What is Product Strategy and Why Does it Matter? — Part 1

Hey Folks! Welcome to this new blog where we will discuss what Product Strategy is. Why is it important? and all the elements related to it? My name is Jayendra More and I lead the product team at a RMG company. So let’s begin with the blog.

Photo by Mark Fletcher-Brown on Unsplash

What is product strategy?

In simple terms, Product strategy is a detailed plan that guides a company in developing, positioning, and distinguishing its products or services to achieve its business goals effectively. It involves identifying the target market, understanding customer needs, defining product features, setting prices, planning distribution, and managing the product throughout its lifecycle. The aim is to align the product with the company’s broader objectives and gain a competitive advantage. Another aspect of product strategy involves defining the target audience, stating the value proposition, and setting objectives for the product’s lifecycle.

Why is Product Strategy Important?

Product strategy is immensely important because it serves as the blueprint for a company’s growth and innovation. Iconic technology companies like Apple and Microsoft owe much of their success to a handful of groundbreaking products that have driven their growth and valuation into the trillions. For example, Apple’s Macintosh, iPhone, iPod, and iPad have collectively generated over a trillion dollars in revenue and established the company as the world’s most valuable. Similarly, Microsoft’s evolution from MS-DOS to Windows and Office, and now to products like Xbox and Azure, has fueled its growth over decades. Even in industries like industrial products, companies like DuPont have thrived for centuries by creating enduring products such as Dynamite, Nylon, Teflon, Kevlar, and Tyvek. In essence, products are the cornerstone of a company’s growth trajectory and innovation efforts.

Products are vital for tech companies, so having a solid product strategy is key. Without it, different departments like engineering, marketing, and sales might not work together efficiently. This lack of coordination can lead to mixed priorities and disjointed efforts. To solve this, companies need clear ownership and responsibility for products within a dedicated team. Without this, goals might clash, and product development and sales could suffer.

Without a clear product strategy, departments may clash over priorities, like support focusing on minimizing customer issues while others pursue different goals. This lack of alignment makes it hard to reconcile differing views. Also, without a customer advocate, their needs may go unheard.

Additionally, lacking a central orchestrator, like an opera conductor, can lead to inconsistency in product development. Just as a conductor ensures harmony, a product strategy orchestrator ensures all efforts align for a seamless customer experience.

Moreover, without a clear product strategy, there can be a disconnect between corporate goals and product offerings, known as “strategy drift,” hindering the company’s direction. Thus, a well-defined product strategy is essential for unity, customer satisfaction, and strategic focus.

Product strategy serves three main purposes:

1. Provides clarity for your organization.
2. Helps prioritize your product roadmap.
3. Improves the team’s overall decision-making.

What happens without product strategy?

Downsides of a product without product strategy,

1. Lack of clear product ownership.
2. Absence of customer advocacy.
3. No centralized orchestrator.
4. Lack of alignment with an overall strategy.

Dysfunctions of Product Strategy

When an organization lacks a clear product strategy, various leadership styles emerge, each with its own pitfalls:

1. Engineering-led Approach: This approach prioritizes technical product features and innovation without a thorough understanding of customer needs and value creation. Engineers may focus on building impressive products without considering whether they address customer pain points or provide tangible value.
   - too much emphasis on features
   - lack of clear value proposition: who is this product for? how and where will it be used? why will customers pay for it?
2. Executive Management-led Approach: In founder-driven companies or those lacking a clear product strategy, the perspective of top executives dominates decision-making. Relying solely on the vision of one individual can be risky as it may be biased or outdated, overlooking evolving customer preferences and market dynamics.
   - biased point of view
   - over-reliance on past success
3. Marketing and Sales-led Approach: In organizations where marketing and sales take the lead, there’s a risk of becoming overly customer-focused on incremental improvements rather than driving fundamental innovation. This approach may result in prioritizing short-term customer demands over long-term strategic goals, leading to a lack of innovation and over-customization to appease individual clients.
   - focus on incremental improvements
   - too much one-off customization

Each of these scenarios highlights the importance of establishing a clear product strategy to ensure alignment with customer needs, market trends, and long-term business objectives.

In companies where one function leads without a clear product strategy, scaling becomes a challenge due to the implementation of numerous custom products. This lack of coordination often leads to technical, sales, or marketing dysfunctions, hindering overall efficiency and growth potential.

