Product strategy is both a fascinating and fashionable subject among digital product leaders. It is an important topic to master for product managers as well as technology and design leads. However, it is not a simple thing to get started with as there is no one-size-fits-all template to prepare your first strategy perfectly. In the first part of this series article, I discussed the process to get you productive with product strategy and to understand why starting is difficult. With this insight, you are ready for a walk through the five steps of getting engaged with product strategy which will be presented in this second part of this article.
Step one: Digesting business strategy
What goes into product strategy is dependent on several factors. Company stage, scale, the existence of a business strategy and its objectives, as well as the operating and management model, and the business environment! This explains why it is so difficult to provide a strategy template to fit an “average” company. At best you can have strategy examples that fit individual companies that take into consideration all these other factors. However, you may find them very different, or unhelpful for you, depending on what type of an organizational whole described.
So where to start? On all occasions, the product strategy begins with observations of what pieces of strategy are offered “top-down” from the rest of the organization. You would normally look for the company’s business strategy, values, etc. and particularly business objectives which will likely touch upon the product. If none of those exist, then the requirements for product strategy grow bigger: product strategy is not only needed for guiding the future of a product but the future of the whole company! If you’ve chanced upon hearing a presentation of Gibson Biddle, this is what his notion of product strategy entails.
The other main consideration is the nature of how the company is organized. How hierarchical the company is, how much autonomy is there for individual teams, and how the company is managed, for instance, is a goal-oriented management system, such as the OKRs, in place. All of these aspects determine how the strategy will be shaped up as the company sets its own expectations for how the strategy must look like to be useful.
Read this blog post on how to Implement well, ensure transparency and drive progress with OKRs.
Step two: Establishing the product vision
With this intro, let’s say product strategy is a collection of insights and decisions that are designed to help you to reach the product vision. Product vision is a component that complements and precedes strategy by giving the direction where the product should be heading.
For instance, your vision might be that someday your time management app will be a companion for the most effective professionals, and at least a million business people use to save an hour every week. Vision is the shared North Star everyone working with the products strives for. It includes something inspirational about how the product will affect the life of its users in the future, standing out from the competition (see for example Joel Spolsky). Notice that the product vision is written from the perspective of the product, not the company. As mentioned earlier, if it is a product company, this product vision might equal company vision.
Vision is intended to be a more stable element than strategy because navigating to the goal of your vision will likely be a long journey that requires several adjustments—revisions of strategy—on the way. Strategy will likely be updated every year or two, vision less frequently.
Those of you who know something about business strategy in general may notice a small discrepancy here. That is the treatment of vision and strategy as separate entities. Distinguished strategy professor Richard Rumelt uses the term template strategy to describe the set of mission, vision, values, goals, and initiatives, which together make up the typical corporate strategy. For products, taking the product vision first and separately puts an emphasis on it. In the 2020 book by Ben Foster and Rajesh Nerlikar they argue for vision-led product management, further highlighting the need for a compelling vision. Foster and Nerlikar encourage extending a traditional vision paragraph to span the full customer journey, a perspective worth considering during the strategy work.
Step three: Setting the base ingredients for product strategy
The detailed product strategy isn’t a one-size-fits-all type of thing. You can’t find a readymade playbook that would perfectly fit the situation of your product, its vision and competitive landscape. We need to approach working on strategy as a creative effort.
From my background in design, I see strategy creation as very similar to an early-phase conceptual design process. It begins with uncertainty and creates clarity by gathering insights, synthesizing them. It identifies key challenges on the way to achieving the vision and explores different scenarios as ways to solve them.
So start with problems and challenges. These are the biggest hurdles on your way to reaching the vision, the greatest steps you need to make to advance the product. Insights will help you to plan what kind of moves might best take you further. Good insight work requires you to combine qualitative and quantitative insights about your product and its users, as well as from the industry and the field of technology where you operate. Working with those insights enables you to entertain alternative scenarios on possible roads you might take, for instance, which platforms seem lucrative for adding some AI functionalities to your product.
The outcome of the product strategy is that you know which problems, or strategic objectives (Melissa Perri calls them strategic intents, Biddle strategies), you will solve for your product over the next twelve months. The total number of objectives may grow somewhat with the product but should not be more than the Head of Product can easily recall. Otherwise, they won’t be either focused or aligned. Objectives describe the outcomes of success without over-specifying what the solution will be like. It is expected that meeting those objectives will be feasible and viable but is not required the type of certainty and detail a classic roadmap would have regarding what and when will a certain output (such as product feature) appear. Interestingly, Biddle argues in favor of using a roadmap to communicate the timing of the expected outcomes, but this should only be done with care and a grain of salt to avoid building wrong expectations about progress.
