have to open my laptop and start typing in a doc, 'cause I just wanna make bullet points. Uh, and so product, I think, was an area that, it, it's just like the, just this engine of being able to kind of take these problems and break them down and make them tractable and take action on them. It's like this cycle of conviction and action. Build conviction, take action. Action helps you build conviction. It's just this cycle over and over again. And I find it so exciting. So, TrialPay was the first place that I was able to do that, and just, like, jump into a space where I was able to build some sort of hypothesis, and then build an actual product that tested that hypothesis. Um, but as you said, the product that I owned was kind of like a side hustle for the company. The company was already a growth stage company. We had found product market fit in the, you know, space of e-commerce and software, and there was this little nugget of a belief like, "Hey, could we apply this busi- business model to another space?" Which was social gaming, which was on the rise at the time. I don't know if you remember the times when everybody had their own farm or aquarium or whatever they were tending to in between, you know, their productive life. Uh, but-

   3. HSHarry Stebbings2:57

      I loved FarmVille. FarmVille was my thing.

   4. VPVickie Peng2:59

      Yes. FarmVille, exactly. And so it was, you know, could this be the product that we sell in this, you know, kind of ad marketplace instead? Um, what, what ... You know, would this work? And so they kind of pulled together this ragtag group of folks across the company that were previously working on the main business, and, and kind of pulled us into the side business, and dropped me in as a new person, a new-to-product, new to the company. "Hey, here's, like, this, you know, side, side gig. Let's see if you can make it a thing." And I think I l- I really learned... The biggest lesson I learned there was, it, there's... Of course you build the product. You have to build a product that delights customers, that actually delivers value. But you also, your job is also to build belief as a product leader, and this belief in the possibilities that are unlocked by that product. And sometimes you're building belief for folks outside the building, like your customers and your investors. But sometimes you're building belief inside the building, because like you said, you know, there are folks that were working on the core business, like, best case scenario, this is an experiment that works. Worst case scenario, this is a distraction, and we took things away from the core business to try something new. And so why would we be doing that?

   5. HSHarry Stebbings4:02

      What do you think is harder, to build belief internally or to build belief externally, and why?

   6. VPVickie Peng4:07

      Oh, man. It really depends on the context. Somehow, you know, I was actually reflecting on my career, uh, prior to this conversation, Harry, and I realized that I somehow ended up in situations where I own the side hustle, and, like, my whole challenge is actually... At Polyvore it was the same, at Instagram it was the same, at Sequoia it's been the same, um, where there's this, like, initial thesis that is unproven, and then therefore, not only do I have to build the product, but I have to build the belief. And so for me, I would say building the belief has actually been a through line in my career. Um, more so than, I think, the average product leader.

   7. HSHarry Stebbings4:41

      Do you not ever wanna be somewhere where the belief just is from day one? (laughs)

   8. VPVickie Peng4:45

      I do. You're, yeah. It's, it, it's an interesting... To your point, yes, I think you hit the ground running easier and you say, "Hey, we all believe in this. Like, let's go." But at the same time, I think the, the act of seeing the tide turn, you know, the, the feeling of being kind of like a rebel or a pirate or a startup within a startup, and then slowly you see traction, and slowly you see customers, and slowly we start popping up in those farm games, and people that were sep- skeptical saying, "Wait a second, this is us. This is our product. Like, this works here in this context." And you see the wheels turning and people kind of opening their eyes to, "Oh, I see. I believe too." Um, you know, and I think that is so rewarding. And I think during, you know... Obviously I'm at Sequoia now, and I work with a lot of our early stage founders, um, all the time. And for them, one of the through lines that we talk them through in Arc, our pre-sea- pre-seed and seed stage company building immersion program, is the importance of story. Like, your job as a founder is build the thing, but it's also to tell a compelling story to all the people that need to hear that story. And people over, well, maybe not overestimate the building of the product, but they underestimate the power of the story and the building of that story.

   9. HSHarry Stebbings5:53

      What do you think they get most wrong about the way that they tell stories?

   10. VPVickie Peng5:57

       Ooh, that's so interesting. I have a list, Harry. Um, I think...I've-

   11. HSHarry Stebbings6:01

       I've got a bullet pointed list. I'm sure you do this. Yeah, yeah, yeah.

   12. VPVickie Peng6:03

       Bullet pointed list. Yes. No, exactly. Okay. So the first thing I would say is framing it from their perspective rather than the customer's perspective. I think, uh, us, me versus the customer and then solution versus problem, I think are the two main issu- kind of issues that I see, where it says, "We do this. Our company is the best. Our company is the best in this space because of this reason. We have this, we have that feature." As opposed to, "This is how your life will change if you kind of realize the possibilities of my product. This is how your life will be better. This is how your possibilities are opened. Um, this is what changes for you, the customer, and that's what you should care about." Um, and then I think the second thing is solution over problem. Like, you know, "We have these features. This is what our thing does. Here's a full demo. Here's all the long list of super power advanced user features that we have," as opposed to, "What problem are we trying to solve?" And are you, you know, do you resonate with that problem? Are you deeply affected by that problem? Like how do, how do, how does solving that problem change your life?

   13. HSHarry Stebbings7:01

       I think we need more purple cows as well. I don't know if you know the purple cow theory, like Seth Godin, so just being different is better in a lot of cases. And it's like there are so many, like, data lake products that I have no idea what they fricking do, but they all sound the same, and I just think that we need more difference to the way that we tell stories.

   14. VPVickie Peng7:20

       But I think differentation in the customer's voice. It's one thing for you to be able to say why your data lake is better than the others, but if your customer can't parrot that back to you in one sentence, then you haven't done your

3. 7:32 – 11:56

   Product Lessons from Polyvore

   1. VPVickie Peng7:32

      job yet.

   2. HSHarry Stebbings7:32

      Okay, before we dive into that, 'cause we could jump around, Polyvore, again, did incredibly well. It turned a fashion community, uh, into this incredibly monetized, largely by banner ads, 200 million acquisition by Yahoo. Uh, what was the biggest product lesson from that and the experience with Polyvore?

