When it comes to leading product teams, one of the most challenging tasks is setting the right objectives and key results (OKRs) that align with the product’s current phase in its lifecycle. A powerful model to guide this process is Kent Beck’s 3X — Explore, Expand, Extract. As an eminent software engineer, author, and the creator of many agile practices, Beck has developed this model to help businesses navigate the changing dynamics of a product’s journey.

The 3X Model and its Implications for Product Leaders

The 3X model divides the evolution of a product into three distinct phases: Explore, Expand, and Extract. Each phase represents a different stage of a product’s lifecycle and requires different strategies, mindsets, and OKRs.

Phase 1: Explore

The Explore phase in Kent Beck’s 3X model is the inception stage of a product. This phase is marked by a series of experimental iterations aimed at discovering and validating product-market fit. It involves identifying key user segments, establishing the product’s unique value proposition, and testing different marketing channels. The critical aspect here is to balance both quantitative and qualitative OKRs to grasp the market and the product’s potential within it.

In the Explore phase, products like Clubhouse (the audio-only social network app) and Neuralink (Elon Musk’s neural tech venture) are in a nascent stage. The main objective is to ascertain product-market fit through iterative experimentation. This phase typically spans a few months to a couple of years.

Effective OKRs in Explore Phase:

• Objective: Identify key user segments.
  • Key Result: Profile and categorize 3 main user segments by the end of Q1.
• Objective: Establish product’s unique value proposition.
  • Key Result: Iterate and finalize product’s unique selling proposition based on user feedback and competitive analysis by Q2.
• Objective: Test different marketing channels.
  • Key Result: Objective: Identify key user segments.
  • Key Result: Profile and categorize 3 main user segments by the end of Q1.
• Objective: Validate product-market fit.
  • Key Result: Achieve 15% week-over-week user growth.
  • Key Result: Maintain user retention above 40%.
• Objective: Understand user needs and preferences.
  • Key Result: Conduct 100 user interviews by the end of Q2.
  • Key Result: Incorporate feedback into 80% of feature updates.

Notice that the quantitative OKRs provide measurable, objective data, while qualitative OKRs offer deeper insights into user experiences and preferences.

Common Pitfalls and Ill-Suited OKRs:

In the Explore phase, product managers often make the mistake of focusing too much on revenue or scale. Setting revenue-oriented OKRs such as “Increase revenue by 50% in Q1” or “Expand into five new markets in Q2” could potentially derail the team from truly understanding the customer needs and refining the product accordingly.

Phase 2: Expand

The Expand phase begins once the product-market fit has been confirmed. This stage focuses on rapidly scaling the product, increasing user acquisition, and extending market reach. Key objectives here may include improving product scalability, optimizing user acquisition strategy, and strengthening brand presence.

In the Expand phase, companies like Zoom and Beyond Meat have validated their product-market fit and are now concentrating on scaling. This phase can last a few years, and the value extracted here comes from rapid user acquisition and market expansion.

Effective OKRs in Expand Phase:

• Objective: Expand product reach.
  • Key Result: Increase the number of active cities from 50 to 200 by the end of Q2.
  • Key Result: Achieve a 30% quarter-over-quarter growth in user bookings.
• Objective: Improve product scalability.
  • Key Result: Decrease server response time by 20% by Q3.
  • Key Result: Achieve 99.9% uptime by Q4.
• Objective: Optimize user acquisition strategy.
  • Key Result: Decrease customer acquisition cost by 25% by Q2.
• Objective: Improve user onboarding experience.
  • Key Result: Increase user onboarding completion rate by 30% by Q3.
• Objective: Strengthen brand presence.
  • Key Result: Increase brand recall rate by 15% by the end of the year.

In the Expand phase, the focus tends to be more on quantitative OKRs as the product has already established a fit and now needs to track growth and scale. However, maintaining some qualitative OKRs can ensure the product stays user-centric as it grows.

Common Pitfalls and Ill-Suited OKRs:

Product managers in the Expand phase often err by focusing too much on features and not enough on scalability or performance. An ill-suited OKR for this phase might be “Add 10 new features by Q3.” This could lead to feature-bloat and neglect the need for a robust infrastructure to handle increased demand.

Phase 3: Extract

In the Extract phase, the product is at market maturity, with steady demand. This phase prioritizes efficiency and optimization to drive profitability while maintaining market dominance. Predominantly quantitative OKRs are set to improve operational efficiency, enhance product profitability, and strengthen the brand’s presence. However, incorporating some qualitative OKRs ensures the product stays relevant, competitive, and continues to improve user experience.

Google’s search engine or Microsoft’s Windows are prime examples.

Effective OKRs in Extract Phase:

• Objective: Optimize user acquisition strategy.
  • Key Result: Decrease customer acquisition cost by 25% by Q2.
• Objective: Improve user onboarding experience.
  • Key Result: Increase user onboarding completion rate by 30% by Q3.
• Objective: Strengthen brand presence.
  • Key Result: Increase brand recall rate by 15% by the end of the year.
• Objective: Improve operational efficiency.
  • Key Result: Reduce server costs by 20% by Q3.
  • Key Result: Automate 70% of customer service queries by Q4.
• Objective: Enhance product profitability.
  • Key Result: Increase upsell rate by 15% by Q4.
  • Key Result: Reduce customer acquisition cost by 25% by Q1 next year.

Companies reap the most value during the Extract phase of the 3X model. This is the stage where the product or service has reached maturity, with a stable and substantial user base, well-understood customer needs, and predictable demand.

During the Extract phase, companies can focus on optimization and efficiency, increasing their profit margins. This is often accomplished by refining processes, reducing costs, and leveraging economies of scale. Since the product-market fit has already been established, there is a lower risk associated with major investments. Furthermore, with a solid understanding of the market, companies can more effectively strategize and make decisions that enhance profitability.

Common Pitfalls and Ill-Suited OKRs:

 In the Extract phase, product managers may overlook the importance of innovation and user engagement, focusing excessively on efficiency. An ill-suited OKR would be “Increase ad placements by 30% by Q2,” which could compromise user experience.

When Do You Move From One Phase To the Next?

One of the most common pitfalls when implementing the 3X model is failing to recognize when it’s time to move from one phase to another. For example, staying too long in the Explore phase can lead to wasted resources on ideas that may not be viable. On the other hand, rushing to the Extract phase too soon can lead to missed opportunities for expansion. Be mindful of the signs that indicate it’s time to transition.

Knowing when to transition between phases can be challenging. Often, it requires a careful balance of quantitative metrics and qualitative insights. To manage these transitions, look for these signs:

Transitioning from Explore to Expand: Look for a consistent positive response from the market. This might be increasing sales, high user engagement, or other key performance indicators that show your idea has traction.

Transitioning from Expand to Extract: Signs to transition to the Extract phase include reaching a point of predictable and high demand. If your growth starts to plateau and you’re meeting your goals consistently, it’s time to focus on efficiency and optimization.

Remember, these transitions aren’t always clear-cut. It’s important to use your judgment and consider the unique aspects of your product and market.

Conclusion

In conclusion, the 3X model by Kent Beck is a powerful framework for managing the life cycle of a product or idea. It allows us to align our strategies with the different stages of a product’s life – from the risky exploration of new ideas, through the challenging expansion phase, to the efficiency-focused extraction phase.

By being mindful of common pitfalls and understanding how to navigate transitions between phases, we can leverage the 3X model to enhance our product management strategies.