What's your Company's
Appetite for Risk?

​Dear Reader,​

Happy New Year! I hope you had a good time off during the holidays with a chance to reflect and recharge. I'm still recovering from over-caffeinization through The Barn's Christmas Coffee Selection and am so happy to be back to writing this newsletter. Onto this week's essay.

The reason the adoption of new product operating models moves slowly in your company or fails completely isn't that you have the wrong model. It's the missing willingness to move from seeking certainty to reducing uncertainty.

In the everyday life of product teams, this shows up as something I call appetite for risk.

Appetite for risk is an organization's actual willingness—not stated willingness—to accept the costs of moving faster.

Here's what's going on behind it and how to deal with it.

The Real Tradeoff

Even if practices like evidence-based decision-making aim to reduce risk, they don't aim to eliminate it. And that's the trade-off you have to get comfortable with: For more modern ways of working in product, that also deliver results for customers and the bottom line faster, you have to trade certainty for responsiveness.

Increasing the speed of decision-making about implementing a new idea comes from proxy data through qualitative and quantitative experiments. Can the company handle never knowing for certain if this is the right idea?

Getting significant results from a split test faster means exposing more users to that variant—including the risk that it converts worse than what you have today. So the trade-off for faster insights is potentially exposing a larger group of customers to a worse converting experience.

When your company backs off from these trade-offs, they might still call it experimentation, but actions don't match.

The Incentive Check

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What's going on behind this lack of willingness to make the tradeoff can best be explained by this quote:

If your C-level is bonused on hitting dates, revenue predictability, and avoiding public missteps, they will back off when experimentation costs appear. Every time.

Appetite for risk isn't about loading your plate at the buffet. It's about what you can actually digest. Most companies pile on "experiment more" and "move faster" without the stomach for what that requires.

Teams sense this. They learn to look like they're experimenting without ever placing a real bet.

Your company might think it wants you to experiment, but can it align the way C-level is incentivized with it? Can they structure teams accordingly? Can they agree on the degree of autonomy and the level of intervention for product teams?

One Move

Before you ask teams to move faster, answer this: Are we rewarded for learning velocity or execution certainty? Your answer determines whether experimentation is real or theater.

And if you're a part of an organization that wants to move faster, but you have doubts about the alignment with your capabilities, make the trade-offs clearly visible to stakeholders upfront:

Before starting, name the uncertainty you're accepting: 'We're deciding on 6 interviews, not 12. Survey data is directional, not significant. If we need more certainty, here's what it costs in time.' Then ask for resistance, not agreement. Because, after all, your job is not to make everyone happy.

The question isn't whether your company says it wants to experiment. It's whether it can stomach what experimentation actually costs.

Thank you for Practicing Product,

​Tim​

1,5 Weeks left to join my In-Person Workshops in Berlin

I'm excited to bring my beloved in-person workshops back to Berlin in two weeks. There are a few tickets left, and you can choose between 1-day workshops on Product Strategy, Product OKRs, or Product ​Discovery, or opt for the full 3-day experience for you or your team.

(reach out for custom team quotes)

If you consume one thing this week, make it this...

Who is Tim Herbig?

As a Product Management Coach, I guide Product Teams to measure the real progress of their evidence-informed decisions.

I focus on better practices to connect the dots of Product Strategy, Product OKRs, and Product Discovery.