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How to see micro opportunities in macro events
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As a product manager, it’s common to get assignments such as:
Machine learning is getting exponentially better at predicting outcomes. Figure out what to do with our product.
We’ve noticed a new consumer trend: teens are watching more video. Figure out what that means for our product.
How do you take a macro trend and shape it into an actionable opportunity for your team’s roadmap? We’ll start with examples first:
Lululemon and the “super girls”
Lululemon’s founder, Chip Wilson, built the $44b company by developing a thesis around identifying and understanding various market segments. He drew from historical context, defining a macro trend that enabled him to design into the future of a specific target market. In his autobiography, Little Black Stretchy Pants, he says:
It occurred to me that in the ‘60s and early ‘70s, the birth control pill had come into widespread usage. The pill immediately transformed the sex lives of anyone under the age of 40, sparking what is commonly known as the Sexual Revolution. Women suddenly had significant control over contraception. If they did want children, they could decide when and how many. There was a newfound sense of independence in this ability to delay childbirth. There was also the opportunity to pursue careers that had, to date, been dominated by men.
Birth control pill comes into widespread usage, and as a result:
Women can decide whether and when they want children.
Women have the opportunity to pursue careers that had traditionally been dominated by men.
As women gain economic independence, divorce rates increase.
A “Power Women” female market segment is created – women who want to be invested in, rise to the top, and treated the same as their male counterparts.
Daughters raised by Power Women spend weekends with their newly-divorced father who have no manual for how to be a single dad, who do what they know best: get their daughters into sports and become their coaches and mentors.
A “Super Girls” female market segment is created – a fit 32-year old with an amazing career and spectacular health. She travels for business and pleasure, owns her own condo, has a cat. She’s fashionable and can afford quality.
In the ‘90s, there was Nike, there was Adidas, there was Reebok, but there was really nothing that catered to women who wanted workout clothes that actually fit and felt good.
I knew that the Super Girls would have the professional jobs that would pay them well. I knew that they would invest in their own wardrobe. They would have money, devotion to health, organic food, and athletics. They were fit and waiting four to eight years longer than previous generations of women to have babies, they could invest in their wardrobes without any concern of how their bodies might change with pregnancy.
There was a propensity for Super Girls to buy fewer, better-quality wardrobe staples that would stay in style longer. I knew that after owning a Lululemon piece for five year, women would know it was the best investment they ever made.
The macro trend doesn’t have to be a change in consumer tastes, it can also be a regulatory change.
Self-made billionaire Sam Zell and radio legislation
In his autobiography, Am I Being Too Subtle, self-made billionaire Sam Zell describes how he sees micro opportunities in macro events. He identifies a clause in a regulatory change, defines the 1st and 2nd order consequences to carve out a market opportunity, and ends up making a 1,236% return in the radio industry.
Previously, the Federal Communications Commission (FCC) rule was that no company could own more than twenty radio stations nationwide.
Congress passes the Telecommunications Act
In Feb 1996, Congress passes the Telecommunications Act. Buried in the legislation is a clause that eliminates the twenty radio station cap and replaces it with a 50 percent market-share cap – companies could buy as many radio stations as they wanted as long as they didn’t own more than 50% in a given market geography.
While the rest of the radio industry deliberates about what the telecom bill meant, how it would be implemented, and whether it was a good change or a bad change, Sam turns to his partner and says:
“I want you to go out and buy every radio station you can get your hands on in America. You buy them and I’ll figure out how to finance them.”
Timing and execution makes all the difference. Within three years, his firm goes from owning 17 stations to 243 and own some of the hottest radio personalities, from Rush Limbaugh to Michael Reagan. Pretty much every broadcasting company expresses interest, including CBS and Clear Channel. In 1999, he ends up selling his radio arm to Clear Channel for $4.4 billion in stock.
While these examples are illustrative, they can be difficult to put into practice, especially when many variables appear speculative.
Once you’ve defined a micro-opportunity, how do you increase your confidence on it?
Increasing your confidence is important not only for yourself, but also for others when it comes time to convince them and take them along for the ride.
1. Measure the new opportunity quantitatively.
To measure if the micro opportunity is relevant to your roadmap, treat it as a product problem: what is the underlying user behavior you are trying to measure and how do you quantify that?
For example, with the Lululemon example, you would be interested in understanding:
Are there more women with more income?
Are these women spending their income on themselves, especially in clothing and fitness?
Is there a hint of women's clothing and fitness segment growing? How would you quantify this?
Is the number of women who spend money on fitness increasing? Is the amount of money per person increasing?
2. Measure the new opportunity qualitatively.
To quickly refine your opinions about a new and evolving space, research will only get you so far. Test and refine your opinions by:
Talking to relevant people in the industry
Getting into online communities where conversations happen
Implementing a mechanism to stay up to date on the trend’s broader category researching shifts in demographics, legislation, or technology in the space
For example, I have a mentor whose full-time job is managing hundreds of million of dollars of her own money. She constantly has business ideas that she’s spinning up. I was working out of her office recently, and it was incredible to see her work. When she came up with a new idea, say in the art world, she wouldn’t spend time spinning her wheels researching on the internet — rather, she’d call up an industry expert friend to get his thoughts. If the friend wasn’t knowledgeable, he’d introduce her to someone else, like a lawyer who works in the space, and she’d meet with them that afternoon.
She’d talk to experts to rapidly test her assumptions and ramp up on a new space. She’d have more than ten calls everyday, which created a tight feedback loop to test her thinking, and allowed her to go from 0 -> 1 faster than she would have sitting there doing internet research. By the end of these conversations, she had a clear product hypothesis that she could execute on.
If it’s overwhelming, narrow it down
This might seem like a lot to chew on, but you can start anywhere. Choose an aspect of change you are interested in (i.e. a clean way to think about it is: (1) demographic, (2) regulatory, or (3) technological change) and an industry you think it will impact. Constrain your thinking to a small sliver of that industry, which is much more solvable than broadly asking how the event will change an entire industry.
Thanks for reading, and if you have any stories or thoughts around seeing micro opportunities in macro events, shoot us a message.