An insight-driven and well-thought-out product strategy plan can drive an industry into the adoption of a hidden need.
The Rise And Fall Of The Headphone Jack — by CNBC — the headphone jack has a long legacy in the audio world. So when Apple decided to exclude it from the iPhone 7, consumers were up in arms. In the years since Samsung has been a champion for those who still wanted the headphone jack Samsung even went so far as to run a headphone jack commercial mocking Apple. But with the release of the Galaxy Note 10, it too has forgotten the decades-old technology. Did Samsung prove Apple right by killing the headphone jack?
Product strategy is the set of choices a company makes to achieve business objectives. Choices such as which products to develop, which market segments to focus on, how to differentiate, how to price, how to position, how to message, and so on. A business needs to follow the following steps if it wants to deliver impact on its product strategy:
- Understand and outline its core business values and objectives
- Outline its business strategy
- Focus on execution
- Allocate the organizational resources to deliver results
Facebook’s 10-year product strategy and roadmap — Photo by Vladimer Botsvadze
— The importance of strategy for product development
Product leaders need to understand what strategy looks like, make sure it exists and is documented, ensure that all key stakeholders understand what it means and are prepared to do their part to make it happen. Most organizations, from small startups to large multinationals, do not have a good sense of their product strategy or follow it consistently, while those that do — such as Apple — see profits skyrocket.
On the other hand, take a look at the many unsuccessful product launch attempts of Google here. It seems that Google has been mostly in a reactive mode in recent years, taking a shotgun approach towards market dynamics, testing what might stick. In general, organizations lose strategic focus due to a variety of reasons. Some companies have vague and incomprehensible strategies to start with, some just lose track of strategy over time. In some organizations, leaders and influential teams pull strategy into conflicting directions, and consequentially, product teams behave as passive order-takers of intuition-based and short-term focused leaders rather than proactively considering the long-term consequences of their work.
Under such ambiguous circumstances, companies exist without a purpose, or constantly change course to the extent that nothing gets done, motivation levels drop and top talent leaves the company. To develop and maintain a successful product strategy, product leaders need to:
- Understand the market and consumer dynamics and trends
- Map out and benchmark competitive offerings in the market
- Stay on top of technological trends
- Assess industry drivers and financial factors
- Define and prioritize actionable strategic options
- Communicate decisions across the organization
- Possess grit and conviction to the longer-term product strategy
— Defining success
A great strategy, like a great navigation app, is a series of simple steps that draw a logical route to help you choose the optimal path to achieve your objectives. A great strategy plan:
- Shows you how to achieve your goals
- Considers market drivers that will impact your business such as competitive dynamics or customer trends
- Assesses your competitive advantage and why customers may choose you
- Encapsulates market challenges and helps you make winning decisions
- Monitors progress through clear and measurable metrics
- Aligns key stakeholders around its proposed recommendations
— The Positioning Framework
No matter how long or detailed-oriented a product strategy is, you need to be able to boil it down to its essence and sum it up concisely and clearly in a few sentences. If not, then it means that your strategy lacks or avoids important points. Geoffrey Moore’s value proposition statement or positioning framework sums a companies’ product strategy in the few sentences below:
FOR ((target customer)), WHO HAS ((need statement)), ((product/brand name)) IS A ((market category)) THAT ((key benefit statement/compelling reason to buy)). UNLIKE ((primary competitor alternatives)), THE PRODUCT ((unique differentiation statement)).
So for Netflix, it would like something like this:
For millennials who want on demand entertainment, Netflix is an online subscription TV service that works seamlessly. Unlike HBO or HULU, Netflix releases original content for binge watching.
For Amazon Web Services (AWS):
For growing companies who need to control infrastructure costs as they grow, AWS, is a cloud hosting service that is highly flexible. Unlike Google Cloud or Microsoft Azure, AWS offers a complete portfolio of cloud services.
For anyone with a smartphone who needs a local ride, Uber is the next-generation taxi service that provides a simpler, more convenient and higher quality transportation experience than conventional taxis.
I. Breaking the framework to build a product strategy
— Identify the target customer segment
Since a product can’t be everything to everyone, in other words, since there is no average product for the masses, first and foremost, identify who you’re building the product for. For example, Facebook was targeted at college students and designed to form habit-forming behaviors in a niche segment before hitting the mass market.