Step four: Applying the art of focusing
To succeed in the product strategy work, you need focus. It is needed in both the creation and application of product strategy. In face of a myriad of opportunities, it means saying ‘no’ to most of the promising new ideas in order to provide clarity and coordination for everything you do. Deciding on what things to focus on is easier said than done. We naturally always come up with ideas and elegant solutions that seem lucrative. Unfortunately, we have to be very picky about what we choose to entertain. The difficulty is in deciding which subset of all seemingly interesting challenges to pursue.
Decisions about strategic objectives should be based on the best available insights on customers (how will the customer benefit), credible development tracks (can we create this in X months), the competition (what is our main competitor up to) as well as the compatibility with the product vision (will this take us further).
The degree of information available depends on the stage of the product. Startups and established companies will be in different situations. Startups may have an easier time getting everyone involved but have fewer data points about customers and less competition to work with than the bigger companies.
It is not feasible here to go through details about the strategic analysis in length. There is a wealth of applicable general business literature out there starting from Michael Porter, but I will provide a few examples of how to proceed. Let’s start with startups.
Considerations for the competitive landscape
In his book, Dan Olsen talks about creating competitive products through feature differentiation, that is, adding product features that make your product stand out on the market against the competition. Olsen suggests you map out your features in a comparison matrix that references the well-known Kano model. Achieving feature parity is never an adequate long-term objective, you must develop something distinctive.
Read this blog post on Using The Kano Model To Prioritize Product Development.
For established companies, the need for consideration of competitive advantage is direr as the mere existence of a business is alone enough to attract competition sooner or later. Among the insight ingredients, a lot of weight will be on understanding competition and choosing your key challenges based on how they will affect your competitive advantage. While you never can fully predict what strategy your competitors will follow, what they are doing today is a good enough market signal.
In the end, you will likely come up with a relatively long, too long, list of prospective objectives. The facilitator of the strategy process has then the duty to make sure the options get a chance to be assessed equally. To give further ideas on weighing them, I refer to Gibson Biddle who talks about how strategic objectives should improve the product in hard-to-copy, margin enhancing ways that delight customers. He calls this the DHM model. Taking this lens to evaluate the options is a good way to ensure you don’t only consider the immediate gains but effects of strategic objectives several years into the future.
The objectives should be relatively abstract. Detailed KPIs and metrics are best set within the organization or team that has the responsibility to execute strategic objectives. Note that there will always be work that falls outside the strategic objectives required to keep the existing product alive.
Step five: Putting product strategy in practice and assessing the success
Creating your first product strategy is an achievement, but it only creates value if it is followed in practical product development work. There will be iterative work to move from the strategic objectives to lower, more concrete levels of work down to epics and backlogs of development teams. But what remains is that product strategy is the common frame of reference for all who work with the same product. However, the bigger the organization, the more proxy goals for distinct teams there will be.
Team specific objectives or projects can be born out of the product strategy work. The exact way forward depends on the management models (such as using OKRs) and is not specific to product strategy. For example, Perri describes product initiatives as actions taken by product leadership to mobilize their units to work on the strategic objectives. This is where you might also encounter a detailed roadmap or eventually a backlog. The extent of cascading objectives from the strategic objectives to product initiatives depends on how large your product organization is but the fewer levels of goals there is, the easier it is for everyone to understand how the company is working together to achieve the vision and implement the strategy.
It is very likely that your first product strategy won’t be a huge success, that’s okay. Product strategy can be a valuable learning tool for organizations that can take in such feedback. Professor Rumelt describes strategy as a hypothesis: we project what might happen in the future if we make these assumptions and then launch ourselves the plan. We will discover whether that worked and then can revise our strategy. Valuable proprietary knowledge is created in the process and will help you in the next iterations. Product strategy is something that needs work approximately once a year unless a new global turmoil such as a pandemic forces you to fully reconsider the validity of your plans.
To conclude, product strategy work is about securing product success by making sure you are focused on doing the most important things. It is really just a part of product development work, just on a very high level. It is not a one-shot thing but provides a long-lasting North Star to maintain alignment in the troubled waters of everyday development.
Read Part 1
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