1) “What is the problem we are trying to solve?”
Ask the internal stakeholders who are pitching new ideas to you, ask this of customers who are asking for new features and repeatedly ask yourself to make sure you are 
not deviating from it as you are getting caught up in the weeds.
2) Is this going to move the “needle”?
What is the measurable impact solving the problem has and by how much? Which “needle” is this going to move – sales “needle”? customer satisfaction “needle”? customer support cost “needle”? marketing “needle”?, engineering “needle”? If it is not going to move anything significantly, then it is nothing but a “nice to have” and probably is not worth spending time on. Don’t forget about the opportunity costs when you are pursuing something that is nice to have.
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Software Product Manager by Gopal Shenoy 
You have raised a valid point. I am getting into product development. And the needle question is often asked though I do support the above comment of usability. I believe, there are things that indirectly move the needle and the usability is one of them. Thanks for sharing this thought.
I’ve heard the question “Does it move the needle?” used as an excuse not to do things by Product Managers.
There are many things in software that are not directly measurable, and in effect, what is being asked is a measurement question.
Usability is one of those areas where the question “Does it move the needle?” breaks down.
If a capability is in a product, but is somewhat difficult to use or is not optimally located for access, how much will “the needle” move by making it easier to use or making it more accessible? This unfortunately is the case with a lot of capabilities available in software and the “move the needle” metric fails when considering whether to fix them, as invariably, some missing capability is rated more likey to move the needle than fixing functionality already in the product.
The two questions you raise are important ones, but Product Managers need a broader context when deciding what to include and exclude in a product release.
I write about this topic in the article entitled: A house with no front door
available here:
http://onproductmanagement.net/2007/08/20/some-pm-reading/
Saeed
One key to remember is that moving the needle is a relative thing not an absolute one. The same opportunity with big impact for a small startup could just be a distraction to a larger organization. That doesn’t mean larger companies shouldn’t go after new, (relatively) small opportunities, but they may have to implement creative ways to fund and manage those efforts separate from their core lines of business.
If the product manager is clear about the direction of the product, then he/she is convinced that it is going to move the needle for the customer.
Good questions, but you forgot one point. Not only do we need to ask these questions when we are starting a project, but we need to make sure that we keep asking them.
Things change quickly and if we don’t keep up and keep asking the key questions, we may end up solving problems that no longer need to be solved…!
– Dr. Jim Anderson
The Accidental PM Blog
“Home Of The Billion Dollar Product Manager”
Brian,
Tell me about it. I keep reminding myself of these two questions when I feel that I am getting caught up in the weeds.
Gopal
John,
Good point on the customer attrition needle. But one thing to watch out for is the threat that customers will walk if they don’t have a particular feature. As product managers, we should make sure that we really get to know the problem by engaging with the customer, because often customers propose solutions.
Thanks for your comments.
Gopal
In the pressure of daily work, it is too easy to loose track of these basic and common sense questions. Although a product manager on my team always says, “common sense is the least common resource on the planet”
Interesting thought about the needle..good way to stay focused. However, don’t forget the customer attrition needle–those customers leaving your product because of something it doesn’t do but which they want, or because of something it does but shouldn’t.