   3. VPVickie Peng7:49

      Yeah. As I mentioned, uh, I had a, a little bit of a track record of jumping into something that isn't the main thing and then, you know, being asked, "Hey, can you, can you turn this into something interesting?" And at Polyvore, it was actually, you know, we were a vibrant social community, fashion lovers. People were coming to the site every day to share their style, support each other in their expression of style, so it was like a really f- positive and fun kind of social community. But we were actually previously monetizing via banner ads. These people were coming shopping minded. They literally were using products, manipulating this jacket goes well with this top goes well with this scarf. They're already partway through the shopping funnel for you, you know, the second they even open the site. And so why would we... Isn't there... We've got to be able to build a performance marketing engine here. Like, there's got to be a better monetization model than homepage takeovers, which is literally what we, what we started with. But monetization and just that wasn't part of the DNA of the team, right? It was, it was very much community and love and sharing, and that was like the magic of Polyvore that it was so supportive. And I came in talking about click-through rate and CPC and conversion funnels and, and, you know, analytics dashboards and performance marketing, you know, goals and ROAS (laughs) , and people said, "Uh, this is not... This is alien to us." And so to turn, you know, to, to prove to people that you can preserve the magic of the community while also building a performance marketing engine, um, and those two can co-exist and you don't have to dilute the former to get the latter, um, I think was also part of the belief, uh, you know, my... the belief building I had to do at Polyvore. So that's... I guess that was a little bit cheating, Harry, since I already gave you that, uh, learning lesson from TrialPay. So, I'll give you a, a new one from Polyvore, which was I think in order to build the belief, you have to build only what you... Like, build only what you have to, I think is one of the lessons I learned. Um, at that time, there was lots of performance marketing engine. I mean, Google existed, product listing ads existed. So there was a way to build a really, really sophisticated ad engine that we could have just taken a page out of their book and, and really started there. We started with a spreadsheet (laughs) .

   4. HSHarry Stebbings9:52

      (sighs)

   5. VPVickie Peng9:52

      So we ran our entire performance marketing engine off of a Google spreadsheet for not... this is not like two weeks just to get it live. We did it, I think it was a full year that we ran it on a spreadsheet, and all the bids from all the advertisers, like you have Saks Fifth Avenue, Neiman Marcus, you know, these people are coming to us saying, "Hey, like, um..." They had to email their account manager to change their bids. So they would say, "Hey, can I change, bump my bids for dresses up from 250 to 275?" And the account manager would let us, forward it to us, and then we'd jump in the spreadsheet and change it from 250 to 275 (laughs) . And I think that the lesson I learned was just it's so surprising how far you can get building with, like, building so little.

   6. HSHarry Stebbings10:30

      Do you think you'll always be embarrassed by your V1? It's a common statement. Some people agree, some don't. How do you feel?

   7. VPVickie Peng10:36

      In general, I agree with the premise of that, that you are almost always going to overestimate the amount that you need to build to actually learn the thing that you want to learn. I think the goal of building, like I said, this kind of cycle of conviction and action, the goal of building is to either move an impact metric that you care about or to learn something about how to move the thing that you care about. And both of those things require way less product than people think. Like, my job as a product leader is almost to-... scope down the product (laughs) that I build. To build less product, I consider it successful.

   8. HSHarry Stebbings11:10

      Do you agree with the other statement that to, to scale you have to do things that don't scale? I think it's PG that commonly said that at YC.

   9. VPVickie Peng11:16

      I think so. I think, or at least open your mind to the possibility. We actually do have this PMF, um, this kind of, um, scoping NVP framework that we, uh, teach during Arc, that I teach during product week, and it talks about, there's three columns of course, there's three pillars-

   10. HSHarry Stebbings11:29

       (sighs)

   11. VPVickie Peng11:30

       ... uh, that we break it into. And the first is what does the product actually need to do? And the second is what can you fake? And that's when people say unscalable things, we're talking about things you could fake operationally, Wizard of Oz, behind the curtain. What are the things you can do that maybe someday your product can do? But it's, doesn't have to do it today for you to learn the thing that you need to learn.

   12. HSHarry Stebbings11:48

       (laughs) I love that. That's a great way to phrase it. And of course those threes, I feel like McKinsey could also have been, uh, a sponsor for this show.

   13. VPVickie Peng11:55

       (laughs)

4. 11:56 – 16:23

   Biggest Takeaways from Instagram

   1. VPVickie Peng11:56

   2. HSHarry Stebbings11:56

      Um, but I, I wanna move to the final segment really being Instagram, in terms of the operating career. Is scaling, you know, SMB ads from 200 million to a billion, w- what was the biggest takeaway from that?

   3. VPVickie Peng12:08

      Once again, this continuing, this parade of building belief, uh, you know, most of the, the vast majority of the ads business was focused on obviously, makes sense, more concentrated, larger, deeper pocket advertisers. And if you have any experience with Facebook or Instagram's ad platform, it is complicated. It's very sophisticated, there are lots of lo- you know, knobs and dials and levers that you can pull. And when you apply that to the SMB space, you know, people are saying, "Hey, this is a long tail, they're a secondary audience. Like let's leave them by the wayside, and maybe kind of just retrofit or dilute what we have and ship it to them, and it'll work." Um, and so I think it was always a little bit of a second order, you know, customer. And I inherited this team that basically was saying, you know, "Our g- our goal is to grow. Because this is the long tail, we make up for price with volume. Like they're not gonna have the budgets, but there's millions of them, so let's go get a million of them." Right? So the problem statement is acquisition, it's growth. Our metric is monthly active advertisers, and you just want that number to go up and to the right. And I think the thing that I most learned there is the power of asking the question, "What problem are you trying to solve?" And I now have become known (laughs) I think at Sequoia for just stopping in the middle of a meeting where there's some sort of alignment que- you know, question at, "Guys, what problem are we trying to solve?" And it's like, "Oh, here's Vicki again with what problem we're trying to solve." But I think at, at Instagram, the problem statement being framed as acquisition, um, when I spent some time digging into the numbers behind the numbers, um, we had an awful, awful, awful retention problem. Um, for every 10 customers that tried the product, six of them the next month would go away.

