Guesstimates are an essential aspect of Product Management interviews. Today’s post discusses how you want to solve a guesstimate and the approach that you would take. We’ll also take an example to show this to you.
Let’s start with this fundamental question.
What are Guesstimates?
As the name suggests, it is estimating something by guessing, and that estimate should be done analytically and logically. Guesstimates are essential in a PM role, not just as an interview question.
So as a PM, whenever you’re working on a new feature or say you’re planning to build a new vertical, guesstimates are very important because they help you forecast your feature or product’s impact.
Let’s say you want to build a chatbot feature for Swiggy (though Swiggy already has a chatbot feature, let’s assume that you have to develop it).
You will have to estimate how much it will impact product metrics and how it will align with the vision of the business.
So the guesstimate is something you will always do while writing PRDs or even creating your product vision.
How to approach Guesstimates?
Guesstimates can be a tricky thing for a Product Manager. To avoid making mistakes, it is vital to have a practical approach when performing guesstimates.
Production vs. Consumption side
When we talk about the approach to a guesstimate, we first think about the production side versus the consumption side.
For this, first, ask many clarifying questions and state your assumptions. Once you understand the question, think about whether you want to solve it from the consumption or production side.
Let’s take an example:
Estimate the number of pencils that are produced in the city of Bangalore.
You can solve these two ways.
- The first way is to approach the problem from the production side. Knowing the number of pencil manufacturing units in Bangalore and the capacity of each unit, you can estimate how much they can produce in a year. Based on this, you can calculate the kinds of raw material required and how this raw material is eventually converted into a certain number of pencils. That will be your production side approach for solving this question.
- The consumption side defines who are the consumers of this product. Now in this question, for the sake of simplicity, let us assume that the consumers will only be kids. How frequently is your product being consumed? This depends on the frequency kids will use it, and using it, you can estimate the actual demand. So you have to figure out how much is required and how much is being consumed.
Now you can start this estimate from the consumption or production sides. In both cases, we will assume that demand is equal to supply, meaning that the consumers consume whatever is being produced. And whatever is demanded is going to get consumed. So this is one assumption you can mention to the interviewer at the beginning of the interview as you approach this question.
Deciding if you want to go ahead with the production or consumption side is a critical aspect of this. So it would help if you kept that in mind as you begin approaching the question; it will be the anchor you will use for the entire question.
How to choose between the Production vs. Consumption Approach?
How would you decide whether you want to go from the production or consumption sides? Generally, you will create a mental map of the data you have.
- If we approach this from the production side, we have no idea about the number of manufacturing units in Bangalore. We don’t even know what the process is of producing a pencil. So we will try to avoid estimating this from the production side.
- For the consumer side, yes, we can estimate the number of kids in Bangalore. And once we have that, we can estimate the frequency and evaluate other factors accordingly.
Another point to keep in mind is assumptions. They’re very crucial because the thing with estimates is that you can make them as complicated as possible. Or you can simplify them so that it becomes easier for you during the interview.
We’d usually pick the most straightforward path in any question during the interview so that we don’t have to struggle because the discussion is already making us anxious and nervous.
So let’s keep going with the same question that we started with.
- What type of pencils are we talking about? Are we talking about mechanical pencils or just basic pencils? You should pick one. And if the interviewer wants you to focus on both types, then you can focus on both.
But you should ask that question and clarify that assumption.
- A second assumption you can make is who is using the product. So everybody uses pencils. But let’s use the 80:20 principle, and for our sake, we’ll simplify this. So if you’re talking about pencils, most users tend to be children. So make that assumption and clarify that in the beginning.
So as you go through the interview, ensure that you and the interviewer are both on the same page about your assumptions. You will use these assumptions as you narrow down two things that you want to focus on so that you can conclude the interview.
The third is process mapping. It means that you should try to arrive at a solution whenever you’re estimating something.
Let’s continue with the example.
So how would you ideally start to estimate the number of pencils in Bangalore?
- First, you will start by estimating the number of children; then, you will try to count how many pencils they will use and at what interval. Let’s assume that every child uses a pencil for one month. Again, this is an assumption; it could be higher or lower, right? Let’s say children below the age of 10 are using one pencil per month, and children above ten are using two pencils per month.
- So what are we doing here? We are bifurcating this according to age. At each segment, you’re trying to map what the usage is like. And once you have the usage, you will multiply the frequency and the number of children for each segment and total data.
If you are a little confused now, don’t worry, it’s not as tough as you think.
What we want to stress here is that you want to try to divide your users into segments and focus on that. The demographic segment is generally the easiest, and then we have to go from there and define the frequency of usage. Then we multiply the frequency by the number of users in that particular segment, which will get you to an approximate amount.
In a PM interview, they will usually ask you to estimate the market size or say how frequently a product will be used. So it would help if you started thinking this way.
Numbers and Formulae
Next, let’s talk about numbers and formulae. So when you have estimated all the various values, keep your formulas handy and apply them. This is very easy once you have calculated the values correctly.
Final answer and Summary
The last part is the final answer and the summary. You should always explain to the interviewer whatever you have interpreted and summarize it for them.
And on that note, let’s summarize whatever we discussed today.
There are five things that you need to keep in mind while approaching a guesstimate:
- production side versus consumption side;
- assumptions; process mapping;
- numbers and formulae; and then
- the final answer and summary.
That’s it for today. Thank you so much for reading. Subscribe to the blog for more such content.
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