Why Every Product Manager Should Study Poker
If you’re a good product manager, you’re probably a good poker player too!
Developing and launching products is like playing poker. Poker players need to be able to judge a hand, read the table, know their opponents, and gather the right data to decide how to play their hand.
Product Managers should be able to assess their product(s), understand the market, their competition and determine a strategy to approach their market with the product. The skills and strategies you learn in Poker, may actually help you to re-think the way you manage products.
During the peak of the Poker hype (at least it was a hype in The Netherlands) I also played poker (Texas Hold 'Em). Mainly online. Because I wanted to grow my skills I’ve read several books about theory and strategy within Poker. Later in my career when I switched to Product Management I started to see parallels between playing poker and managing products.
In poker and product management you have to make the best decision with the limited available information you have. At the same time you try to gather more information as you develop your product and study the market.
As a product manager you have to make the best decision with limited available information
In this article I’ll look at a few strategies behind playing poker, and how those can be translated to Product Management.
Judge your hand
One of the first decisions to make in a poker game is to decide whether you want to play the hand you are dealt. ‘AA’* a.k.a. pocket rockets is the best possible hand to start with.
However, the chance to be dealt this hand is small (4.5%). If you would only play this hand you would lose money due to the blinds system that forces you to put money into the game at every round. 'AA' you can play at any time. But there are also cards that you can be dealt that are super strong, yet not the best.
You should also learn that you need to play those cards. KK, QQ, AK are among those that are strong and you will win with most of the time.
What can Product Managers learn from poker players about judging your hand?
The same logic applies to developing products. You don’t need to have the best product in order to be successful in a market. But you have to understand the potential of a product:
- in which markets is this a good product
- what is the potential for future growth of this product
You don’t need to deliver the best product in order to be successful.
There are various methods available for product managers in order to judge products and features. One common method used in software development is to the Moscow method.
Features are qualified as “must-have”, “should-have”, “could-have” and “won’t-have”. Although that methodology easily results in a battle of different features, endless discussions, it is an easy to understand way of judging a product and its features.
Back to our poker-analogy. If you would focus only on the “must-have” features and setting that as your baseline you would only play AA.
You can also turn the reasoning around: what is the minimum hand you want to play? Does the product lack any features that make it unusable, or does it actually does a decent enough job in most domains? If that is the case, it may be worthwhile to release or launch the product anyway, as it already delivers value to part of your users. Remember that even an above-average hand like JTs can win a hand in a round of poker.
Leverage your position
As you advance in playing poker you will learn about the value of position.
The later you are to make a decision in the game, the stronger your position is. Consequently you can play with weaker hands if your position is better. For example, our earlier mentioned JTs may be a hand that you fold when you are early, but it may be worthwhile to play when you have seen what other players have done.
It is a hand with a lot of potential, because you may hit a street or a flush. This means that your course of action depends on which position you are at the table. If three players have raised in front of you,
it’s a wise decision to fold your hand: there is a lot of strength already shown. The chance that one of the other players has a better hand is very likely. However, if you are the first to make a move you show strength by making a move.
If there are big players already in the hand, you better bring a killer hand too
What can Product Managers learn from poker players about leveraging your position?
This is the same for product development. If you are in a highly competitive market with big players, you better bring a very strong product. If you don’t: you will lose. However, if you are a first mover — or the first to move into a new domain — you have the benefit of your position.
You can afford to have less features on your product, because there is less competition. Similar principles are described in the book ‘blue ocean strategy’ and this is why a lot of companies are looking for unexplored markets or needs. Those markets are easy to enter and needs can be met more easily.
You can bring a product with limited features to a new market
As a product manager you need to understand the market that you operate in and what the minimum level of quality is that you need to deliver in order to play.
By Malakooti, B. (2013). Operations and Production Systems with Multiple Objectives. John Wiley & Sons. — Malakooti, B. (2013). Operations and Production Systems with Multiple Objectives. John Wiley & Sons., CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=34342695
You can look at the market you want to sell your product in along the product lifecycle curve. This typically describes 4 phases (introduction, growth, maturity, decline).
This curve is normally used to track in which phase your product is, but it also applies to a product category as a whole. If you are in a product category that is mature, you need to bring a stronger product, than if the category is in it’s early stages.
