Be fundamentally different, not incrementally better | Jag Duggal (Nubank, Facebook, Google)

Jag’s background (00:00:00)

• Jag Duggal is the Chief Product Officer at Nubank, a highly successful digital bank in Brazil.
• Before Nubank, Jag held leadership positions at Facebook, Quantcast, and Google.
• Nubank has achieved remarkable growth primarily through word-of-mouth, surpassing the combined size of several prominent fintech companies.
• The bank's strategy is not to incrementally improve but to be fundamentally different, aiming to create fanatical love among its customers.
• Nubank has successfully launched various new business lines, including lending, investments, insurance, and small business products.
• The company exercises caution when scaling projects, waiting until key metrics reach compelling thresholds.
• Jag emphasizes the importance of having a clear strategy, even if it might not be entirely correct.
• A well-defined strategy provides a shared understanding of the company's goals and direction.
• Nubank aims to reinvent banking by offering innovative solutions from emerging markets like São Paulo, Mexico City, and Bogota.
• Jag discusses the key elements of building products that people become fanatical about:
  • Simplicity: Products should be easy to use and understand.
  • Delight: Products should provide moments of delight and surprise.
  • Trust: Products should be reliable and trustworthy.
  • Community: Products should foster a sense of community among users.
• Jag explains the concept of category design, which involves creating a new category of products or services that didn't exist before.
• Nubank's success in Brazil demonstrates the potential of category design in disrupting traditional industries.
• The company's product line expansion has been guided by customer needs and opportunities to improve their financial lives.
• Jag shares his thoughts on the future of fintech:
  • Embedded finance: Financial services will become increasingly integrated into non-financial products and services.
  • Decentralized finance: Blockchain technology will enable more decentralized financial systems.
  • Open banking: Open APIs will allow for greater collaboration and innovation in the financial industry.
• Jag offers advice for aspiring product leaders:
  • Be curious and always learning.
  • Be humble and willing to admit mistakes.
  • Be passionate about solving problems and making a positive impact.
  • Be bold and take risks.

Nubank’s remarkable achievements (00:04:34)

• Nubank is larger than Coinbase, Robinhood, Affirm, Sofi, and Lemonade combined.
• 80-90% of Nubank's growth is through word-of-mouth.
• Nubank has more customers than Bank of America despite only operating in three countries in Latin America.
• Nubank held the Guinness World Record for the world's largest simultaneous unboxing of a credit card.
• Nubank recently set a new world record for the first underwater credit card transaction.
• Incremental improvements are easy to copy and don't create a lasting competitive advantage.
• Fundamental differentiation creates a unique value proposition that is difficult for competitors to replicate.
• Nubank's success is due to its fundamentally different approach to banking, such as its focus on mobile technology, customer experience, and financial inclusion.
• To achieve fundamental differentiation, companies should:
  • Identify their core values and beliefs.
  • Understand their customers' needs and pain points.
  • Develop a unique value proposition that addresses those needs and pain points.
  • Execute flawlessly on their strategy.

Nubank’s product development process (00:06:01)

• Obsessed with building a product that customers are fanatical about.
• 80-90% of Nubank's growth is through word-of-mouth.
• Tapping into a very deep pain point: Brazilian banks were profitable but hated.
• Culture at Nubank is maniacal about making customers love the product.
• Bias decisions in favor of the customer's love and willingness to tell others about the product.
• Focus on customer discovery before building.
• Use techniques from various sources to innovate on customer needs.
• Continuously measure whether customers love the product and iterate until it's just right.
• Don't just be incrementally better, be fundamentally different.
• Example: Tesla vs. traditional car companies.
• Focus on the customer's pain points and solve them in a unique way.
• Don't be afraid to take risks and challenge the status quo.
• Be willing to fail and learn from your mistakes.
• Surround yourself with people who are passionate about your mission.
• Be relentless in your pursuit of excellence.

Nubank’s values (00:11:23)

• Want customers to love Nubank fanatically.
• Hungry and challenge the status quo.
• Build strong and diverse teams.
• Pursue smart efficiency.
• Think and act like owners, not renters.

Building products people love fanatically (00:12:16)

• Use the Amazon mock press release technique to ensure the customer understands the value of the product before building it.
• Hold product and design reviews multiple times a week to question if the product is great for the customer, fundamentally different, and redefines the category.
• Measure product-market fit using the Sean Ellis score and only scale a product when it reaches a compelling threshold.

The Sean Ellis score (00:15:21)

• Nubank uses the Shaun Ellis score to measure product-market fit, aiming for 50% of customers to be very disappointed if the product were to disappear.
• NPS (Net Promoter Score) is used post-launch to measure customer satisfaction and loyalty, with a goal of achieving world-beating scores across different product verticals.
• Churn rate is monitored to ensure customer retention and avoid a "leaky bucket" scenario.
• The objective is to create products that customers love and recommend, reducing the reliance on heavy marketing investments.
• The Shaun Ellis score is incorporated into product reviews to assess customer sentiment and potential for positive word-of-mouth.
• Nubank prioritizes building fundamentally different products rather than making incremental improvements.
• Data analysis is used to identify areas for improvement and segments where the product excels.
• The company strives for greatness, avoiding complacency with "good enough" solutions.
• Investing in product excellence reduces the need for extensive marketing efforts.