   4. HSHarry Stebbings13:41

      (sighs)

   5. VPVickie Peng13:41

      And even, yeah (laughs) .

   6. HSHarry Stebbings13:44

      (sighs)

   7. VPVickie Peng13:44

      Even, uh, even though, even despite that, the number of monthly active advertisers would keep going up, because we're just pouring new advertisers in the funnel. And, you know, I became known as, I had, I had to like evangelize the idea that the problem is not acquisition, it is retention. And if we don't fix this retention problem, we are going to be at a serious cliff in some amount of time. I don't know if it's six months, 12 months, but e- eventually we are going to run out of advertisers to pour in the top of the funnel, and we will have nothing. Um, and so I think, you know, just reframing the problem, um, and really understanding what problem it is you're trying to solve, uh, is, is probably my biggest lesson.

   8. HSHarry Stebbings14:24

      But I mean, it, it's a perfect segue there 'cause I wanna go into kind of that North Star metric, how to really know what to focus on. I do just wanna touch on the, you know, the pivot to venture and pivot to moving to Sequoia. Why did you decide to make that and how did that transition come to be?

   9. VPVickie Peng14:37

      There are kind of two parts to that story. One is kind of like a personal relationship, and one is, you know, the possibility of, of, you know, what was in front of me here. Um, the personal story is that wa- at Polyvore, uh, Jess Lee was the founder and CEO of Polyvore, and I was one of the first PMs she ever hired, um, at that company. So we went through that. I stayed through the acquisition, and so we go way back. And Jess of course, after she left Polyvore, came to Sequoia. Uh, and so she, you know, she once again, this pattern of building belief, um, you know, she and a few other partners at the firm had a thesis like, you know, "We at Sequoia spent all day investing in outlier technology companies. What happens if we look more like a technology company? Would that help us do the business of Sequoia better? If we had our own technology asset or technology platform, wouldn't that amplify a bunch of the work that we do?" But that is basically as far as that went, uh, in terms of having the thesis, and it's like, "Let's bring in some people and test this hypothesis out." And so Jess kind of thought of me for this role and kind of pitched it to me. It took a little convincing, but I would say like the thing that really brought me over the line was, this is, you know, Sequoia's 50, 50 plus year old firm, um, but what got us through the first 50 years isn't going to get us through the next 50. And there's gotta be something that provides the team, you know, the leverage and the amplification for what we need to do, which is find the next outlier founder. Um, and there was a belief that technology was the answer to that question. So you could change the way that like the most storied venture firm in the Valley does business by being that nugget of this new leverage point. Why don't you come and do that? Um, and, you know, I think that was five years ago that, that I joined, and, um, you know, I guess I like to say the rest is history, but we're still (laughs) , we're still in the middle of, of making the history now.

5. 16:23 – 21:49

   Good vs. Great Product Mission

   1. VPVickie Peng16:23

   2. HSHarry Stebbings16:23

      It's compelling. I get that as a, as a impact statement so to speak. I, I, I wanna go to kind of the foundations before we dig into the framework. You mentioned that kind of the core metric of like actually focusing on retention, not on activation or acquisition. I think I wanna start with, we often hear about product missions, um, and I actually didn't really know much about 'em to be honest, which is what I said to you before, which is why I do these shows. So what is a good versus a great product mission?

   3. VPVickie Peng16:50

      That's a great question. So this is actually taking from a framework that I do teach during Arc, which is during product week of Arc. And the, the thing about this role that I do at Sequoia that's really fascinating is I take my kind of obsession with structuring and bullet points (laughs) , and I am applying them not only to the founders that I work with very closely as a product of Arc, but also to the art or science, depending on how you think about it, of doing product itself.And so this framework aims to basically demystify and break down the act of product management into a framework, essentially. And so it's a four-part framework. Uh, it has, as you suggested, mission, is like kind of like the top of, of the framework. And all of the remaining factors kind of like cascade down from mission. So first you have a mission, then, which is a qualitative statement of what success looks like. So we usually use an image of a mountain, and it's like the flag at the top of the mountain. What does it look like to achieve, you know, to, to scale this mountain? What does success look like?

   4. HSHarry Stebbings17:46

      Well, what, what, what would an example of that be?

   5. VPVickie Peng17:47

      Yeah.

   6. HSHarry Stebbings17:48

      Would that be like be the number one CRM provider for SMBs?

   7. VPVickie Peng17:51

      Oh, that's a perfect... Yes. Okay. So there's two core things I think that make a great product mission. One is that it's customer-centric, so it should describe what it changes for the customer and their world, how it changes the customer's world. Two is that it is a thing that you can imagine working against or working towards for the next decade, not the next quarter. So, one problem statement that a lot of early stage founders have is that they're so hyper-focused on what's right in front of them this week, this inbox, this meeting, this feature, this ship date. Um, and it's really, really hard to think way bigger than that. And when we say way bigger, we don't mean before your Series A, we mean the next decade or two. Um, so the one great example I use that 'cause, you know, most of us are customers of this company is Airbnb. Um, their mission is belong anywhere. And I think that just immediately kind of like grounds the idea of, okay, for you as a customer, they're hoping that they can produce experiences in places for you to stay that help you feel like you belong, um, wherever you go, wherever you travel in the world. It is a customer-focused, like, statement, and it is pretty massive in terms of, I can imagine 10 years from now, maybe Airbnb doesn't feel like that box has been checked, right? It's something that you kind of almost work towards but never achieve.

   8. HSHarry Stebbings19:01

      Love it. Is it, uh, measurable? Uh, is there any, like, you could look at customer NPS, but different customers like different things. Um, so it may not actually suggest home from home. How do you think about the importance of whether it's measurable in a mission statement?

   9. VPVickie Peng19:15

      What a great segue, Harry. The next, uh, kind of part of this framework-

   10. HSHarry Stebbings19:19

       Mm-hmm.