Additionally, with limited resources, you are better off creating a critical mass of value for a target segment than failing to satisfy the masses. This is exactly the case with the auto industry where Toyota aims for the mainstream middle-class families that value functionality while BMW targets more affluent people, interested in a luxury experience.
As a product manager, segment the market using typical demographic categories, such as age, gender, level of income, and geographic location. Also, break down the customers using psychographic interests and behaviors to get a more refined definition of your audience. As you are identifying the target segment for your product, consider the attractiveness of the segment, the addressable opportunity, and potential revenues.
For BMW, the target customer segment could be as follows:
For educated, affluent males, ages 35 to 55.
— Understand ‘THE’ customer need
A customer need should be real, meaning you shouldn’t be a solution in search of a problem. Many ideas emerge with the potentials of a new technological innovation or by envisioning a certain method of implementation of current technologies. For example, when Apple came up with the iPod, it wasn’t looking to do something with a portable hard drive rather it wanted to enable customers to take their music library with them, everywhere, because that was a problem indicated by its customers. Moreover, focusing on the problem helps product teams keep an open mind in experimenting with the best available solutions.
When identifying your customer need, focus on one strong need over many weak ones. A need may take the form of a pain that needs to be relieved or a benefit that creates gain. Usually, customers’ needs can be observed and validated but sometimes they may be hidden. For example, back in 2004 when Facebook got started, who imagined that we would need another social network to connect with friends. Well, Mark Zuckerberg was a psychology major. The founders of Instagram studied Symbolic Systems and Management Sciences as their core subjects. These entrepreneurs were able to pick up hidden social and psychological needs and deliver unique experiences as solutions.
For BMW, the customer need could look something like this:
For educated affluent males, ages 35 to 55, who seek excitement and luxury.
— The market category
A market category is how customers will perceive your product and how you will communicate with them. Customers will adapt and make sense of things by categorizing and comparing them to things they already know. Customers will let you know how they perceive your category, by comparing you to current service such as mentioning ‘you’re the Facebook for X’, or ‘Uber for Y’, and that would shed light on how they perceive your product’s category.
Despite your belief that you might be building a new category, in reality, this rarely happens and it would be wise to use currently established categories and perceptions to find message-customer fit. Educating customers on new market categories will be challenging and expensive unless it is a dire need that will grow mainly through word of mouth. If you reach such a business model, then you have come up with a billion-dollar idea and need to recruit the best of talent, especially in your product development department.
For the case of BMW, the market category, for the Series 3 model, could be as below:
For educated, affluent males, ages 35 to 55, who seek excitement and luxury BMW Series 3 is a family luxury sedan.
— Key benefit
For starters, you only need one key customer benefit — the most important benefit that your product is delivering. Also, note that your product features are not your benefits. For example, an insurance policy protects individuals from potential financial losses. An insurance policy could have many features that combine to deliver an underlying benefit. Do note the difference between a benefit and a feature; customers adopt products not for the features they have, but for the key benefit they create.
For the case of BMW, the single most important benefit it offers could be:
For educated, affluent males, ages 35 to 55, who seek excitement and luxury, BMW Series 3 is a family luxury sedan that provides a great driving experience
A customer decides to adopt your product by comparing its benefits against the benefits of other similar offerings out there. Therefore it is important to understand the set of direct and indirect options available to your customers if you want to remain competitive.
To identify your customers’ consideration set, it is best to study their behaviors and perceptions towards your key benefit. For example, an alternative to buying a BMW would be buying an Audi or using public transport, or Uber, or a bike. However, BMW’s core customers will not be mentioning public transport or a bike as an alternative, and this is what should be indicated through customer research.