As an example consider that when Netflix started their portfolio with movies and series was rather limited. But that was okay, since there was no real competition.
Since the product category of streaming services has matured, customers have higher demands for any product in that category.
Read your opponent(s)
Many people associate playing poker with bluffing. And this is somewhat true. Bluffing — or representing a certain hand — is an important part of playing poker.
Yet equally important is the ability to see through the bluff and read your opponent. You should be able to judge whether the hand that they actually communicate to have is also the hand they actually have. They will never tell you exactly what they have.
Read their actions and logically explain what possible hand they could have. Good poker players understand that the actions their opponents take give information about the hand that they are playing. And it is actually very difficult to play a bluff strongly. If you want to play a strong bluff, you have to play it hard and consistent. You must bet the hand you pretend to have, not the hand that you actually have.
In poker, players try to collect as much information about their opponents as possible. This information can come from anything they do. Players may have specific ‘tells’: touching their ears or nose when they bluff, certain betting patterns, ways of holding their chips, etc. All this information can help you to figure out what they are up to.
What can Product Managers learn from poker players about reading your opponents?
There is a lot of bluff and buzzword parade in the market nowadays. It is the responsibility of product managers to know their competition. You first have to know who your key competitors are. Competitor analysis may be difficult. The advice I can give is to focus on the most important competitors first.
You should separate competitors that are a threat to your business from the competitors that operate within the same space, but are much smaller or bigger. Smaller competitors you should keep an eye on, but they pose no immediate threat. If they grow in size and they catch up, they might become a threat.
Bigger competitors you don’t need to worry about too much either. You probably don’t have the resources and manpower to take those on head-to-head anyway. You want to focus on competitors that are about the same size as you, that operate in the same domain and that are targeting the same customers as you.
Your customers will compare your company to those companies, and your products to theirs.
(I must make a small note here that it is important to look at the complete competitor landscape, but you don’t need to analyse every competitor in as much detail as you do for direct competitors)
Identify your key competitors that operate within the same space
As a product manager you must follow the actions that competition is taking to see through their bluff. Their actions will inform you about the strategy that they are following.
Think about the moments where your competitors reveal their cards: look at their marketing campaigns, see what they are posting on LinkedIn and what vacancies are opened.
Check with whom their leadership is connected. Are they taking over other companies? What partnerships have they announced? These can all be great indicators to see where your competitors may be heading.
Hitting the board
The cards are dealt and you hit the flop! Excellent! This is the best thing to happen in a poker game. Your next step is to extract as much out of the hand as possible.
In poker you try to get as much value out of your opponents as possible, by giving them poor odds to play. In the long run, this is what separates the good poker players from the bad poker players: good poker players consistently play hands that have favorable odds. Bad poker players play anything.
What can product managers learn from poker players about hitting the board?
Product managers should do the same. If you have a product that is popular in demand and fulfills a need for your customers you should optimize your offering to extract as much value as you can while the product remains valuable(that doesn’t means you should trick your customers like a kitchen or car salesperson, but get fair value for your product or service).
If you’ve hit the market with a product that is really taking off, try to see if you can expand either expands your product offering, or if you can expand your market.
Remember that in poker after the flop there is still a turn and river to come. Those need to be played as well. And they can dramatically change the value of your hand.
As a product manager you can sit idle and wait for the money to flow in. You need to manage and nurture the product. It needs to stay relevant in a dynamic market. Keep assessing and validating whether you need to develop your product further, or whether it needs pruning or phasing out.
Know when to hold, and know when to fold. Portfolio lifecycle management is key to successful product management. For every product you should consider what the cost is to grow the product, or to maintain the product. If the costs outweigh the benefits you should phase out the product.
There might be various reasons why products are phased out (following list is not exhaustive): the product is no longer relevant in the market (think about DVD players or analog photography), you have a better product (think about the annual update cycles of mobile phones), or lower cost product,
or there are stronger competitors in the market, or you need the manpower to work and deliver a higher margin product.
Bet to get information
In poker the best way to get information from your opponents is to make a bet. If you make a bet you force your opponents to a choice: fold, call you, or raise you.
If they fold, you’ve forced them out of the hand and won. If they call your bet, they are not certain enough about their hand to raise you. Probably they don’t have a super hand (or they are slow-playing it). If they raise you, they tell you they expect to have a stronger hand. You’ve acquired this information because you’ve made a bet.