   11. VPVickie Peng19:19

       ... the four-part framework is actually the metric. So the, the whole point of the mission is kind of inspiration, aspiration, also clarity around what it is that you want your team to achieve. The metric is the quantification of that aspiration.

   12. HSHarry Stebbings19:31

       Mm-hmm.

   13. VPVickie Peng19:31

       So at any given point, there is one number that is the best determinant, and if you're talking about the mountain analogy, the best compass to tell you what is up the mountain and what is down the mountain. And that thing can change over time. So pre-product market fit, for example, we give, um, our Arc founders the strong advice to pick a number that represents customer happiness. And you mentioned NPS. I recommend not using NPS. I recommend using, for this purpose, I recommend using a metric that's specifically an action in your product. So imagine any time this user takes an, uh, this action, they're pressing a button that says, "This product is great. I love this product," or "I, I'm using this product." So it could be an API call, it could be, uh, you know, a dashboard that's created. It could be a query, it could be a image that's created. There's something that they're doing in your product that is the core action of your product that suggests that they're finding value out of it. Um, and that is the thing, that is the quantification of their happiness at this current stage.

   14. HSHarry Stebbings20:25

       I so agree with you 'cause I get so pissed off when I, and I shouldn't be as vocal as this, but, uh, I am anyway, so fuck it. Um, but (laughs) uh, when, when people are like, "Oh, our, like, our, our metric is MRR," and I'm like, there's 10 different input metrics that lead to that as the output metric. It means nothing.

   15. VPVickie Peng20:43

       Especially from, you know, i- if you're talking early stage, pre-product market fit, the farther you are from customer happiness, and, like, I literally imagine them pushing a button or raising their hand. Like, every time this thing happens, they're happy or they're getting value. MRR, there's, like you said, so many output metrics and downstream metrics that you can measure. Great, measure on, measure them all you want, but goal on the thing that makes your customer happy. And one example from a recent Arc, um, company that I worked with is a robotics company. Um, and they, you know, they have... The, the whole point is that the robots are set up in your lab and helping you kind of like automate h- what otherwise would be done by human work. Um, and so they have, you know, they have a long sales cycle, they have a long implementation cycle. And you can goal on any number of those things, you know, time to implementation, robots live, contracts, you know, signed, uh, you know, things like that. But really what you should be going on is robot hours live (laughs) . How many hours, how many actions, how many things are the robots actually doing in the lab environment that are driving value? Um, and all those other things are either upstream or downstream of like the moment of value delivery for the customer.

6. 21:49 – 27:09

   Starting Point for Effective Product Strategy

   1. VPVickie Peng21:49

   2. HSHarry Stebbings21:49

      We have the mission, we have the metric. Okay. Product strategy wise, again, uh, pretty naive here, bluntly, what's the first step in defining a good product strategy?

   3. VPVickie Peng22:00

      Yes. Okay. So it follows from the mission and the metric. The product strategy piece is the most mystical black box thing. Like, people either think you have product intuition or you don't, or you can't follow a formula 'cause every product is different, so you just kinda wing it. Okay. From my perspective, product strategy is actually ca- a kind of, um... You can break it down into its component parts. The first component is to have the mission, the second is to have the metric, and the third is to understand the metric. So basically, let's say we have repeat monthly active advertise- advertisers, or maybe it's retention, but pick a number. You basically analyze your metric and determine why and what the gap is between what the level is today and what the optimal or ceiling of that number is. So if you know your monthly retention is, I don't know, 20%, and you know that amazing world-class monthly retention is 60 or 70%, there's a huge difference there. And so you have to either break down the gap and understand or have a hypothesis as to why there's a gap. And the key there is that there's a user-facing hypothesis. So this is users are not coming back, they're voting with their feet and their behavior that this project is not sticky and they don't wanna return. What are the top three reasons why that is true?

   4. HSHarry Stebbings23:08

      How do you find them out?

   5. VPVickie Peng23:10

      I think it's through the feedback loop into your business. So it's the data, it's their actual data. Where are they retaining, where are they not? What types of users are retaining, what types of users aren't? It could be by geo, it could be by platform, it could be by flow, step of the flow. So data is a really good tool here. And then secondly, actual qualitative feedback. When you talk to users, they will tell you, (laughs) why they're not coming back.

   6. HSHarry Stebbings23:30

      Uh, I think the biggest problem that people try and make is they try and go too broad, too quickly. Which is like, mean a lot to a small number of people. Do you agree with that? And how do you think about that first initial ICP and whether it's too targeted and too small or too big?

   7. VPVickie Peng23:46

      Yeah, I think there is a, that's a little bit of an art more than a science, I think. In terms of, you want somebody to deeply, deeply care about the product that you put in front of them. And if you haven't met that bar, it's gonna be really hard to, you know, get to PMF. But I think to your point about having too niche of a product audience, that, then the question is, how many more of those people are out there? And you do have to actually almost calculate this both bottoms-up and tops-down, right, at the same time. If I only ever make Harry Stebbings happy with my product, how many Harry Stebbings, or Harry Stebbings-like people are there out there? And if there's only one of you, then I'm-

   8. HSHarry Stebbings24:21

      None.

   9. VPVickie Peng24:21

      ... zero.

   10. HSHarry Stebbings24:21

       None.

   11. VPVickie Peng24:22

       Right?

   12. HSHarry Stebbings24:22

       None. I'm a unicorn.

   13. VPVickie Peng24:22

       That's not a, that's not a very big business, Harry. So, (laughs) so, you know-

   14. HSHarry Stebbings24:27

       I spend, I spend a lot. (laughs)

   15. VPVickie Peng24:28

       Right? Yeah. Well, okay, so maybe, you know, high ARPU maybe will save you.

   16. HSHarry Stebbings24:32

       (laughs)

   17. VPVickie Peng24:33

       Um, but yeah, I think that it is truly a balance. Like, there's no one right answer. Yes, somebody needs to deeply love your product and yes, people need, there needs to be more than, you know, enough of those people to, to produce a meaningful business.