An example project using the Sean Ellis score (00:21:27)

• Launched a product called Assistente Gagos, a payments assistant for paying bills in Brazil.
• Paying bills in Brazil is complex due to four different payment rails.
• Customers need to keep track of bills, payment rails, and ensure payments are made reliably to avoid negative credit bureau reporting.
• Initial Sean Ellis score was around 40, indicating a borderline product-market fit.
• Discovered a small cohort of customers with 4+ commitments registered, and an even smaller cohort with 4+ commitments on at least two of the four rails had a Sean Ellis score of 70.
• Identified the need to consolidate across payment rails and simplify onboarding for multiple bills.
• Implemented dozens of iterations to allow customers to manage multiple bills across multiple rails in one go.
• Increased monthly active users from hundreds of thousands to over 10 million in 15 months.
• Focus on creating a fundamentally different experience, rather than making incremental improvements.
• Look for small cohorts of users with exceptionally high engagement or success metrics.
• Identify the key factors driving their success and double down on those aspects.
• Continuously iterate and improve the product based on user feedback and data.

Picking up the phone and calling customers (00:25:07)

• Identify customer segments that love the product the most using data and surveys.
• Focus on getting agile feedback from the customer segment that loves the product the most.
• Encourage product managers and designers to directly call customers to get real-time feedback.
• Calling customers allows for understanding tone of voice and getting a sense of what truly resonates with them.
• Jeff Bezos' quote: "If you have data and you have an anecdote, usually the anecdote is right."

The importance of starting small and iterating (00:28:20)

• Iterate on a small scale before scaling up to avoid creating a big mess.
• If something isn't working at a small scale, iterate until you get it right.
• Scaling becomes easier when the product is successful on a small scale and customers are excited about it.
• Avoid pouring money and effort into making a product look great if it's not fundamentally sound.
• Be disciplined about starting small and iterating to ensure product-market fit before scaling.

Pushing back effectively (00:30:42)

• Product managers should push back against bad ideas, even if it means challenging senior leaders.
• It is important to have a sense of ownership over the product and to be willing to deliver bad news, even when it is inconvenient.
• Senior leaders respect those who have a clear vision and are not afraid to challenge the status quo.
• Product managers should practice pushing back and articulating the other side of the argument, even if they believe in the product's potential.
• Ultimately, product managers are responsible for the success or failure of their products, so it is important to make decisions based on data and analysis, rather than simply following orders.
• A culture of ownership is important for pushing back effectively.
• Product managers should feel empowered to speak up and challenge bad ideas, even if it means going against the grain.
• Senior leaders should respect and encourage those who are willing to push back and bring clarity to the decision-making process.

Uncovering pain points through customer research (00:34:10)

• Customer anecdotes are often more valuable than data analysis.
• Clearly articulate a hypothesis before conducting research to guide data interpretation.
• Avoid becoming attached to your hypothesis and maintain objectivity.
• Use indirect questions and observation to gather insights rather than relying solely on direct questions.
• Prioritize customer anecdotes over data analysis.
• Clearly articulate a hypothesis before conducting research.
• Avoid becoming attached to your hypothesis and maintain objectivity.
• Use indirect questions and observation to gather insights.

An example of setting a clear hypothesis (00:37:53)

• Have a clear perspective on what you think the customer will say about your product.
• This will help you gauge their excitement and identify pain points.
• Example: Swiffer was invented by observing granular problems with mopping.
• Hypothesis at Nubank: Joint bank accounts, invented 120-150 years ago, are not designed for modern customers.
• Approach: Go into research with a hypothesis, but don't try to sell it.
• Play the Devil's Advocate and push back against your idea to get the customer to sell you on it.
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Developing a strategy (00:43:11)

• A coherent strategy involves applying strengths against a core problem, rather than setting ambitious goals.
• Execution is crucial, but it's futile when multiplied by a poor strategy.
• A successful strategy should be specific, detailed, and locked in, not broad or vague.
• Concentration builds wealth, while diversification preserves it; startups should prioritize building over preserving.
• Success requires making high-stakes bets with clear reasoning behind them.
• Frameworks like "Good Strategy Bad Strategy," "Play to Win," and "Where to Play How to Win" can aid in developing a strategic mindset.
• Fundamental differentiation, not incremental improvement, and customer obsession are key to success.
• Concentrating bets is essential, even if it's daunting, while hedging is appealing but less effective.
• Successful startups sustain their focus and customer obsession even after achieving success with a few products.
• Practice in making hard choices and concentrating bets enhances one's ability to do so effectively.

“Be fundamentally different, not incrementally better” (00:52:16)

• Focus on creating products that are fundamentally different, not just incrementally better.
• Fundamental differences attract customers and drive word-of-mouth marketing.
• Not every feature needs to be fundamentally different, but strive for anchors of fundamental difference.
• Build sustaining innovation around fundamentally different features.

