The term “product strategy,” much like the entire role of product management, doesn’t have a standard definition. It means different things at different companies. Some companies don’t have a product strategy at all.
However, as product management functions continue to proliferate both startups and large companies, it’s increasingly important for leaders to develop an effective product strategy. Doing so requires product leaders to step away from their (many) day-to-day responsibilities to think about the big picture.
The product strategy describes who your customers are, how your product fits into the current market, and how it will achieve business goals. The strategy helps your team focus on what will have the most significant impact on your customers and the business.
This guide covers how to fit strategy development into your other planning activities, the four key components of an effective product strategy, and when to iterate on your strategy.
Product strategy turns the vision into a roadmap
Product managers take part in a number of strategic planning activities. Every company has different planning practices, but I’ve noticed some commonalities amongst the highest performing digital companies. These companies have an audacious vision, a roadmap that defines what products and features to build to achieve that vision, and a product strategy that describes how product development fits into the business strategy and company vision.
The company vision is typically set by the Chief Executive Officer, potentially with help from a Chief Product Officer or other c-level executives. The vision describes the ultimate impact the company will have in the world.
In our episode, “Crafting a Vision is Product Management,” Blade Kotelly, Leader of the Advanced Concept Lab at Sonos, said that the vision should be at the bounds of what’s imaginable while still speaking to customer needs. “The best vision always speaks to enduring human needs”, he said. He elaborated, saying that if the vision is too fantastical, it’s not actionable. But if it’s too specific, there isn’t room to iterate based on customer feedback.
IKEA’s vision is to “to create a better everyday life for the many people.” This vision is not specific to the product they offer today (furniture) and is not something that can be definitively defined as achieved in the near future. It’s a north-star that inspires employees and customers.
The product strategy is typically set by the Head of Product. The product strategy describes how product management will help the company achieve the company vision and business goals.
When I interviewed Steven Haines, Author of the Product Manager’s Survival Guide and former Senior Director of Product Management at Oracle, he described how developing a product strategy fits into a product manager’s role:
“It is vital that people who are in product roles be able to look at what’s going on with the business, identify what that future state ought to be and create a pathway to get there.”
The product strategy describes your target market and your method for achieving business goals. The method may entail building a single product, managing a portfolio of products in order to conquer a category, as Michel Feaster described in “Conquering a Category is Product Management,” or building a platform via an API, as Jeremy Glassenberg described in “Building APIs is Product Management.”
The product roadmap is typically set by the Head of Product, with input from product managers who are closer to customers and engineers. The product roadmap describes what products and features will be built to realize the strategy and vision, who is responsible for building those product features, and, sometimes, an estimate of when those products and features will be released.
The 4 key components of product strategy
The vision is the north-star the company is working to achieve. The roadmap specifies the products and features to build to get there. The strategy describes how to build product features to realize that north-star.
According to Bob Caporale, Author of Creative Strategy Generation and former Head of Thomas & Betts’ Global Product Management and Technology teams, an effective strategy covers four key components: your customers, your competitors, your business, and the macro environment. I’ll break each of those down and then give you an example of a product strategy.
The foundation of a successful business is a product that customers want. Therefore, the product strategy should first define who your customers are. Many companies serve multiple customer segments. For example, many banks provide services to both consumers and businesses.
Make sure you have a strong understanding of your customers’ needs before setting a long-term product strategy or roadmap. And be willing to adjust as you get feedback from your customers throughout the product lifecycle.
Most companies have direct competitors in their market, or, at least, companies that provide a similar value proposition. The product strategy describes how you position your product to your customers given the other products and services on the market.
In the cloud storage market, Box is more tailored to the needs of large companies than Dropbox. Airbnb provides guests with the opportunity to live like a local, while the major hotels provide a consistent experience across the world.
For-profit companies have shareholders that expect the company to make money and provide a return on investment. The product strategy describes how the product will make money and achieve business goals.
Twitter is a consumer product that monetizes its user base through selling advertising space to brands. Box sells subscriptions to its enterprise customers. Companies employ a variety of different business models. It’s important to define your business so that your team understands how the product facilitates it.
