What is a product strategy
A product strategy explains what your product teams will focus on, and why. Teams never have a shortage of ideas of what they should be building. Assessed on its own merits, each idea might make sense to work on, but some will offer better returns than others. Product teams are always resource constrained at some level however, so you don’t want to waste effort on areas with low returns when you could spend that effort on areas that will deliver much higher returns.
A strategy provides a rationale for concentrating on some things at the expense of others. This allows you to make as much progress as possible where it will be most effective, without having to assess everything individually. Think of this as applying pressure to something – the same force applied over a smaller surface area generates a higher pressure.
The test of a strategy is whether it results in high impact work in line with the declared areas of focus. Without connecting the thinking about what to work on with actual action, strategy is just navel-gazing and a waste of time.
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Because a product strategy is only as good as the work it results in, the connection between the strategy and day-to-day work of the teams needs to be very clear. Let’s define a few terms, and then see how they fit together.
- Objective – The challenge that our strategy is a response to. The purpose our work has, and how we measure progress towards it.
- Vision – An inspiring description of what we think the world looks like in the future as a result of our work
- Strategy – The pillars, or areas of focus for us to deliver the vision and why they are the right ones to focus on
- Opportunities – A theme of work for a team that contributes to a strategic pillar
- Features – Shippable pieces of work that exploit an opportunity
- Goals – How we measure progress towards our vision and the success of our strategy, opportunities and features
- Roadmap – A visual description of what the team plans to work on over time
If multiple squads are working on the same product, then each squad’s strategy stack resembles a zoomed in view of the overall product strategy. Each squad will inherit a lot of its strategy from the overall product strategy, and at the same time, the overall product strategy is just the aggregation of every squad’s strategy. There should be two-way feedback, so squads adapt their strategy as the product strategy shifts to exploit new macro opportunities and the product strategy adapts as squads generate new insights from working on their piece of the puzzle.
How to develop a strategy
There are seven steps to creating a really effective product strategy:
As with product development itself, this is not a purely linear process. You will find that as you get to the later steps, you need to double back and update the earlier ones. This fits naturally with the fact that creating a strategy is a continuous process, not a once-and-done task. However much research you do, there will always be uncertainty. Whenever you ship things, you will generate fresh insights that should feed back into the next iteration of the strategy.
For these reasons, it’s worth generating a strawman strategy (a draft designed for criticism and feedback) as fast as possible, and then updating this as you progress and gather more insights. A strawman makes it easier to get feedback from others and focuses where to conduct research first. Try developing a strawman in a day, aiming to validate the main assumptions in a couple of weeks, and then continually updating your strategy based on ongoing discovery.
As you can see, creating a strategy has three main activities:
- Analysis to generate insights
- Interviews and meetings to challenge our thinking and create buy in
- Consolidating strategy into a coherent narrative
In order to justify focusing on a small number of things, you’ll need to make a compelling argument based on a broad range of insights. Think about collecting insights from as broad a range of sources as possible:
- Funnel analysis – understanding the core journeys users go through and where they drop off
- Behavioural metrics – how users engage with and use the product
- User research – what users tell you about the product and the problems you are trying to solve with it
- Customer service touch points – what customers talk about when they reach out for help
- Sales and marketing touch points – what teams with direct interactions with users understand about them
- Competitor insights – how other products are positioning the benefits they offer and delivering on these
A broader range of insights will give you a richer understanding of the problem space to make sure you don’t have blind spots.
Interviews and meetings
As you do this analysis, it’s a good idea to share your thinking with as many people as possible. By exposing your thinking early, you can invite challenge from others and make sure your reasoning is as tight as possible. It’s also important to do this, so that you take people along with you. If people around you don’t buy into the strategy, then it won’t result in the focused action that you are looking for and your efforts will be for nothing. Think about speaking regularly with:
- Stakeholders from other disciplines
- Your team
- Peers working in both related and unrelated areas
As you bring together more data, you should be able to spot emerging themes, and synthesise everything together into a coherent narrative. The trick here is to include as much analysis as you need to convince people that the strategy is the right one, without anything extra that would dilute the message. You don’t want to bore people with 100 slides if they are convinced in 5.
Be hypothesis driven
Have a hypothesis about what the strategy should be from the start, and then try to build a case for this, and see if any evidence contradicts it. It will save you huge amounts of time, and often your initial view will be 80% correct
Proactively tackle difficult stakeholders
Senior stakeholders that don’t buy into your strategy will derail it sooner or later. Work out who is most likely to do this, and if possible co-create the strategy with them to make sure they are on your side early.
Hunt down the killer slides
Great strategies often have 2-3 slides that are instantly memorable and define how people view the problem. Lean heavily on these to create soundbites that people will refer back to
Verify surprising results
If you find something really surprising, double check it. 9 times out of 10 it will be a problem with tracking or data definition. Knowing you can rely on your numbers gives you credibility for the remaining 1 time in 10 that you uncover something genuinely unexpected.
