The concept of product strategy is understood in different ways. For some, it is a plan for the next product release. For others, it is a world-embracing vision of developing an own industry domain over the next ten years. Too often, it’s a magical plan for a company’s future that everyone says they know, but no one has seen.
Here are some useful definitions from Oxford Languages:
Vision: The ability to think about or plan the future with imagination or wisdom (goal)
Strategy: A plan of action designed to achieve a long-term or overall aim (plan)
In this blog post we will discuss what happens when you don’t have a product strategy.
The 3 main problems caused by the missing product strategy
- The company’s product vision is missing
- Customers will not understand your messaging, and you will not stand out from the competition
- Making decisions will be difficult and slow
Let us explore all three of these problems in turn.
The company’s product vision is missing
If your product vision is not clearly defined (and understood), different views will arise with time.
The stakeholders will not work towards a common goal, and your company’s different functions will have different views of the direction.
- Sales and Marketing target customers’ short-term aspirations
- Product Development focuses on technical subtleties (minor improvements to good enough)
- Product Management is firefighting tactical moves only
A change, such as a change in the business model made possible by digitalization, affects the entire organization. If there is no common understanding of the milestones for its phased realization, there is a high probability that change will not happen. Change always requires time and action in terms of product portfolio, too.
Without a product strategy, the offering can only develop incrementally. You can add functionality x to customer desire y and measure your operations with quarterly financial figures each year. But with this short-term view, you will not be able to respond to changes in the market and the environment.
Longer leaps (or forklift upgrades) won’t occur if the focus is only on the present. And without those, how long will you stay competitive?
"A goal is not always meant to be reached, it often serves simply as something to aim at."
— Bruce Lee
Customers will not understand your messaging, and you will not stand out from the competition
When making a purchase decision, your customer assesses your ability to meet their needs, also in the future.
This process often takes longer than you would like. The efficiency of purchasing is also reduced if there are many suppliers, and the average purchase is small. The company’s reputation may be more important than the technology itself.
The best way to convince the customer that you are the right supplier, is to present the problems and needs the customer is likely to experience in the future. And by having a vision, you have already started preparing to solve those.
Predicting the future is difficult. When preparing roadmaps for a longer period of time, you should raise the level of abstraction:
- A view of the features for about 12 months
- A view of what kind of problems and needs you will solve for about 24 months
And after that: only describing the future at a high level.
Without a proper product strategy, you compete on the very same arguments as your competitors. This leaves only one distinguishing factor – the price. This is often revealed by reading win-loss analyses. Typically (in 80% of lost cases) the reason for the loss is a lower price from your competitor.
Although the purchasing decision is influenced by many other, even more important factors, the product strategy helps make the offer stand out from the competition, thus reducing the importance of the price tag.
"Who would want to compete only on price?"
How can marketing and sales help sell your product if you can’t communicate your strengths clearly and understandably? The first rule of product marketing is to leverage your strengths. How can you do good product marketing if you don’t know what your strengths are?
Your competitive advantage is usually also reflected in the products and is the backbone of the product strategy. Or at least there is a theme that is somehow present in all the products. How successful are your marketing campaigns and lead generation process, if you can't tell your marketing partner what customer segments you're targeting?
"Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives - choice, not chance, determines your destiny."
Products thrive when they are made to meet the needs of specific customer segments, and marketing and sales are aligned to serve those. A good product strategy defines the desired customer segments, so that marketing gets the raw material it needs for its own work.
Making decisions will be difficult and slow
Without clear product vision, the wishes of (individual) customers drive your product - including the wishes of the customers who never buy from you.
The product business is all about standardization. Investment has been made to develop and deliver the product or service. The same product or service is then delivered as is to multiple customers, forming a market segment(s). With a well-functioning product strategy, you can respond proactively to the customer segment’s needs. Ultimately, showing the solutions before the customer asks for them, brings us to the core of the product business.
"If I had asked people what they wanted, they would have said faster horses."
— Henry Ford
If individual customers get too much influence on your development roadmap, the risk of “two-customer” solutions emerges. This may lead to an unwanted business model combining the high cost structure of product business, with the low volumes of project business.
If product strategy does not guide product-related decision making, decisions will not be made. Instead, they are often referred to the management team, which can become a bottleneck in decision making.
Product strategy is always connected to the:
- business model
The product strategy is therefore a common plan that affects all functions of the company. Proper product strategy connects these functions, tearing down the organizational silos.
Without a well-functioning product strategy, decision making slips out of the way. One of the most important principles of modern management is that decisions are made where there is the best knowledge to make them. This principle requires that high-level directions shall be easily and comprehensively accessible to all.
What a working product strategy includes
The product strategy includes a goal/vision to be achieved in the longer term. So, what does “longer term” mean? The timeline varies according to the maturity of the company and the life cycle of the products.
- The direction of a start-up company may be determined by the requirements of the next round of financing and focuses on about a 3-12 month period.
- The life cycle of a new aircraft model is tens of years, so the product strategy should cover 5-20 years.
- In B2B services it could be in the range of 2-5 years.
The product strategy includes the means by which the desired goal/vision is achieved. It includes a description of how you are progressing from the current state to the desired goal. However, the product strategy is not carved in stone.
A good product strategy also documents what you don't do. This protects product development in particular, from unnecessary requests.
When you are making a product strategy, you have to make assumptions, because you always have an incomplete picture of the future. Setting simple KPIs for the assumptions and hypotheses helps you follow and adjust to the developments of the market.
In summary: these are the main benefits of a product strategy
- You can change and evolve your offerings. Because the market and the environment are changing independently of you.
- The messaging to customers becomes clearer. And you don't need to compete on price, as your customers will appreciate that your offerings can meet their future needs.
- You can make faster and better decisions that are aligned with your common goals - and those goals are more likely to be achieved.
Published: January 20, 2022