Product strategy is a complex but critical aspect of business planning that determines a product’s long-term success within competitive markets. It is about more than just envisioning product features; it requires a deep understanding of market challenges, insightful decision-making, and precise execution.
Understanding the Core Elements of a Strategy
According to Richard Rumelt, a well-formulated strategy should comprise three essential elements, which he refers to as the “kernel”:
Diagnosis of the Challenge: This involves a deep understanding of the current market landscape and identifying the main hurdles that the product must overcome. A good diagnosis simplifies complex realities by focusing on critical aspects, making the problem more manageable.
Guiding Policy: Once the challenge is diagnosed, a guiding policy outlines the overall approach to tackle these obstacles. This isn’t about specific actions or goals but rather a broad approach that dictates how the challenges identified in the diagnosis will be approached.
Coherent Actions: These are the specific steps designed to implement the guiding policy. Each action is coordinated with others to ensure they collectively support the overarching strategy, working synergistically towards overcoming the identified challenges.
Having a strong problem definition is critical and this requires effort from the exec team
Many companies do not take enough time to properly understand, define and communicate the problem they are trying to solve. Exec members can assume they are all on the same page, when in fact they each have a different version of an idea and they go to the rest of that company with different views. Doing the work to document the problem is time well spent. Effective problem-solving processes are essential for developing a strong product strategy – some tips here:
- 7 Steps to Bulletproof Problem Solving
- Strategy as a Problem-Solving Process
- Problem Solving is a Critical CEO Issue
- 7 Most Common Mistakes Leaders Make When Trying to Problem Solve
Why is Product Strategy Challenging?
Marty Cagan highlights the inherent difficulties in defining an effective product strategy, pointing out four major challenges that organisations often encounter:
Making Tough Choices: Strategy involves decision-making, often requiring tough choices about what is most important. This means saying no to many good ideas to focus intensely on the truly great ones.
Generating and Leveraging Insights: A strong strategy is based on insights. This could involve deep market research, user behaviour analysis, or technological trends that can offer a competitive advantage.
Converting Insights into Action: Insights are only as valuable as the actions they inspire. A robust product strategy translates these insights into actionable plans that can be executed by the team.
Balancing Active Management and Autonomy: Managing a product strategy requires a delicate balance between providing clear direction and avoiding micromanagement. Leaders must empower teams to execute the strategy while ensuring alignment with the business goals.
Addressing the Four Types of Product Risk
In deciding our product strategy, we are looking to identify and solve for four types of risk, as described by Cagan:
- Value Risk: Whether customers will buy the product or users will choose to use it.
- Usability Risk: Whether users can easily figure out how to use the product.
- Feasibility Risk: Whether engineers can build the desired product within the given constraints of time, skills, and technology.
- Business Viability Risk: Whether the solution aligns with the business’s needs and contributes positively to its objectives.
Gathering and Synthesising Insights
A strategy requires gathering, synthesising, and keeping up to date with insights. These usually include:
Customer insights, including
- Qualitative insights – conversations with customers, product managers, customer support, business development, and sales – better if focused around specific research goals aligned to the problem you are trying to solve
- Quantitative insights – product usage data, sales data, website analytics, aggregated feedback from reviews, support tickets, and social media.
Market data, including information about competitors, annual reports, competitor customer reviews, the media, market size data, expert analyst reports, and academic research.
Having agreed processes for gathering and surfacing insight, synthesizing it and deriving value and actionable plans is often overlooked in companies because everyone feels they own many aspects of strategy creation when in fact no one does.
The executive team needs to communicate the strategy to the company (continually)
Whilst the head of product is responsible for evangelising the product strategy, there needs to be teamwork in reiterating it in all parts of the organisation. The strategy needs to be documented in some way, and that document needs to be kept up to date. Some templates for doing this can be found here.