Ok, let’s run through each of the steps in a bit more detail.
Alice: “Would you tell me, please, which way I ought to go from here?”
The Cheshire Cat: “That depends a good deal on where you want to get to.”
Alice: “I don’t much care where.”
The Cheshire Cat: “Then it doesn’t much matter which way you go.”
From Alice in Wonderland, by Lewis Carroll
Strategies are always a response to a challenge, problem or opportunity. Without a clear sense of where you are trying to get to, getting there faster, or more efficiently has no meaning.
The best objectives have two halves:
- Mission – an inspiring qualitative statement
- Measure – a quantified definition of success
This is the reason your team exists, its purpose, the why. Having a clear motivation behind what you are doing is important because it inspires people. People aren’t inspired by numbers, they are inspired by emotions. The more emotional you can frame the challenge you are responding to, the more effective it will be as a call to action.
Consider the following company missions:
- Shopify – Arm the rebels; make it easier to start, run, and grow a business
- Tesla – Accelerate the world’s transition to sustainable energy
- Stripe – Increase the GDP of the internet
- Slack – Make work life simpler, more pleasant, and more productive
- Google – Organise the world’s information and make it universally accessible and useful
- Etsy – Keep human connection at the heart of commerce
Just as companies have missions, so too should teams.
Whilst missions are great at inspiring people into action, alone they can’t tell you how much progress you’ve made, and whether your strategy is an effective response. This is why it’s so important to complement your mission with a measure. A good format to use is:
“Move [metric] from [baseline] to [target] by [date]”
- Increase annual revenue from $100m to $120m by 2024.
- Increase day 30 retention from 20% to 25% by the end of Q3.
- Decrease returns from 22% to 18% by 30th October 2024.
A coherent product strategy relies on a clear definition of the target audience. All too often businesses find it difficult to align on opportunities and goals because senior stakeholders are focused on fundamentally different users, such as sales targeting enterprise customers, while marketing are going after small businesses. It’s impossible to create a good product strategy unless you are aligned on who your target users are and therefore who you are not targeting.
Users should always be defined by the needs they have. This gives you a clear direction on how you are going to generate value for the user; by addressing those needs. When thinking about this, always ask why users have this need once or twice more than you would normally. This follows the Jobs To Be Done (JTBD) framework – a user doesn’t “want” a nail in the wall, they “want” to hang their pictures or decorate their house. The Job To Be Done is decorating the house, not putting holes in the wall. Thinking this way uncovers fundamental needs that are stable over time and allows you to think of more radical solutions to users’ problems. It will also give you a better understanding of the benefits that you’re trying to create for users and how to frame the solutions you build for them.
A great way to map out user needs and the challenges they face is by creating a customer journey map. This allows you to plot the stages the user goes through as they complete their Jobs To Be Done. Often, these steps will correspond to screens on your website or in your app. For each stage, you can add insights from qualitative research and behavioural metrics to understand what the user needs are at this point. This helps you visualise where your users are getting stuck and where it’s worth focusing your efforts to make their lives easier. If this resonates with your team, you can also add competitor references, your vision, CRM touchpoints with the user, and the tech stack supporting this step of the experience.
Once you’ve defined the user needs, some organisations like to bring these alive with personas – descriptions of what a typical user might look like. This can be valuable as long as the needs are recognised as primary to the personas. Otherwise you run the risk of defining your users by demographics like age, gender, and location, which doesn’t provide you with a lot of insight into what you are trying to build and draws you into using unhelpful stereotypes.
Having established what your user needs are, you need to have a view on how your company is uniquely positioned to solve this problem. Without this, the product you are providing can be easily copied by competitors, commoditising the market and destroying your margins. This is tackled at the product level and doesn’t need to be considered by PMs working on their squad’s strategy, though of course they should be aware of it and work within that context.
What makes it hard for companies to compete with you? There are seven “powers“, or hard-to-copy advantages:
- Network effects – Each user enjoys more value as new users join the network
- Scale economies – Unit costs decline as volume increases
- Switching costs – Switching to an alternate product would be costly or painful for users
- Counter positioning – Where a new product’s business model or value proposition cannot easily be copied by incumbents as it would damage their existing business
- Cornered resource – Unique access to a valuable asset
- Branding – An objectively identical offering has higher perceived value
- Process Power – Embedded company culture and process which enable lower costs and/or superior quality
It’s very difficult to pick a couple of the seven powers and then build a product to create these without considering user needs first. But if your solution to a customer’s needs doesn’t generate 2-3 of these powers then that’s a warning sign that your business will have difficulty maintaining its margins long term. This is one of the key aspects of any business that investors try to understand because it has such an important impact on the long term profitability of a company and therefore its value. So, if you’re presenting at board level, it’s even more important to reference the powers you are developing if you want to seem credible.