Category design (00:53:10)

• Jag Duggal believes in creating new categories rather than competing in existing ones.
• Successful companies are often those that create new categories.
• Nubank's success was due to its creation of a new category: a branchless bank based on the rise of smartphones in Brazil.
• Even within established categories, Nubank tries to build fundamentally different experiences.
• When entering a market where customers are already spending money, aim to reinvent the category rather than just offering incremental improvements.

Nubank’s founding story and goals for the future (00:57:37)

• Nubank started as a Brazilian credit card monoline in an app.
• In the second phase of the company, Nubank aimed to transform from a Brazilian credit card company to a full-solution Latin American bank.
• Nubank launched five new products: a bank account, a lending product, an investment product, an insurance product, and a series of small business products.
• Nubank expanded into Mexico and Colombia, offering more than just credit cards in these countries.
• Nubank is working on the third phase of its products, which involves moving beyond financial services and launching an e-commerce marketplace within its app.
• Nubank envisions a future where banking is fundamentally different, leveraging social technologies, self-driving, and AI technologies to create a personalized banking experience accessible to all eight billion people on the planet.

Advice for adding new product lines (01:00:46)

• No predestined master plan, but rather robust debate and re-examination of decisions.
• Some decisions are obvious (e.g., a bank account is a good product for a bank), but many involve art and debate.
• Key factor: using the gate of whether 50% of people would be disappointed if the product didn't launch.
• Nubank tries not to scale big problems and instead solves problems when they are small.
• Example: Ultravioleta credit card launched in July 2021 but only started scaling aggressively 2-2.5 years later after iterating and finding product-market fit.

The future of fintech and banking (01:03:46)

• Believes banking should be holistic, providing a full solution across all financial seasons of someone's life (spending, saving, investing, borrowing, protecting, etc.).
• Aiming to build the first global bank on a single code base, leveraging the advantages of a unified technology infrastructure.
• Exploring social mechanics and self-driving automation to simplify financial life management and reduce the need for manual effort.
• Using AI to enhance automation and provide insights to customers, regardless of their financial education level.
• Envisioning a future where technology can offer personalized financial advice and guidance based on life stage and circumstances.
• Challenging the notion that banking innovation must come from traditional financial hubs like San Francisco, New York, or London, and seeing potential for disruption from cities like Sao Paulo, Mexico City, or Bogota.

AI corner (01:09:23)

• Using AI tools to improve customer experience and efficiency.
• Exploring ways to build AI-native products.
• Aiming to create an AI-native mindset in financial services.
• Using the metaphor of a private banker for everyone to guide product development.

Failure corner (01:12:34)

• Jag Duggal dropped out of grad school to join Google based on a friend's startup acquisition, which ultimately failed due to an incorrect premise.
• Google pivoted its strategy to focus on bringing TV advertising to YouTube after learning from the failure and the success of YouTube.
• Duggal and his team faced the possibility of being laid off after the failure of the startup.
• Within a year and a half, Google acquired DoubleClick and combined it with YouTube and real-time bidding technology to create a new approach to display advertising.
• Duggal led a team at Google to challenge Yahoo's dominance in online brand advertising and eventually built Google's second-largest business, the display advertising business.
• Duggal emphasizes the importance of persistence and determination in achieving success, even when the odds seem stacked against you.

Key takeaways (01:20:24)

• Perseverance and being clear about your goals and how much you're willing to fight for them is important.
• Be open and transparent to feedback from the market to know what's working and what's not.
• Let go of what's not working and hold on tightly to what is.
• To break through as an insurgent, you can't fight on the same ground as the incumbents.
• Find a disruptive vector that is fundamentally different to break through the noise.
• Incremental improvements alone won't get you there unless you have a unique hook.

Lightning round (01:22:11)

• Jag Duggal recommends the books "Play to Win: A Modern Strategy Book," "Where to Play and How to Win" by Roger Martin, and "From Third World to First" by Lee Kuan Yew. He also suggests watching the TV series "The Gilded Age" for insights into societal disruption caused by technological changes.
• Duggal's favorite recent product is the Lomi, a kitchen countertop composter that turns food waste into soil.
• His life motto is "Be fundamentally different, not incrementally better," which he applies to both work and life. He emphasizes the importance of having a clear goal, being willing to tolerate failure, and avoiding merely fulfilling others' expectations.
• Duggal shares an amusing anecdote about being caught smuggling mangoes from the Caribbean due to his love for high-quality mangoes.
• He invites listeners to connect with him on LinkedIn to share stories of fundamental difference, especially those achieved against the odds.
• Duggal was involved in building Nubank, a social and self-driving AI-powered bank. Their unique purple credit card, known as the "little purple card" or "hosho" in Portuguese, has become a symbol of the company's identity and success.
• During a regulatory crisis in Brazil in 2016, Nubank faced the risk of shutting down. However, their loyal customers intervened by contacting the Central Bank and advocating for the company's survival. This led to the creation of the phrase "the future is purple," which became a rallying cry and a symbol of Nubank's resilience and customer-centric approach.