Product Strategy

Aldrius Low
Oct 28, 2019
6 min read

What is Product Strategy

Product strategies are decisions settled to improve products to satisfy market requirements and determine in which way to gain competitive advantage for products. (Steinhardt, 2010, p.50).

Simply put, product strategy describes how a product will achieve success. It should outline all the key elements required to develop a successful product that helps the business to realise its product vision.

Product Strategy sits in between Product Vision and Product Roadmap. The graphic below illustrates the relationship between them. Previous articles on Product Roadmap can be found here

Elements of the Product Strategy

In order to successfully describe how a product will achieve its overarching goals, it should answer some of the key questions like: What product will it become? Who will it benefit? How will it create value? Why will the product stand out? Why it is worthwhile for the company to invest in it? etc.

Taggartand, James and McDermott (1993) asserts that product strategies are composed of the categorisation of a differentiated product by the organisation in respect of the needs and wants of the customers and the satisfaction they aim to obtain from the product.

The 4 key elements in a product strategy are:

Target Group/Market

This answers the questions on “WHO”, i.e. it describes the target customers and users that are likely to purchase and use the product. It defines which market or segments of the market that the product is addressing. For example, if the product is a dating app, then the target market is most likely people who are still single. The product team could further drill it down to a segment of the market, for example, people that are over 50s, people who lead a certain lifestyles, people in a specific geographical region etc.

Needs

This answers the “WHAT” questions, i.e. what main problems the product is trying to solve, or what the primary benefits will the product bring. Using the previous example of a dating app, the main problem identified could be the difficulties faced by certain people in finding a partner, e.g. there are no dating apps catered for the above 50s. Then the natural progression on the key benefits would be: how would the product (dating app) create new opportunities for those above 50s to find a date.

Key Features (and Differentiators)

This answers the question on “HOW”, i.e. how will the product solves the needs mentioned above. Here the focus is to highlight aspects of the product that are crucial to addressing the main problem that will make the product stand out from the competitors. The aspects are:

Feature - What features will add to increase the benefits offered to your target markets, e.g. location services in a dating app, or matching people based on interest or hobbies. It is important to think about how the feature allows the product to differentiate itself from the competitors
Design - What will the product team design to make it stand out from the companies, or allow better user experience?
Quality - Quality should be considered as well since consistent product quality ensures the product meets the expectations of their target market.
Branding - Brand is a powerful product differentiation tool that can be used to convey the message of reliability, quality, and/or confidence to the target market.

Business Goal

The last part answers the “WHY” question, i.e. why is it worthwhile for the company to invest in the product? It captures how the product is going to benefit the company. For example, will the product generate revenue, increase market share, reduce cost, increase brand quality etc?

Product team should seek to clarify the business goals with key stakeholders, as this allows them to select the right key performance indicators (KPI) to measure product performance. For example, if the goal is to increase market share, then it might make sense for the product to offer a lot of free features to differentiate itself and gain market share from competitors, but it might suffer in terms of revenue generated.

Why is Product Strategy Important?

Input for Product Roadmap

Product Strategy form the basis for executing the product roadmap. Product Strategies contained within it all the key elements for a successful product. Product team can use this document to guide them in mapping the direction of the product offering over time.

Reference to the Business Strategy

The role of product strategy is to make an association between the company’s product development and its business strategy (McGrath, Anthony, & Shapiro, 1996) and according to McGrath (2000) it guarantees that the firm and its products is engaged in the right markets from a strategic viewpoint.

Focus the company’s effort

Product Strategy helps the company to decide the target market and market penetration. It makes it easier for firms to determine the direction of the product efforts.

Organisations that launched flourishing products such as Apple and Microsoft have been credited with adopting the right product strategy for their products (Wall Street Journal, 2006).

Useful Tips in Constructing Product Strategy

Start first, be agile

Traditionally product strategy is the result of months of market research and business analysis work, with the end result being a marketing requirement specification that is factual, reliable and ready to be implemented.

However, this method would not work well in an agile environment where products are expected to evolve, and requirements are expected to change quickly. In such a dynamic environment, it makes sense to adopt the same agile methodology to the development of product strategy. Product team can follow these 4 steps (STAR)

i) Start with an idea, state the vision and capture the initial strategy

ii) Test product strategy, identify the biggest risks

iii) Address the risks and improve strategy

iv) Rinse and Repeat

This iterative approach, pioneered by Lean Startup, helps develop strategy built on empirical evidence rather than intuition, authority, or influence. It also helps enforce fast failure and correct product path quickly to avoid unnecessary sunk cost.

Keep it simple, focus on what matters

Different people will have different ideas on what product strategy means. However, it is paramount that the product team should focus on what matters most: the four elements of the Product Strategy: WHO (Target Market), WHAT (Main Benefits), HOW (Key Features) and WHY (Business Goal)

Vision first, strategy second

Just as it is important to have a product strategy that will provide a functional guidance for the product roadmap, it is important to have a product vision that acts as a north star to guide the product strategy. The product vision is the very reason for creating a product: It describes the overarching, aspirational goal that the business is trying to achieve.

For example, we can describe the interaction between the two: the product vision could be to help people to find potential dates ( as per the dating app example above), and the product strategy could be to develop an app that will allow this to happen. However, it is worth noting that the product strategy could also be to open a centre for single people to socialise. However, without the vision to act as a north star, it would be hard to define success, let alone finding out all the key elements for success.

Communicate, internally and externally

Internally, it is important for the key stakeholders to be involved in creating the product strategy. This ensures buy-in, create shared ownership and leverage the collective knowledge of the group. Co-creation trumps hard selling, i.e. selling an existing vision and product strategy can be more challenging than co-creating it with key stakeholders. A great way is to employ a collaborative workshops attended by key stakeholders such as product team, development team, business sponsor, sales and marketing team etc.

Many product managers try to develop their product strategy entirely internally, they talk with executive, brainstorms with product and marketing team…. But they miss a crucial element in developing a winning product strategy, the product user. In the bestselling business book The Four Steps to the Epiphany, author Steve Blank makes the case that “There are no facts inside your building…so get outside.” It is important to listen to what the user has to say. The product team can work with a focus target group to test their assumptions about what the users want. They should define their target market clearly, select the right test group and test method to ensure useful feedback and data

Strategically Review and Revise

As most product goes through a lifecycle of introduction, growth, maturity and decline. It would make sense that the product strategy should be strategically reviewed and adjusted at each of those inflection points to ensure that it is still relevant.

For example, a new product might aim at trying to get the product to launch, then achieve product-market fit. On the growth and maturity phase, the product strategy could change to increasing market shares or revenue. On the last inflection point, the business could either revitalise the product by reinvesting it or opening up new target market, or let it mature and die.

Summary

The product strategy is another important artefact for the product managers as it outlines the necessary key elements for success. As a result of that,it is important to make sure that enough effort are spent in curating the winning product strategy that will eventually guide product roadmap and product releases.