For BMW, the positioning statement could be continued as follows:
For educated, affluent males, ages 35 to 55, who seek excitement and luxury, BMW Series 3 is a family luxury sedan that providing a great driving experience. Unlike Audi (or Mercedes)…
— The differentiating factor
The differentiator is the one thing we’d like customers to consider as unique to our product. The differentiating factor is not necessarily the most important feature or benefit of the product, but it will certainly be something that makes the product stand out to help it break through the market clutter. To build a lasting differentiator:
- Benchmark what your competitors are doing. Figure out how they are trying to differentiate themselves
- Go to customers, run options by them, and see what sticks in their minds
- A differentiator will fall into one of these categories: lower prices, better services, or exceptional quality
Again, differentiation isn’t always about extra benefits, it’s about doing something well and standing out. For the case of BMW:
For educated, affluent males, ages 35 to 55, who seek excitement and luxury, BMW series 3 is a family luxury sedan that provides a great driving experience. Unlike Audi or Mercedes, BMW is fanatical about engineering quality.
II. Developing the product strategy
— The ‘How’
A strategy is about the ‘what’s and the ‘how’s. Many consulting companies come up with grandiose, detailed, and theoretical plans using best practices, but most of the time their plans end up collecting dust on a shelf because they do not address the ‘how’ part — ‘how’ to build the necessary support for the organization and ‘how’ to get it implemented. Therefore, before getting started on the details of your strategy:
- Identify the key stakeholders who should be involved in the strategy forming process
- Collect input from a wide range of people with a variety of perspectives
- Pay attention to what others are doing, such as investors or competitors
- Communicate your project development broadly and frequently with the stakeholders, let them get involved, and help set the direction
- Figure out how to tell a good story that excites people and inspires them to take action
- When details are outlined, shift focus from strategy to execution. Get help from all stakeholders to turn strategy into implementation
— Key stakeholders
Your key stakeholders will be people who will help you build or improve the strategy, fund implementation, or execute it, such as:
- Decision-makers: usually a CEO or a GM who runs the company or business unit
- Potential influencers and gatekeepers: internal, usually in the inner circle of the decision-makers, and external, consultants or key accounts
- Finance people: potentially the CFO or the investors
A strategy is said to be working when colleagues bring it up in meetings and conversations and when it helps business leaders decide what to do and what to avoid. And to get to that point, you need to actively involve others in the strategy creation process.
— Collecting and organizing input
For product strategy development, we want to stay objective on driving organizational and business goals. Therefore we need to collect data that leads to an unbiased analysis to deliver logical decisions and drive action. Product leaders need to collect input from primary and secondary sources, organize and prioritize them to comprehend the nature of the opportunity, make specific strategic choices, and finally, execute this strategic plan. When gathering input:
- Interview key stakeholders
- Read industry publications
- Reach out to thought leaders
- Follow recent investments
- Acquire secondary sources of market research
- Examine financials and projections
- Follow competitors and assess their decisions and moves
As you collect and document these inputs, extract strategy shaping insights such as:
- Key industry trends that forecast the direction of the industry
- Key competitors’ decisions and the reasons behind it
- Your position in the market
- A direction that makes sense for your product and organization
— Build support if you want to see your work get implemented
- Be enthusiastic about your efforts, and share that enthusiasm with others
- Engage your stakeholders in the strategy-building process. Let them know why a long term perspective on the product is needed
- Project confidence! Be assertive and have structured and rigorous research that would be defendable
- Know your audience. Tailor your messaging and pitch accordingly
- Get the CEO or GM and the functional leaders to present and explain the strategy to their teams so that the entire company is aligned
Your product strategy needs to be a dynamic and living document because markets are constantly changing. As market economics, competitive dynamics, consumer behavior, and technologies change, so should your understanding of the circumstances. As the strategy is implemented, the real world will react and with feedback, strategies will need to be updated.
If you are in an established organization and are feeling that your business has become complacent towards your product strategy, always remind yourself of the case of Nokia. And if you are a startup, it is important to change and adapt, maybe weekly, depending on the stage of your product life-cycle. Always hold hypotheses and gather market feedback and change or pivot your product strategy accordingly.
- Use the positioning statement as a guiding framework to develop your product strategy
- Break the positioning statement down, and build it back up with detailed research and input from a variety of sources and perspectives
- Create a detailed action plan, build support and quickly shift focus on implementation if you want to drive impact
- Update your strategic plan with market feedback, regularly
Written by: Akash M Dubey
Follow on Linkedin : https://www.linkedin.com/in/akashmdubey/