4. Macro Environment
The macro environment accounts for economic, technological, political, and cultural forces that may affect your market and your product over the short and long-term. The product strategy should account for the below factors as appropriate:
- Emerging markets where your product may have demand
- Emerging technologies that may impact your customers
- Economic forces that may impact your customers’ budgets or needs
- Evolving customer needs and behaviors
Amazon’s product strategy
In 1997, Amazon CEO, Jeff Bezos, published his first letter to the company’s shareholders. The strategy he described has obviously been successful given that Amazon has not only gained significant market share in retail and e-commerce but also built successful products, such as Amazon Web Services, in entirely new markets.
Below are some of my favorite quotes from this letter. You’ll notice how it describes Amazon’s current and target customers, competition and market position, business goals and strategy, and the high-level macro forces that may affect the company in the future.
Bezos shared Amazon’s strategy of continuing to serve existing customers and expanding into large new markets and outlines the company’s high-level product priorities to beat the competition:
“Our goal remains to continue to solidify and extend our brand and customer base. This requires sustained investment in systems and infrastructure to support outstanding customer convenience, selection, and service while we grow. We are planning to add music to our product offering, and over time we believe that other products may be prudent investments. We also believe there are significant opportunities to better serve our customers overseas, such as reducing delivery times and better tailoring the customer experience.”
In terms of business goals, Bezos opts to favor long-term growth over short-term profitability:
“We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.”
In describing the macro forces in Amazon’s market, Bezos emphasizes the importance of personalization, which after 20 years since the letter was published, Amazon seems to be the leader:
“Today, online commerce saves customers money and precious time. Tomorrow, through personalization, online commerce will accelerate the very process of discovery.”
Iterating on your product strategy
In today’s world, where new technologies are constantly reshaping customer experiences, and startups can capture market share faster than ever before, it’s critical for product teams to be willing and able to quickly iterate on their product strategy. Bob Caporale emphasized this point:
“If you go out with an immovable plan, your plan is almost inevitably going to fail.”
If you spend too much time developing your strategy, it may be outdated before you get to market with the product. There are three factors that should influence your product strategy:
The product lifecycle
In the early stages of building a new product, your strategy will be focused on discovering the needs of your customers and finding product-market fit. Once you find product-market fit, your strategy will be focused on growing within your market and exploring adjacent markets. Eventually, your strategy will be focused on scaling your team and operations and reaching markets throughout the world in a profitable manner.
In “International Growth is Product Management,” Vinay Ramani, Head of Global Growth at Uber, emphasized the importance of adapting your product to the unique needs of customers as you scale to new markets across the world.
The most effective product leaders I’ve interviewed get feedback from their customers throughout the product lifecycle. They’re constantly working to understand their customers’ needs and test new product and feature concepts.
As product managers run surveys, interview users, and build and test prototypes, they learn what products and features will have the most significant on their customers and the business and adapt their strategy accordingly.
The company lifecycle
In “Continuous Transformation is Product Management,” Eric Ries, the Author of The Lean Startup and The Startup Way, described how as companies grow, they often lose sight of the entrepreneurial practices that helped them to get to where they are. It’s critical for companies to maintain these entrepreneurial capabilities so that they can continue to adapt to changing market conditions and customer needs.
Eric has helped companies including General Electric to update their product strategy to be more focused on building new products. He advises companies to emphasize experimentation and data-driven decision making to discover how they can better serve current customers or reach new markets.
Getting started and leading execution
If you don’t have a strategy, it’s easy to lose focus on what’s most important to your customers and your company. Block off time on your calendar (which I’m sure is already pretty busy) to set and re-evaluate your product strategy. Your strategy will help your team focus on your business goals and your customers and set a roadmap for execution. But your strategy is worthless if your team doesn’t follow through on the execution.
To ensure execution, communicate your strategy to all relevant stakeholders in your organization. This includes sales and marketing teams, engineering teams, and the c-suite. Remember to be willing to iterate on your strategy based on customer feedback and changing market conditions.