The Decision Stack: A Framework for Strategic Alignment in Product Management

Introduction

In the world of product management, making good decisions is crucial to success. But where do these decisions come from? How can product leaders ensure they're making the right choices and inspiring their teams along the way? Enter the Decision Stack, a mental model for strategic alignment developed by Martin Eriksson, a titan of product management thinking.

What is the Decision Stack?

The Decision Stack is a framework that helps ensure alignment from the top to bottom of an organization. It connects the most senior leadership's vision down to the day-to-day execution, while also providing alignment from bottom to top. This allows individual contributors to understand why their work is important and how it connects to the bigger picture.

Martin Eriksson explains: "It's a mental model for strategic alignment and really it's about ensuring that we have that alignment from the top to bottom. So from the most senior in the organization, from your kind of vision, your most high-level view down to the thing that you're executing every single day."

The Components of the Decision Stack

The Decision Stack consists of five key components:

1. Vision
2. Strategy
3. Objectives
4. Opportunities
5. Principles

Let's explore each of these components in detail.

Vision

A vision statement sets the direction for the company and motivates people. It should be aspirational but not necessarily achievable in the short term. A good vision statement:

• Gives a big direction
• Motivates people
• May be a bit fluffy, but that's okay
• Doesn't need to be achievable in our lifetime

Eriksson provides an example: "One of my favorite visions is actually Oxfam, which is a UK charity, and their vision is a world without poverty. Now that would be amazing if we could do that in our lifetime. Sadly, I don't think that's possible, but it's also imagine what an amazing kind of mission that is to go to work for every day."

Strategy

Strategy is about making choices. Eriksson defines it as "a coherent set of choices about what we're going to do to achieve our vision." A good strategy should:

• Make clear choices
• Be coherent across different aspects of the business
• Connect back to the vision

One of the biggest mistakes companies make with strategy is not making choices. They want to do everything or claim that the entire world is their customer. This lack of focus can lead to confusion and ineffective execution.

Objectives

Objectives break down the strategy into more actionable, trackable goals. Many companies use OKRs (Objectives and Key Results) for this purpose. Objectives should:

• Flow from the strategy
• Be measurable
• Empower teams to figure out what they need to build

Opportunities

Opportunities represent the potential areas for improvement or innovation that align with the strategy and objectives. These could be:

• Customer needs
• Market gaps
• Technological advancements

Principles

Principles, sometimes called values, guide decision-making within the organization. Eriksson argues that many companies' values are useless because they don't actually help make decisions. Good principles should:

• Help teams make day-to-day decisions
• Reflect the company's strategy
• Highlight trade-offs the company is willing to make

For example, Eriksson shares a principle from his time at Monster.com: "We build it job seeker friendly because if the job seekers come, the recruiters have to follow." This clear principle helped the team make decisions without lengthy debates.

The Importance of Strategic Alignment

Strategic alignment is crucial for several reasons:

1. It ensures everyone in the organization is working towards the same goals.
2. It empowers teams to make decisions that align with the company's vision and strategy.
3. It helps prioritize work and allocate resources effectively.
4. It provides context for individual contributors, helping them understand the importance of their work.

However, many companies struggle with strategic alignment. Eriksson cites a Harvard Business Review article stating that 95% of employees don't know what their company's strategy is. This lack of alignment can lead to inefficiencies, conflicting priorities, and missed opportunities.

Challenges in Implementing the Decision Stack

While the Decision Stack provides a framework for strategic alignment, implementing it can be challenging. Some common obstacles include:

Lack of Clear Strategy

Many companies don't have a clear strategy or haven't made the necessary choices to focus their efforts. Eriksson estimates that of the companies he's worked with directly, about 75% had no strategy by his definition of having made any choices.

Poor Communication

Even when a strategy exists, it's often not communicated effectively throughout the organization. This can lead to misalignment and confusion among teams.

Short-term Thinking

Pressure for immediate results can lead to decisions that prioritize short-term gains over long-term strategic goals. This is particularly common in sales-driven organizations.

Misaligned Incentives

Different departments may have conflicting incentives that work against strategic alignment. For example, sales teams might be incentivized to pursue any deal, even if it doesn't align with the company's strategic focus.

Improving Strategic Thinking in Product Management

Eriksson notes that many product managers struggle with strategic thinking. This may be due to:

• Historical focus on execution rather than strategy
• Lack of experience in strategic decision-making
• Overemphasis on features and roadmaps rather than broader strategic goals

To improve strategic thinking in product management, Eriksson suggests:

1. Focus on customer needs and problems rather than features
2. Start conversations with strategic bets and hypotheses
3. Use data and evidence to support strategic decisions
4. Practice connecting day-to-day work to broader strategic goals

The Role of Product Leaders in Strategy

Product leaders play a crucial role in developing and implementing strategy. They should:

1. Develop product strategies that align with the overall business strategy
2. Use their product strategy as a starting point for broader strategic conversations
3. Bring customer insights and data to strategic discussions
4. Help translate strategy into actionable plans for their teams
5. Coach their teams on strategic thinking

Eriksson advises: "A good product team should be able to put together a strategy and even a vision for their product. The big challenge then is not to just kind of go and execute that and not tell anyone else in the company, but to use that almost as a strawman to have the bigger conversation with the rest of the organization."

Balancing Strategy and Execution

While strategic thinking is crucial, product managers must also balance it with effective execution. This involves:

1. Breaking down strategic goals into actionable tasks
2. Prioritizing work based on strategic importance
3. Making trade-offs when necessary
4. Communicating the strategic context of day-to-day work to the team

Eriksson warns against getting too caught up in roadmaps and feature discussions at the expense of strategic thinking: "I kind of want roadmaps to die because we as product people get too obsessed about our roadmaps, and roadmaps inevitably pull us into a feature conversation."

Dealing with Conflicting Priorities

One common challenge in implementing strategy is dealing with conflicting priorities, especially in B2B or enterprise environments. For example, a salesperson might push for a feature that would secure a large deal but doesn't align with the overall strategy.

Eriksson suggests handling these situations by:

1. Having clear strategic choices agreed upon by the leadership team
2. Emphasizing trade-offs and implications of deviating from the strategy
3. Using data and evidence to support strategic decisions
4. Escalating decisions to the executive team when necessary
5. Considering whether new information might warrant a change in strategy

The Importance of Incentive Alignment

To support strategic alignment, companies need to ensure that incentives across different departments are aligned with the overall strategy. Eriksson notes: "That classic sales-product standoff comes up a lot because sales have short-term incentives. They're very incentivized to go get that million-dollar deal, and product is thinking much more long-term."

Leadership teams should consider how to align incentives across the organization to support strategic goals.

Conclusion

The Decision Stack provides a valuable framework for achieving strategic alignment in product management and across organizations. By clearly defining and communicating vision, strategy, objectives, opportunities, and principles, companies can empower their teams to make better decisions and work more effectively towards common goals.

However, implementing this framework requires ongoing effort, clear communication, and a willingness to make tough choices. Product leaders play a crucial role in this process, bridging the gap between high-level strategy and day-to-day execution.

As Martin Eriksson concludes, "The more we can step away from opinion and the more we can step away from that kind of view of the world and make it more about data, the better." By focusing on data, customer insights, and clear strategic choices, product managers can improve their strategic thinking and drive better outcomes for their products and organizations.

For those interested in learning more about the Decision Stack and strategic alignment in product management, Eriksson is writing about these topics at thedecisionstack.com, with a book on the subject expected in the near future.

Article created from: https://www.youtube.com/watch?v=sy5bdllN90A