The Ultimate Guide to Scaling Growth with the Litmus Framework

Use the Litmus Framework to increase your confidence while testing new ideas, decrease cycle times, and increase speed to market.

We’ve been doing growth work for more than a decade now, at companies like Trulia, Zillow, ShopKick, Houzz, and HomeLight. And the elusive question of product growth is always - how to do it consistently. 

In our experience, developing a practice within your team to build growth iteration with confidence is the main unlock for driving consistent results. 

In this article, we’ll focus on a methodology that has worked for us and our teams to work across multiple stakeholder teams and prioritize the quickest iteration to hit KPIs.  

Before we go there, let’s talk a bit about other frameworks when prioritizing growth features. We found all of them terribly limited by the same issue - opinions on effort, impact, etc with little numerical value or actual estimates used.

And they really fail when it comes to producing successful growth teams - who prioritize speed, confidence, and iteration as methods to quickly identify the biggest bets.

Take a look at RICE (Reach, Impact, Confidence, Effort). It has you assign a 1-3 number to impact, but only goes part of the way on estimates by using reach as the main factor to numerically place a “bet”.

This is self-limiting. Product Management prioritization decisions shouldn’t feel like you’re "all in" gambling. They should feel like well-placed bets on initiatives with business cases. And business cases don’t have to start off with a bottoms-up detailed excel model. They can be a quick napkin math estimate that are used to gauge the $$ potential for that phase of the initiative.

Enter the Litmus Prioritization Framework

Remember in your high school chemistry class, when you used Litmus to determine if a liquid was basic or acidic through the color of a paper strip?

This level of decisiveness and quickness is equivalent to how senior leaders make decisions. There is plenty of analysis and context that goes into the decision, but you’ll always notice that it’s done with confidence. 

There needs to be a framework that brings this level of confidence in the hands of any Product Manager. We’re convinced that this is what separates successful growth teams from others. 

When to use the Framework

When considering any framework to apply, it’s important to understand the purpose. 

In its current form, the Litmus Framework applies very well when addressing two goals:

1. Prioritizing a Growth Roadmap for immediate value or ROI

2. Evaluating multiple solutions for a prioritized problem or opportunity for immediate ROI

When you use it, expect that it will lead to a step-function change in your team. A key part of this will be opening up the process to more than just EPD (Engineering, Product, Design). Litmus does encourage you to explore other ways to launch tests and iterations, such as through the ops, sales, or marketing teams. 

There is a version of this that we’ve been working on to incorporate larger, longer-term strategic initiatives, but that’s for the next article in this series. For now, let’s delve into how to prioritize features using the framework.

The Litmus Value Formula

The four factors are:

• Estimate: the Napkin Math estimate for KPI impact. Often shared in $$

• Resourcing Impact: similar to dev effort, but meant to consider larger stakeholder impact as well. This is illustrated in a 0-100% format.

• Risk to Existing Revenue: many initiatives carry risk to existing revenue streams. This is illustrated in a 0-100% format. 

• Exec Buy-In Prediction: If you feel confident in your idea, you should also factor in how execs/decision makers will receive this idea as you sell it. This is also in a 0-100% format.

The formula is:

We use this to arrive at a Litmus Value (a number) that can be used to prioritize and stack rank your initiatives, projects, or features, easily. The Litmus Framework can be used for solution prioritization as well as roadmap planning.

Napkin Math

The main value that must be determined in order to determine the Litmus Value is the estimate on KPI impact. 

In the Litmus Framework, we call this “napkin math” as the metrics and values that should be used are from memory and do not need significant preparation. 

As a Product Manager, you’re given so many resources to make investment decisions on. It’s important to build this muscle, as this is a corollary for many of your abilities as a Product Manager. 

Imagine being in the elevator with your CEO, and finding the opportunity to explain why you are investing in “Project X”.  You need to be able to communicate clearly in the matter of simple metrics. 

How to use Napkin Math:

1. Identify your assumption variables and your formula that you can use for multiple ideas. 

2. Pick the highest order variables so it does not require additional data research to do this math. 

3. Choose values for assumptions that you are 80% confident in. 

   You will realize that these are values you should know off the top of your head

4. Calculate within your formula from #1

You will seldom be perfect in your estimate. But the more you do this, the more you are directionally accurate and “in the ballpark.” 