   18. HSHarry Stebbings24:44

       What was the biggest product mistake that you made, and what was your biggest lesson from it? If we think about tactics, hypotheses, I'm just intrigued. I think we learn a lot from things that don't work out.

   19. VPVickie Peng24:54

       I think I actually fell into the trap early on, um, when I was at Instagram, um, adopting the mindset of ... I kind of like failed one of the first tests, I would say, which is to build the product for the customer. Don't build the product and then find a customer for it. And like, we really did just take this big massive ad platform and tried to water it down, um, for SMBs. And you're imagining, you know, you have big, deep-pocketed advertisers that have millions of dollars, agencies, whole teams that are working on their ad platform, that your whole job title is to work on Facebook ads f- on behalf of this advertiser. And we're taking this platform and then we're shoving it into the hands of a baker who is running, you know, a local bakery and they're baking cakes and, and you know, kouign-amanns, (laughs) and then they're trying to figure out this like ad platform during the day. In what world did we actually think that that would work? I think this was kind of before the awakening or the realization that, hey, like, diluting this product for this person is not going to work. Even if that's the most efficient path, it is not the most effective path. (laughs) And I think it took a few cycles to actually break out of the growth mindset and then break out of the, "Hey, let's take what we have off the shelf and see what we can do with this." We really had to kind of rethink.

   20. HSHarry Stebbings26:02

       That's what I find so funny about like product market fit in the way that I ... Sorry, it's a bit strange given the, the topic, but I think it's such a challenge statement because product market fit changes with every segment, with every product that you release, with every pricing, customer. You know, for you going to SMB with, you know, the Instagram product, you have to refind product market fit-

   21. VPVickie Peng26:22

       Absolutely.

   22. HSHarry Stebbings26:22

       ... in a new segment.

   23. VPVickie Peng26:23

       Absolutely. And it, and I think product market fit, I mean, this is gonna sound very meta. You know, it's a, it's a journey, not a destination. I mean, I truly believe that, in that even growth stage companies, you're either finding product market fit in a new area, you're trying to s- you're struggling and you're fighting to keep it because of what's changing in the competitive environment, or you ha- you're trying to expand it, um, to different places. And so nobody ever actually gets and keeps product market fit. It is an ongoing battle, um, or an ongoing journey, um, that nobody ever really just conquers and says, "Okay, I'm done. I've done that."

   24. HSHarry Stebbings26:53

       Did you really just say it's a journey and not a destination? (laughs)

   25. VPVickie Peng26:55

       I really did. I really did.

   26. HSHarry Stebbings26:57

       Oh, no.

   27. VPVickie Peng26:57

       That's also part of ... Yes, you know, I'm a little cheesy.

   28. HSHarry Stebbings27:00

       Don't w- I know. Hey, don't worry. W- we'll, we'll put that as the title. Yeah, it'll be great. Yeah. Really inspiring.

   29. VPVickie Peng27:04

       Oh, yes. This is good.

   30. HSHarry Stebbings27:05

       We can do a mountaintop illustration as well.
7. 27:09 – 31:10

   Three Different Types of PMF

   1. VPVickie Peng27:09

   2. HSHarry Stebbings27:09

      It's great. So what are the three different types of PMF?

   3. VPVickie Peng27:12

      A lot of PMF content talks about your product as if it existed in a vacuum. It's like, how do you get your product in front of the right customer? How do you get your product used? How do you get your product to the retention number? How do you get your product to hit this benchmark? But what about the market? And specifically, what about the customer mindset? So that's really what this whole framework is anchored on, is the product that you build has to follow from the mindset that your customer, and the relationship that your customer has with the problem that you're solving. And how they, how actively or ... Either actively they're trying to solve it, urgently they're trying to solve it, or how even aware of the problem they are, really factors into how you build the right product and how you get to PMF. So that's kind of the core insight of, of the framework. Um, and so there are three basically archetypes of customer mindsets, uh, that we kind of revealed through just almost like back testing, looking through so many companies that we've worked with and thinking through, "What are the themes that are emerging here, specifically as it relates to customer mindset on this problem statement?" So the three archetypes, uh, we'll start with the first one, which is hair on fire. Uh, I think that's pretty self-explanatory (laughs) in terms of the name. But this customer obviously is in the mindset of, "Help me now. Help me yesterday. I am urgently trying to solve this problem. I'm out there actively comparing my solutions that are available. I'm, you know, doing feature comparisons. And I'm also probably inundated." You mentioned earlier there's millions of data lakes. Uh, you know, "I'm inundated with messaging that all sounds the same, but I need to solve this problem, so what do I do?" And so the hurdle to overcome here mainly is, it's a crowded marketplace. You're not the only person that has discovered this customer has a burning need. Somebody else is tackling and may- multiple people are tackling this problem as well. And so the key hurdle is really differentiation and overcoming noise. And we come full circle. I know we, we touched on that earlier in our conversation. Um, but, you know, the nuance here is not just differentiation in the product, which means that you're, you're actually solving their, you know, problem in a way that is compelling, but also that they get the difference. Because, like we said, there's a million other people trying to sell them something that sounds the same. And so I think the true test of this is whether ...... the customer can say in one sentence clearly what is this point of differentiation and whether it is compelling. Um, because you know, if you still have a gap to that, I think there's still a lot of work to do in a market like this, in hair on fire.

   4. HSHarry Stebbings29:27

      Do you not find that every founder overemphasizes their customer's pain to the problem that they think they have? Every founder I know is like, "Oh, my customers are dying of this pain." And then you speak to customers and they're like, "Yeah, it's like top, top 10, but not massive." Do they not always overestimate it?

   5. VPVickie Peng29:45

      Yes. And I think that's one of the things that we teach (laughs) uh, also in Arc, is ask the terrifying question. And sometimes you are just so ... You wanna believe, right? We've talked about having a, a group, a room of believers that is all kind of, you know, moving and rowing in the direction of, of bringing that belief to reality. Sometimes you gotta have somebody that's sanity checking you, right? And, and there's, there's always at least one terrifying question.

