In its simplest form, product strategy is a business plan for the product—the planning to achieve the product's vision. It involves the company's overall business strategy and objectives, deciding what products to develop and bring to market, market trends, customers' needs, and how to promote and sell them. A well-crafted product strategy can be a significant asset for a company, giving it a clear roadmap for success.
It's important to note that product vision is the "what," product strategy is the "how," and the roadmap is the "when." In the initial stages, the whole team sets the product vision and strategy. Then, as the product matures, the product team takes over the strategy and the leadership, which we may call the product's CEO, takes over the vision. Marty Cagan explained the difference between vision and strategy in this article Vision vs. Strategy.
The product strategy aims to create a roadmap for developing products that will meet the target market's needs and help the company achieve its business goals. There are a few prerequisites to creating a product strategy roadmap. You need to:
- Clearly understand your company's business strategy and objectives.
- Understand the needs of your target market and what trends are impacting that market.
- Have a team in place that is capable of executing the product strategy.
- Have the resources to support the product strategy's implementation.
Some tools help you craft your company's product strategy, like market research, competitive analysis, customer surveys, business planning, financial modeling, and product development.
However, the most effective tool is the "do." The question "What do you need?" is the wrong question to ask your potential customers when doing market research. Instead, you should ask, "What do you do?" You should act like a social anthropologist and discover what they do.
Observe your customers and prospective customers and try to find answers to these questions:
- What do you do?
- How do you do it?
- Why do you do it?
- Where do you do it?
- When do you do it?
- What's standing in your way?
Then you can translate those "do's" into wants and need and create real solutions they'll buy, not just a technology that may or may not solve a problem.
The strategy should be a living document that is constantly updated and refined as the product evolves if the market or the company's business strategy changes. The whole team should have access to the plan and be able to contribute to it, so a shareable document on the cloud, like Google Docs, is a good choice. Some teams create a PowerPoint presentation, but they should be careful not to end up in the bike shed problem, in which the aesthetics of the presentation becomes more important than the content.
Amazon's "Prime" program is an example of a successful product strategy. The company should focus on developing a program that would offer free shipping for customers who purchased items from Amazon. As a result, Amazon was able to attract more customers, and the program has been successful in helping the company to compete with other online retailers.
Breaking down Amazon's "Prime" a little bit, first, we need to know the company's vision:
"Our vision is to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices."
Given that vision, the company's strategy is to create a massive customer base to take advantage of the network effect. The make the customer base, the pricing strategy is to offer a membership program that would give customers free shipping and other benefits. But, even losing money from customers, they win from its back-channel seller services, like commission on sales, because the sellers sell on Amazon's platform because of the vast base of customers.
Of course, that's a tiny part of the strategy, but it's a fine example of how a company can use a product strategy to achieve its vision.
Another example of a successful product strategy is Apple's "Think Different" campaign. The company based the approach on the idea that the company should focus on developing unique and innovative products rather than trying to compete with other businesses by offering similar products.
An example of an unsuccessful product strategy is Microsoft's "Windows Vista" campaign. The company focused on developing a new operating system that would be more user-friendly and compatible with other software programs. However, the product was not well-received by consumers, and Microsoft was forced to release a new version, "Windows 7," just a few years later.
Every company should have a product strategy before development begins, especially about discovering the market's needs and if the product solves a real problem. Unfortunately, many mistakes are just identifying a few parts of the strategy and then jumping into development, which causes much waste. The opposite is also true; you should avoid aiming to create the perfect product strategy document and not execute the idea.