Getting to grips with the psychological effects of loss aversion.
A recent article by Jesse Weaver (director of entrepreneurial design at CMCI Studio) offered an interesting insight into how the psychological phenomenon of loss aversion affects today’s Product Managers.
Loss aversion, a term introduced in 1979 by economists Kahneman (Thinking, Fast and Slow) and Tversky, refers to the basic human tendency of disliking losses about twice as much as enjoying gains.
Numerous occurrences of loss aversion have been documented in a variety of business contexts. As such, it can also influence PMs and their roadmaps during — now widely used — iterative product development cycles.
Shipping a product to customers as quickly as possible is often done through a Minimum Viable Product (MVP) approach. Effectively being a ‘stripped-down’ version of a certain product vision, the development surrounding an MVP offers a good example of loss aversion. Even if an MVP proves successful through validation, it can ultimately feel like a loss to the product team — as they will dislike having to omit many ‘cool’ features.
Weakness-based Product Management
In the case of weakness-based product management, PMs strive to deliver value through an additive strategy — fixing what’s broken or what they believe is missing, e.g. because competitors have similar features. After the MVP is live, this mindset compels PMs to win back (perceived) lost value by adding functionality that was previously omitted. This effect can be further amplified when analyzing data and feedback, as focusing on losses rather than gains can make PMs prioritize fixing areas that don’t work above areas of strength. Some PMs might even look for signals that confirm a feeling of loss, albeit subconsciously.
The danger lies in a situation where PMs focus not on further improving the aspects users really like, but on fixing things they don’t like. Swimming against the current, they end up with a product that rates okay in most aspects, instead of a product that sticks out as awesome in the aspects your users actually value.
Strengths-based Product Management
Strength-based product management, as Weaver puts it, “means leveraging the existing behaviour of your users to maximise the value they get from your product. It’s about capitalizing on momentum, instead of trying to create it.” He offers Instagram as an example, as their features have been kept very limited for a long time, enabling them to focus on leveraging existing value through additions like new filters and faster upload processing, while keeping the customer experience relatively straightforward.
By adopting a strength-based product strategy, PMs swim with the current. They analyse what their users already like, and build on the value they’re already delivering.
Change your mindset
Weaver lists three things to change if you find yourself practising product management from a weakness-based perspective.
1. Analyze what works
Focus on the features that are already driving your business goals and make those the focus for your roadmap.
2. Don’t add, but subtract
View weak metrics as opportunities for simplification instead of improvement. Chances are, those features are taking up space that your high-impact features deserve. Often, products created through weakness-based product management have bloated, underused feature sets that negatively impact UX and ultimately business goals. In this case, a strategy of subtraction can restore a product’s core strengths.
3. Understand your strengths
Measure the impact of your product’s features on your business goals, identify the most valuable features, and adopt a strengths-based approach to product management. If you lack the data science capacity or the right tool to quantify this, Weaver suggests starting with a simple matrix on which you plot your product’s features: one axis represents the frequency of use, the other the number of people using it. Find your core value features at the upper right quadrant (both high), and ask yourself if your focus lies there. If not, chances are you might benefit from a change in mindset. Avoid wasting time on features at the bottom left (both low) and even consider removing them.
As Weaver concludes: “the value you gain will more than make up for anything you lose by cutting the things that are holding you back.”