   6. HSHarry Stebbings30:07

      What sort of thing is a terrifying question? Is it-

   7. VPVickie Peng30:09

      Is this problem actually that bad? I mean, I think if you got the real answer to exactly what you just said, that happens so many, so over and over and over again, like this problem statement of this is a huge problem, it is a big deal, it is the most urgent number one problem, budgets are there. And you hear the customer literally tell you the exact opposite. Maybe top 10, it's not that big of a deal. I think the terrifying question is, does this problem actually matter in, in many cases. Um, and I think when you face the terrifying question, you get answers very quickly. (laughs)

   8. HSHarry Stebbings30:43

      (laughs)

   9. VPVickie Peng30:43

      Uh, and I think on the hair on fire, in the hair on fire path, it is, it is specifically the, the differentiation point, um, around, you know, does this problem matter and are you solving it in a compelling way?

   10. HSHarry Stebbings30:53

       I know, I, I love that in terms of the hair on fire statement. My, my, my trouble is like, you know, you said before, like is your customer compelled by your difference as a-

   11. VPVickie Peng31:01

       Mm-hmm.

   12. HSHarry Stebbings31:01

       ... kind of clarifying statement around that. Again, the difference is the really hard part. Product marketing, I think, I think is actually done really poorly still. Again, I'm gonna get

8. 31:10 – 37:58

   Advising Founders in Competitive Markets

   1. HSHarry Stebbings31:10

      in trouble for this.

   2. VPVickie Peng31:11

      Mm-hmm.

   3. HSHarry Stebbings31:11

      How do you think about advising founders on standing out in supremely competitive markets and what works and what doesn't?

   4. VPVickie Peng31:18

      I think I would go back to using their words, not your words. The number of times that I have seen a founder, you know, describe, "This is what my product does. This is what it is. This is, you know, the category we're in. This is, uh, the feature set we have." And then you go and ask the customer and say, "How would you describe this product?" And it is completely orthogonal to the way that the founder either describes it or thinks it exists in the world. And then they think, you know, "Hey, it fits, for me, it fits here. For me, it is this useful. For me, this is the biggest benefit." And the, the words just don't align necessarily.

   5. HSHarry Stebbings31:51

      (inhales deeply) Okay. Question for you.

   6. VPVickie Peng31:52

      Yeah.

   7. HSHarry Stebbings31:53

      What do you do when you've got horizontal products? You know, I look at your Notions, I look at your airtables.

   8. VPVickie Peng31:57

      Mm-hmm.

   9. HSHarry Stebbings31:58

      They're not vertically applied to problem statements. And so it's like very difficult to come up with compelling, uh, catchall statements that you can put on a billboard. How do you think about effective horizontal product marketing?

   10. VPVickie Peng32:10

       I would actually, I would challenge that in that at least every, every truly engaged and evangelist customer has a way that they describe Notion and why they think Notion is head and shoulders above the rest. And I would, basically what you have with a horizontal product is you have to collect that data point across a lot of different customer profiles and use cases and pull together a thread of similarity across those. But you still have to do the work of understanding how a customer uses that product. Same thing with, I always use Excel as the example because Excel is, you know, there's so many different ways that you could use Excel, but it didn't start as a, "Hey, here's a spreadsheet. You know, use it for whatever you want." Right? There was somebody that was like a more compelling and deeper use case for that, whether that was, you know, financial analysts or people that really needed to manipulate data, um, you know, to do their day, day-to-day job. You have to actually pull the true value prop and the evangelism out of people that actually see that value prop clearly.

   11. HSHarry Stebbings33:04

       Challenge accepted. (laughs)

   12. VPVickie Peng33:08

       (laughs)

   13. HSHarry Stebbings33:08

       That was the most into ... You were like, "I'm challenging." I'm like, "Oh, I, I didn't realize it was a challenge or a jewel." Uh, how wonderful. Uh, I, I wanna go to the second, which is a hard fact. What's a hard fact, Vicki?

   14. VPVickie Peng33:21

       Yeah. A hard fact, I think I would, I, I love that this comes right after hair on fire because these people are, you know, "Please help me now." Hard fact customer mindset is literally we use the phrase, "It is what it is." It's just resignation. It's not the best. Yes, it's a problem statement, but I hacked together something, I'm using something that has existed for 20 years. There's no better way to do it. You know, I've got what I've got. It is what it is. And this is a hurdle of not noise and crowded and competition, but this is a hurdle of habit. It's a hurdle of inertia. It's a hurdle of people who have just lived their lives this way and they're not... And this is, this is I think the most, um, eye-opening path, I think, for many of the founders that we walk, um, through this framework with, that there is any other path outside hair on fire.... because I think the conventional wisdom is build something people want. And so that means you go out and build a thing that people urgently are saying that they need, um, which is not what hard fact is. Hard fact is, somebody has accepted that this is just a hard fact, a hard truth of their life, and you're trying to get them to accept that, "No, this is a hard problem that I have now solved for you."

   15. HSHarry Stebbings34:26

       What do you think is an example of that? "It is what it is."

   16. VPVickie Peng34:29

       I think marketplaces actually fall into this, um, mindset very clearly in that I need a cab, and if there's no yellow cab on the street, I'm standing out here for five minutes. Can't find a cab, guess I have to take the subway or walk. And it's just like, "It is what it is." That's just how it works, right? And you have something like Uber come along and say, "Actually, there's an completely different source of supply that you have not thought of for getting you from point, point A to point B." I actually started my career in investment banking, um, and I used to work in downtown San Francisco. And so I would get out of the office at 2:00 or 3:00 AM. I would call up a cab company, and I lived, um, not in the city, but I lived, like, across the bridge in, in Berkeley. And, um, these cabs would come and show up to the office, and then they would see that I'm going over the bridge and they're like, "I don't want to go over the bridge." And they would just leave me.