The vision is the description of the future you are trying to build. This might be a short paragraph that explains what the product looks like in 3-5 years, a few mock ups that highlight key benefits users get, or a clickable prototype that people can play around with. The goal isn’t to define exactly what the product will look like but to inspire teams with a general direction of travel.
Having a vision saves huge amounts of time and effort in aligning everyone around what they are meant to be doing, because anyone can ask: “Does this fit with the vision?”. Whilst a mission provides an answer to why we come into work, a vision answers what we are trying to build.
Overall, product visions are usually owned by the product and design leadership and are created as they start to develop a sense of where they think the product might be in 3-5 years. This doesn’t mean they should develop it without input from anyone else though. As with other parts of the strategy, the vision should reflect the best insights and feedback from across the entire organisation. Each squad’s vision will be a more detailed view of what they think their part of the product will look like. The overall product vision is therefore like the greatest hits of every squad’s individual visions.
It’s worth mentioning that it’s not uncommon for the vision to come before the mission or after the users and needs are identified. Don’t worry about the order too much – start where it feels easiest, get something down, and come back and iterate as necessary.
With a clear vision and understanding of where you will create value for users, you’re in a good position to pick your strategic pillars. These are the 2-4 themes of work that will solve your users’ needs, deliver on the vision, and grow your sources of power. This is the heart of where you will focus, betting that by concentrating your resources in these pillars you can deliver a world class experience that users love and will pay for.
The flip side to this focus is that you will limit your efforts in other areas, so you can devote as much time to what really matters. This can often be a contentious decision, as stakeholders realise that topics they thought would be given time and resources aren’t actually core to delivering the vision. It’s worth spending as much time here as necessary to get everyone aligned to ensure that the strategy isn’t derailed later on in execution.
“All models are wrong, but some are useful.” – George Box, statistician
Once you’ve got a hypothesis about what your pillars should be, it’s critical to test that these will deliver the impact you’re looking for. Whilst you can’t know for sure before you build things, you can greatly reduce the risk by building an impact model to size the opportunity that each pillar represents.
Estimating the impact that product work will have is always a mixture of art and science, and never leads to precise answers. However, it’s an invaluable tool that helps you get a handle on some of the most fundamental decisions you need to make as a product manager – which problems are worth solving, and how to solve them.
Estimating the impact that pillars will has two main steps. First you work out which metrics you expect to move if you release a feature. Second you estimate the degree to which these metrics will move. You can do this based on previous work, or any differences you see in the metrics between different user segments.
By doing this you can usually get a good sense of the order of magnitude any changes are likely to have, and see if this adds up the the amount of impact that you are looking for. If not, you can review your pillars and vision before going any further, and committing valuable engineering time to initiatives that won’t deliver a return on investment.
With your strategy defined at a high level, it’s worth considering how you’ll keep everyone up to date with progress. Stakeholders generally want input and transparency from product teams. If you’ve created the strategy collaboratively with them then they should feel they have had input. You can work out how to give them transparency by considering:
What this translates to in practice will vary hugely on the scale of the business, but having a roadmap that you keep up to date will be a core part of your communication strategy. There are several formats you might opt for, depending on the level of detail that is appropriate, and whether you are doing discovery-heavy or delivery-heavy work.
Learn how to create your own strategy with our 7 week course: Product Strategy
A good product strategy, whether for an entire product or an individual squad, explains where you will focus and why. Based on robust research from different perspectives, it results in focused action which maximises the impact product teams have. Fundamentally, a strategy is a communication tool to guide people on where they work and helps you say “no” to inbound requests that are low value. Co-creating it with the teams that will be delivering it, and leadership stakeholders, positions them as champions of the strategy alongside yourself. This maximises your chances of the strategy delivering the results you want it to.
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Can vision come before mission?
Absolutely. Don’t worry about the order too much; strategy is a continuous process anyway. What is important is that everyone understands both why our work is important and what you are trying to achieve.
What’s the difference between vision and mission?
The mission describes why the work we do is important. It explains our motivation for coming to work. The vision is a description of the future we want to build. It gives us direction and allows multiple teams to build towards a coherent product long term.
What about projects that don’t fall under the strategic pillars?
Projects that don’t support the strategic pillars should be avoided or done with the least effort possible. By definition they offer lower returns than working on our core strategy. If stakeholders are still pushing for projects outside the pillars, this is a good indication that they have not fully bought into the strategy.
How do we know if our powers are strong enough?
You should be able to find references of other companies that have built a successful, durable business with similar advantages to you. Another good indicator is advice from experienced, independent people such as investors, board members, or industry experts. If they are not convinced, then you may have a problem.