Here’s an example.

You’re a Walmart PM that is evaluating conversion improvements to the shopping experience. You have an idea that could increase conversion for new visitors by 30%.  How do you estimate the potential revenue impact? 

1. # New visitors per Day  x $ AOV x  (Visitor Conversion Rate * 30%)

2. 50K new visitors. $40 AOV. Visitor Conversion rate 3%

3. 50K x $40 x 3% x 30% = $18K a day opportunity 

Each of these variables are ones that the PM should know off the top of their head. Napkin math really shouldn’t take more than a few minutes.

Comparing against other Frameworks

Let’s revisit a few of of the previous frameworks we had mentioned earlier. When comparing RICE vs MoSCoW vs Litmus you can easily see the advantages that Litmus has for Growth-minded teams.

Evaluating a Growth Roadmap

Now let’s try an example where we use the Litmus framework to grow an example company’s metric.

Zillow is the largest real estate search website that helps Americans find their next home to buy or rent. On the rental side, Zillow makes money through landlords or large apartment communities paying for leads or for leases that close. 

Let’s try to prioritize 5 ideas that we want to evaluate for their impact to rental revenue. We can apply a Litmus value for each one using the above formula. 

Here are the assumptions that we may apply:

And here are the 5 projects we want to evaluate:

We took these ideas and we first filled out the Napkin Math, using baseline and target values from the assumptions and KPI impact columns.

Then we filled out the litmus formula as shown below. Check out the actual spreadsheet link here to see the calculations used for each step.

As you see from the table, the post-lead experiences got the highest litmus value.

This is because the Litmus framework pushes what would be the highest impact in the quickest amount of time and least disruption to the business (buy in, revenue, and resourcing). In this case, since all of the revenue impact values were relatively large to begin with, the other factors held a larger weight.

Another item to note - when misjudged, the exec buy-in prediction can completely derail initiatives. The sort order change, while relatively easy to build, might not be worth prioritizing first as it may give an impression to the executive team that your roadmap is not strategic in nature. And on the flip side, the AI Agent work might be very exciting and have executive buy in for the strategic direction, but the Litmus framework guides us to get out quick wins on items that are easily built and tested like post-lead experiences.

Evaluating Solutions using the Litmus Framework

Even when you choose an initiative to focus on, deciding the solution to develop can be tough. 

Let’s see how the Litmus Framework can help. 

We’ll continue with the Zillow Rentals example, and go back to an initiative

Gaurav Hardikar

actually ended up building. 

Problem

Zillow makes money off of rental leads that are sent to both landlords and apartment community managers. The traditional model is to charge on a per lead basis. 

The average revenue per lead can increase dramatically if priced per lease or if the quality of the leads go up. In addition, this may open up an opportunity to create a subscription model for larger rental managers.  

Zillow wants to find a way to have consumers provide more information about themselves before seeing a rental, so they can charge more per lead. Consumers reach out to at least 5 rentals.

When we think about possible solutions, we may come up with something like the below. And we would likely have Pros/Cons for each solution. But it’s not enough. 

Having the Litmus value under each solution makes it even easier to see why one solution is the right call for now (and it’s what Gaurav ended up building). It also becomes abundantly clear to always consider a non-tech option first to gauge level of success before investing EPD resources.

If there’s one great takeaway from this process, it is that there are many different ways to test your hypothesis. There’s no advantage to keeping everything only with EPD.

It’s also not that the other solutions are necessarily wrong. They are just wrong for the current time.  Solution 3 in this case, would likely be what we would (and did) build after Solution 2 had mass adoption. 

Up Next

Hopefully this gives you a foray into how the Litmus Framework can help you, as a Product Leader, to drive faster decisions with confidence in any role. 

Next, we’ll be describing how to incorporate strategic, long-term initiatives in the Litmus Framework and provide more examples and case studies. 

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If you’re interested in learning more, book a call with Insider Growth Group below.