   17. HSHarry Stebbings35:11

       (laughs)

   18. VPVickie Peng35:11

       Um, and I'd have to call oft- sometimes two, three, four cabs at 2:00 or 3:00 in the morning to get one to agree to take me across the bridge. And that's how I lived my life, and I think that's one of these things about hard fact companies is, why was I living my life that way? (laughs) Um, and yeah-

   19. HSHarry Stebbings35:26

       Are, are they not inherently so hard because you have to fundamentally reprogram human brains around habits?

   20. VPVickie Peng35:34

       Yes. And it may sound almost like, I think as a founder, "Oh, wow, there's not a bunch of competition to elbow out of the space. Um, that sounds great." But no. I mean, I think breaking people's habits y- could, in many cases, be way harder than kind of standing out amongst competition.

   21. HSHarry Stebbings35:49

       Well, and I think there's, like, the inherently entrenched incumbents, which is, I think, too-

   22. VPVickie Peng35:53

       Absolutely.

   23. HSHarry Stebbings35:53

       ... which is like banking traditionally was always-

   24. VPVickie Peng35:55

       Exactly.

   25. HSHarry Stebbings35:55

       ... and phone contracts. It's like-

   26. VPVickie Peng35:57

       Yep.

   27. HSHarry Stebbings35:57

       ... you know, AT&T. It is what it is. They're a pain.

   28. VPVickie Peng35:59

       It is, yep.

   29. HSHarry Stebbings35:59

       The customer service sucks, but whatever. But AT&T, the infrastructure requirements, the brand, I mean, it's just-

   30. VPVickie Peng36:06

       Exactly.
9. 37:58 – 46:59

   Future Vision

   1. VPVickie Peng37:58

      true.

   2. HSHarry Stebbings37:58

      I want to move to the third, which is r- s- again, kind of completely different one. It's future vision. What is future vision and how does that compare?

   3. VPVickie Peng38:07

      So future vision is a place where you p- have some deep expertise in some area that causes you to see a world that not everybody else sees yet. And so this is, you know, think Elon Musk, think Jensen Huang, you know. Think, yeah, these, these are the types of folks that not only see a product that can change people's lives, but a paradigm that can change people's lives. And the really, the thing, you know, we said in the first path, the hurdle to overcome was competition. In the second, the hurdle to overcome is habit. In the third, it's actually disbelief. It's, "Sure, I'd love flying cars, I'd love teleportation, I'd love all kinds of things. Great, yeah, but I'll believe it when I see it."

   4. HSHarry Stebbings38:44

      Mm-hmm.

   5. VPVickie Peng38:44

      Um, and I think your job as a founder in this path is, is mostly kind of validation to prove the val- validity of your kind of vision of the future, A, like almost literal technical validity. And then secondly, applying that and finding the right stepping stones to your ultimate vision. Um, and like, you know, people say, "What does that mean?" Uh, I like to use OpenAI as an example here. Their ultimate vision of the future is that AGI exists, right? And so it's crazy to think that ChatGPT and all their GPT models were a stepping stone to realizing the vision of AGI. They found a commercial application that solved problems that people were compelled by, uh, to adopt for, you know, one use case or another, on their way to the actual ultimate future vision, which actually hasn't come to fruition yet. And this is something that, you know, future vision founders, there's one thing about going into a cave for 10 years and emerging, and then everybody wants the thing that you have. But there's another thing to actually prove the hypothesis in bite sizes and in milestones and in stepping stones and finding the right stepping stones.

   6. HSHarry Stebbings39:45

      I would say 90% of the companies that I see as an investor are in the first category, which is obviously-

   7. VPVickie Peng39:52

      P- purify.

   8. HSHarry Stebbings39:53

      ... the hair on fire.... hair on fire. Yeah. Is that true for you?

   9. VPVickie Peng39:55

      When we actually look through our portfolio, I would say it was actually pretty representative across the different paths, surprisingly enough. Hard fact is really, um, comes through a lot, I would say, actually, surprisingly so. A lot of founders find, that's why I think a lot of founders found it so illuminating because they realized, "Wait a second, so all this struggle I have with skepticism and kind of waking people up to like, 'You doesn't have to be this way,' it's because I am actually not on the hair on fire path." And so I think that was the biggest aha moment I saw from founders that actually were on the hard fact path, not realizing that that path existed. So, it, it, the portfolio was actually pretty representative, I s- I would say, across the paths. One interesting thing I would add is that some, I would say both kind of from a founder perspective and also from an investor perspective, certain investors kind of like really gravitate towards certain paths.

   10. HSHarry Stebbings40:41

       Oh, yeah, hair on fire is like, I think is an inherently shit one to be part of.

   11. VPVickie Peng40:44

       (laughs) Why do you say that?

   12. HSHarry Stebbings40:46

       Uh, (laughs) wh- why? You require a lot of marketing spend to actually differentiate. That's if you even have great product marketing, which I think is very rare. You have incredibly competitive markets.

   13. VPVickie Peng40:57

       Yeah.

   14. HSHarry Stebbings40:57

       And so your retention is generally lower and it's harder to keep them. Uh, also, people forget about the marginal cost of software dev, and if there's hugely competitive markets, they will expect continuous, incredible improvements very frequently-

   15. VPVickie Peng41:09

       Yeah.

   16. HSHarry Stebbings41:10

       ... versus a much more stale market where there's not many alternatives. So actually, your margin really changes because you have to have-

   17. VPVickie Peng41:16

       It definitely does. Yeah.

   18. HSHarry Stebbings41:16

       ... continuous amazing software updates, amazing CS.

   19. VPVickie Peng41:19

       Yep.

   20. HSHarry Stebbings41:20

       They're inherently worse businesses -

   21. VPVickie Peng41:21

       Price comparison's really low.

   22. HSHarry Stebbings41:23

       Yeah, and so, and then for business, and then also, you've got no pricing. Sorry, I'm just really getting on a high horse.

   23. VPVickie Peng41:27

       (laughs)

   24. HSHarry Stebbings41:27

       Your pricing power is shit.

   25. VPVickie Peng41:28

       I feel your energy around this, Harry.

