Why Product People Should Care About Business Strategy
As product people, we can be very fond of the products we manage. While it’s good to care about them, we must not forget that they are a means to an end: Products only exist to create value for their users and the business. It is therefore important that your product helps your company move forward and supports the overall business strategy, as I discuss in this article.
Business Strategy vs. Product Strategy
A business strategy describes how a company wants to achieve its overall aspiration and create value for its users, employees, and shareholders. It’s distinct from the product strategy: The business strategy states how the company will be successful, whereas the product strategy describes how a product will achieve success, as the following picture illustrates.
The business strategy provides the company with the basis for making the right investment decisions. This includes determining if a new product idea should be pursued and how much money should be spent on an existing product. At the same time, it offers you, the person in charge of the product, the necessary context to make the right strategic product decisions, for example, the market your product should serve and the business goals it should meet. It is therefore a key input for any product discovery work.
Unfortunately, it’s not uncommon in my experience that organisations don’t have a business strategy, or that the strategy is not communicated. Statements like we want to grow, increase our profit margin, or gain more market share are not business strategies. Achieving growth is a business imperative; increasing margins and market share are goals that might be part of a business strategy. On their own, they are not enough.
Elements of an Effective Business Strategy
What does an effective business strategy look like? I find Roger Martin’s approach for creating such a strategy helpful. It involves answering the following five questions.
What is your winning aspiration? Why does your organisation exist? What is the company’s vision? State the purpose of the organisation that provides continued guidance and helps identify the right strategic objectives. Think, for instance, of Google’s vision “to organise the world’s information and make it universally accessible and useful”.
Where will you play? Clearly describe the areas in which the company will compete to fulfil its aspiration. Who should benefit from your offerings? Do you intend, for instance, to address existing markets? Or do you aim to create new markets (also called blue oceans). Which geographies or regions do you want to address? Which product categories and channels will you require? Note that answering this question requires making tough choices — saying yes to some options, and explicitly discarding others.
How will you win? What is your competitive advantage? For example, cost leadership (low prices), differentiation (uniquely desirable products and services), or focus (niche markets) — three options originally suggested by Michael Porter. Answering this question requires you to understand the strengths and weaknesses of your business and the competition you face.
What capabilities must be in place? What do you need to be really good at? Which new products or services do you require? Which existing products you should enhance, and which offerings you should remove? In other words, decide how you should adjust your product portfolio thereby creating the context to allow the product people to make the right strategic choices for their individual products.
Which management systems are required? Which processes and structures are necessary to build the appropriate capabilities and reinforce your organisation’s strategic choices? This might involve creating or strengthening a product management organisation and hiring or developing product people who have the right skills to professionally manage digital products.
Note that there is no perfect business strategy — just like there is no perfect product strategy. Instead, strategy is about increasing the chances of being successful. Bear in mind that strategy is not fixed: as the market and competition change, your business and product strategies have to evolve. It is therefore important that you regularly review the business strategy, as well as the product strategy — biannual reviews for the former, and quarterly reviews for the latter, as a rule of thumb.
Read On …
To read the rest of this article and access the remaining tips, please head over to my website: https://www.romanpichler.com/blog/business-strategy-and-product-strategy/
Learn More
To learn more about aligning business and product strategy, attend my Product Strategy and Roadmap training course and read my book Strategize.
Source: https://www.romanpichler.com/blog/business-strategy-and-product-strategy/