Conversely, a robust product strategy offers several benefits:

1. Clear Product Vision:
   With a defined product strategy, there’s a clear vision of what the product aims to achieve, directly aligned with the company’s overall vision. For instance, Microsoft’s vision to empower individuals and businesses guides product visions like Surface and Office, ensuring alignment with broader goals.
2. Customer Advocacy:
   A well-defined product strategy ensures that customer needs are adequately represented within the organization, fostering customer-centric decision-making.
3. Product-Market Fit:
   Products are tailored to meet market demands and customer requirements, ensuring alignment with the target market and sustaining relevance over time.
4. Improved Cross-Functional Collaboration:
   A cohesive product strategy encourages collaboration across various functions such as engineering, marketing, sales, finance, supply chain, and manufacturing, fostering alignment and synergy among teams.

Overall, a clear product strategy serves as a guiding framework for product development, facilitating coherence, alignment, and customer-centricity across the organization.

Who Needs Product Strategy?

A robust product strategy drives growth and innovation, making it indispensable for any organization aiming to thrive in today’s competitive landscape. Without it, alignment, focus, and customer-centricity suffer, hindering overall progress.

But who needs a product strategy? The answer: nearly everyone and here’s why:

1. Technology Industry:
   In tech-driven sectors like hardware, software, telecommunications, and e-commerce, firms like Amazon, Microsoft, SAP, Apple, and Salesforce rely heavily on product strategy to stay ahead.
2. Industrial Companies:
   Even traditional industrial giants such as GE, Siemens, John Deere, and Caterpillar benefit from a strong product strategy to navigate evolving markets and customer needs.
3. Technology-Intensive Companies:
   Many companies, not traditionally viewed as tech firms, have become technology-intensive. Examples include Allstate Insurance, J.P. Morgan Chase, and law firms embracing LegalTech. Even IT services companies like Accenture and TCS develop products alongside their services.

In essence, in today’s digital age, every company, regardless of industry, must adopt a technology-driven mindset and invest in a robust product strategy to drive growth, innovation, and competitive advantage.

Product Strategy Myths

Regardless of whether your company is traditional or tech-focused, products and product strategy are central to its success.

Addressing some common misconceptions, let’s debunk a few myths about product strategy:

1. Only for Big Companies:
   Contrary to popular belief, product strategy is not exclusive to large corporations with hefty budgets. Even startups, with just one founder, require a product strategy from the outset to guide their product development efforts.
2. Product Roadmap Equals Product Strategy:
   Having a product roadmap or a list of features doesn’t equate to having a product strategy. The roadmap is a result of strategic planning, which begins with a clear vision and mission and extends beyond mere feature planning.
3. Product Managers’ Responsibility:
   While product managers play a crucial role in shaping product strategy, it’s not solely their responsibility. Anyone involved in any aspect of the product, including support functions, should understand and contribute to the product strategy, as it impacts the entire organization.

In essence, product strategy is a competency that transcends job titles and roles. Understanding how product strategy works and where one fits into the larger picture is essential for all business executives, regardless of their direct involvement in product management.

Framework Used to Build Product Strategy

Here is a blog that I’ve written previously on V2MOM, a framework used to build product strategy.

V2MOM
V2MOM is like a blueprint Benioff crafted on a paper napkin to outline the company he envisioned. This framework, in use since 1999, has proven its staying power and remains relevant. What makes it even more remarkable is its versatility — it can be applied to companies and products, and even adapted for personal use. More on this topic here.

Related Topics

1. What is Product Strategy and Why Does it Matter? — Part 2
2. Unlocking the Power of V2MOM: Crafting Your Vision, Values, and Mission for Success

In our next blog, we’ll dive deeper into product strategy. We’ll cover:

1. Product Strategy in Consumer Goods: How it drives success in consumer markets.
2. The Link Between Project Strategy and Company Size: How company size impacts strategy.
3. Product Strategy in Professional Services: Strategies for service-based firms.
4. Focusing on Problems, Not Just Products: The importance of addressing customer needs.

Stay tuned for insights on these topics and more!

I would love to hear your thoughts on this topic in the comments. If you enjoyed this article, please Follow me here on Medium for more stories on similar topics and other Product Management-related subjects.

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