   26. HSHarry Stebbings41:29

       Yeah.

   27. VPVickie Peng41:30

       Well-

   28. HSHarry Stebbings41:30

       The commoditization is real, uh-

   29. VPVickie Peng41:32

       But don't forget, though, that the demand is given, right? That's the other, like there's pros and cons to each. Like, it's kind of like, um, oh, another thing that I, uh, you know, get, go really deep on the rabbit hole on is, uh, personality tests and frameworks. But, but there's not, you know, you say in those that there's not a good one or a bad one, right? Like, there's just pros and cons to each. And the pros here, like you said, you've run into so many founders that say they're solving a problem that's number 10 on people's lists. In hair on fire, in theory, the demand is clearer, which is why it is hair on fire.

   30. HSHarry Stebbings41:58

       Mm-hmm.
10. 46:59 – 52:53

    Quick-Fire Round

    1. VPVickie Peng46:59

    2. HSHarry Stebbings46:59

       Yeah. Uh, okay, I wanna do a quick fire round. So I say a short statement and you give me your immediate thoughts. Now, I have no friends-

    3. VPVickie Peng47:04

       All right.

    4. HSHarry Stebbings47:05

       ... and have probably lost every founder that's building in dev tools for the rest of my career.

    5. VPVickie Peng47:09

       (laughs)

    6. HSHarry Stebbings47:09

       Uh, don't wanna-

    7. VPVickie Peng47:09

       You can edit that out. It's fine, right? (laughs)

    8. HSHarry Stebbings47:11

       No, I never wanted to meet them anyway. It's fine.

    9. VPVickie Peng47:13

       (laughs)

    10. HSHarry Stebbings47:15

        Uh, (laughs) uh, literally, b- do my teams listen to this? And they're like, "Oh, Harry."

    11. VPVickie Peng47:19

        Not again. (laughs)

    12. HSHarry Stebbings47:20

        Not again. You said you didn't like founders? Christ. Uh, that one we do edit out. Um, okay, first one, what's the most common reason you think founders don't get product market fit? Like one reason.

    13. VPVickie Peng47:34

        Not solving a problem that matters with a solution that's compelling enough. (laughs) That's what, like 10 words or something like that.

    14. HSHarry Stebbings47:41

        Yeah.

    15. VPVickie Peng47:41

        But you-

    16. HSHarry Stebbings47:42

        No, that's good.

    17. VPVickie Peng47:42

        You either, you fail on part A or you fail on part B or you fail on both.

    18. HSHarry Stebbings47:46

        It's funny, I sat down at the start of the year and I said to the team, "I wanna have a smaller audience. I want us to deliberately get smaller as a media company because I want to mean more to fewer people."

    19. VPVickie Peng47:55

        Yeah.

    20. HSHarry Stebbings47:56

        Yeah. Uh, okay. What's the biggest product marketing mistake you see founders make?

    21. VPVickie Peng48:00

        I'll, I'll go back to, I'll say it again, say it in their words, not yours. Your words, yo- ye- the, the way that you see your product, you are too close to this thing, it is not actually how they experience it. And in some cases, like in these markets that you're talking about, like dev tools, you know, where you believe that you are your own customer because you are also an engineer, like I think we just have to break ourselves from that. Like you've gotta hear it in their voice.

    22. HSHarry Stebbings48:19

        God, I love dev tools. Um, uh-

    23. VPVickie Peng48:22

        There it is.

    24. HSHarry Stebbings48:23

        ... what, (laughs) what would you say is the biggest mistake founders make when hiring product teams?

    25. VPVickie Peng48:27

        The thing that I actually warn both founders and product operators against is joining as a product leader too early in a company. And what I mean by that is, there's kind of three layers of product. Um, there's product vision, there's product strategy and there's product execution. And when you are very, very early on in a company, I would hope that at least the first two come from the founding team, um, some is anchored on the founding team. And if you're joining as like to provide one or more of those things, you may run into, there, there's often some tension basically between what swim lanes people live in. Um, and I've seen that happen, where the founder thinks that they're ready to give up product vision or product strategy and it turns out that that's not actually the case. And it's a, it's a difficult conversation to have once you find yourself there.

    26. HSHarry Stebbings49:12

        Tell me, uh, what other function does product have the most tension with?

    27. VPVickie Peng49:16

        I think it really depends on the context, and it really depends on how willing the other functions are to step out of their own function. I believe in a cross-functional team, sure, you know, my job is to do product strategy. Like I kind of set the stage for why we're solving this problem and what the problem is. And then maybe an engineer's job is to figure out what we're actually gonna do to solve the problem and how we're gonna implement that. But we all have a say in all of those voices and rooms. And so I think that the tension usually comes from, "That's your lane, this is my lane. Stay in your lane. Here's the wall." You know, and, and, and I think that's even a bigger mac- micro- you know, macrocosm when you think about product development versus sales or marketing or some of the more business functions. It's like, "You stay in your lane, I'll stay in my lane." I think many of the tensions arise there, and are easily, maybe not easily, but they are definitely, you know, surmountable.

    28. HSHarry Stebbings50:04

        So a friend calls you up, yeah, and they've got their first day as a new product leader at this new job tomorrow. What advice do you give them going into day one as a new product leader?

    29. VPVickie Peng50:14

        I would go back to conviction and action. I think, um, the first thing you should do is build conviction in your problem and your customer. So probably meet a bunch of customers, figure out how to get in front of the customer, get r- absorb all the user research that's been done. What are we doing here? What does success look like? Who, who is this person and what do they care about? And then the action side. So that's outside the building. I think action is more inside the building. How do things get done here? How do we make decision? Who has influence? How does the process work? Um, how do I fit into this thing to actually make things happen? And I think that is, you know, mine actually, it's probably the more challenging, um, job for somebody just dropping into a role for the first time.

    30. HSHarry Stebbings50:50

        Okay, final one, and you can have a second to think about it if you need to. Which product strategy recently have you been most impressed by?

Episode duration: 52:53