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#9 The GEM Model - Gibson Biddle - Medium

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Prioritizing growth, engagement, and monetization to keep organizations aligned.That’s me, explaining the GEM model at our Product Leader Summit in 2018, using Chegg as an example.As companies grow, product strategy helps teams maintain focus. However, misalignment happens often, especially across product, marketing, sales, and finance. One of the biggest causes is differing opinions on prioritizing growth, engagement, and monetization. The GEM model forces cross-functional teams to prioritize these factors and helps build a metrics-focused organization.When I joined Netflix in 2005, the company had nearly two million members, was growing 30% year-over-year, and monthly cancellation, the proxy for product quality and engagement, was about 4.5%. However, the key challenge at the time was our ability to demonstrate to Wall Street that we could build a profitable business. Barry McCarthy, our CFO, felt we would have a higher valuation — and attract more investment — if we could generate higher profits.Here’s the resulting forced-rank prioritization of growth, engagement, and monetization, along with the metrics we used to evaluate each factor:GEM PrioritizationMonetization: As measured by Lifetime Value (LTV) and gross margin.Engagement: As measured by monthly retention. (Think of this as a proxy for product quality.)Growth: As measured by the year-over-year member growth rate. (30% in 2005.)Based on the forced-rank prioritization above, we prioritized some new projects. In 2005, we started testing advertising, experimented with selling previously viewed DVDs to members, and initiated lots of price and plan testing. Our priority was monetization to answer the question, “How can Netflix deliver a higher-margin business?”Eventually, we figured out how to deliver a more profitable DVD rental service by introducing lower-priced plans, substantially improving retention. We maintained our $22/month, three disks at a time plan but added $15 and $9 monthly plans for two and one DVD at a time. Both of these lower-priced plans generated a substantially higher lifetime value.By 2008, we were confident that we could deliver a profitable business, and we flipped the priority as we set a goal to achieve 20 million subscribers by 2010. We wanted to convince investors we would have a big, profitable business in the long term. Here was the revised forced rank in 2008:GrowthEngagementMonetizationBy this point, we had reasonable confidence that we could deliver higher margins, and the priority shifted to growth. At different times in a company’s life, the priorities change. It’s an excellent habit to reassess the priority of these three factors every six months or so.Product Strategy Exercise (#11)Thinking about your company's overall needs, how do you prioritize growth, engagement, and monetization? Which metric will you use to measure each? Now, compare notes with your CEO and leaders in other functions to see how they prioritize the three factors. If the answer is different, find ways to debate the prioritization and reach an agreement. Doing this every six months will dramatically improve cross-functional alignment.I hope you enjoy the following essay. It outlines how to bring strategic thinking “front and center” in your product organization:Essay #10: The Quarterly Product Strategy MeetingBest,GibGibson Biddlewww.gibsonbiddle.comNovember 2024 Update: Sign up for my new 3-hour virtual “Product Strategy Workshop” on Maven. (Monthly cohorts from 9–12 am PT.)PPS. Here’s an index of all the articles in this series:Intro: How to Define Your Product Strategy#1 “The DHM Model”#2 “From DHM to Product Strategy”#3 “The Strategy/Metric/Tactic Lock-up”#4 “Proxy Metrics”#5 “Working Bottom-up”#6 “A Product Strategy for Each Swimlane”#7 “The Product Roadmap”#8 “The GLEe Model”#9 “The GEM Model”#10 “How to Run A Quarterly Product Strategy Meeting”#11 “A Case Study: Netflix 2020”#12 “A Startup Case Study: Chegg”#13 “TLDR: Summary of the Product Strategy Frameworks”Click here to purchase my self-paced Product Strategy Workshop on Teachable for $200 off the regular $699 price. The course includes recorded talks, PDFs, my essays, and pre-formatted Google Slides so you can complete your product strategy independently. You can also “try before you buy” — the first two modules are free.