Imagine you would have played the same hand, but hadn’t made a bet. Instead, you let the other player make a bet. What would that have told you? Nothing. You don’t know whether they are trying to push you out of the hand with a bluff, or whether they have a reasonable or even strong hand to play.
What can Product Managers learn from poker players about betting to get information?
As a product manager you also need to get your ‘product’ out there in the hands of customers. Don’t wait for the product to be 'finished’, cause it will never be perfect. Get people to use the product and judge it. There are many great ways in which you can easily prototype an MVP of a product. At Philips Hue the best thing we did is to give the product to people for a week and then offer them to keep the product, or pay them the compensation for participating in the study. If they take the money, your product isn’t good enough. (We’d pay them anyway, but were just interested in the answer to the question).
You can only win a poker hand if you play it. You can only win a product if people use it.
Poker is a game of odds and mathematics. Since there is a limited set of cards and players in the game you can make well-educated assumptions and guesses.
Every poker player will learn that there are a few key principles you need to understand:
(1) what is the value of my hand before the board is dealt,
(2) what are my odds to win this hand and
(3) how deep can I get into this hand? If you understand when you favorable odds to play the hand and how you should bet, you can be a winning poker player. Consequently, poker is a game of data. The more data you gather about the game and your opponents, the better you can get to favorable odds.
For example: Loose players typically play more hands, which typically means you’ll get more favorable odds against them (if you select your cards properly). As a poker player you base your decisions on an understanding of the mathematics of the game, and complete that with data about the players.
What can Product Managers learn from poker players about data?
Product management must be data driven. Especially if you are in a domain of software products and/or services it is easier than ever to gather data. As a product manager make sure that you understand the market and product dynamics you are in. You must have an understanding of how the game is played.
Try to get as much information as possible about the market size, average customer value, customer acquisition cost, product cost base, etc.
At the same time you will also need to understand the dynamics of your product: where are your biggest costs? How can you increase your margin? What can you add to your product to make it twice as valuable? What is the biggest threat that could destroy your product? Make sure that you find the key indicators for your products’ success.
As an example: it is claimed that for Spotify the higher the number of minutes that a non-paying customer listens to music on Spotify increases the chance to convert that customer to a paying customer. If you find such a strong correlation you can use this data to help your business grow.
The most difficult part in poker is to fold a strong hand. If a player keeps raising your bets, they probably have a stronger hand. For Product Managers this is no different. If the data you gather disproves your ideas and beliefs, stop. Do not try to find the data to support your ideas. Try to find data objectively and base your decisions on the data, rather than your ideas.
In this article I’ve use poker to explain key aspects of the product management profession.
- Just as poker players need to judge a hand, product managers must be able to judge and assess the potential of a product for the market they are in.
- Just as poker players leverage their position in the game, product managers must fit the product to the market and maintain that fit.
- Just as poker players read their opponents from what they do (not say), product managers need to understand their competitors through their actions
- Just as poker players play their hands strong when they hit the board, product managers need to optimize their strongest products to extract the most value out of it.
- Just as poker players bet out to get learn about the value of their hand, product managers need to get their ‘products’ out to understand where the value in their product is
- Just a poker players must understand the mathematics of the game and complement it with data, product managers must understand the space they are in and get key data from their product.
Obviously, Poker and Product Management are completely different. In this article I take Poker strategies as an analogy for Product Management.
Of course there are many ways in which Poker is completely different from Product Management. To name a few: in Poker you cannot change the hand you are dealt, in Product Management you can change and develop the product. Poker is a ‘winner-takes-all’ game, where Product Management may leaves room for multiple products and companies to co-exist.
* Poker Hand Notations
Poker hands are typically notated by the value they represent: 2, 3, 4, 5, 6, 7, 8, 9, T, J, Q, K, A. When they are of the same suit (i.e., hearts, spades, clubs, diamonds) this is indicated by an ‘s’. For example, AA indicates that a player has two aces. K8 means a player has a King and an eight. K8s means that a player has a King and an eight of the same suit.
Father, Huisband and board game enthousiast. Designer by education, product manager by profession. Passionate about innovation, technology and space travel.