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Rocking at Product Strategy: 3 steps and 10 tools to succeed where most companies fail

Defining the product’s strategy is a complex problem. But considering all the hard activities product teams must do, this is one with surprisingly high failure rates.

Furthermore, when we try to learn how to do it right, we find plenty of material about strategy, that is full of “motivational” or very high level (and common sense) advice, but no real guidance on how to develop your own strategy.

I want to fix that! But let’s first explore some reasons why we fail:

1. Not setting a (real) strategy at all

It is incredible how many companies do not set a Product Strategy. I first thought I was overreacting to the examples I stumbled upon until I saw Marty Cagan recently said the same :)

Why do companies avoid formulating a strategy? I have found different “excuses”:

• Focusing on quarterly targets prevents creating a long term strategy
• “The world changes too fast; by the time we created the strategy, it will no longer be valid”.
• Top-level management would say they already have a strategy but it is not formulated anywhere
• Supposedly not required: “the product is too small”, “we are only doing optimization”, “we are in the discovery phase, so we don’t have a strategy yet”.

Of course, all of them are invalid excuses to avoid hard work (that creates great rewards).

2. Insight-less strategy

Another common mistake is blindly following a hunch. You create a plan that lacks any insights from the user’s needs, the market, the competitors, and even your own data.

Arguably the most critical aspect of a successful strategy is a deep understanding of the situation, to choose the most rewarding problems and assign resources to it. Failing to base the strategy on insights is similar to not creating a plan at all.

3. Setting the right “flight level”

This one is the one I have seen unfold more often: strategy is either a one-line ambition (“Increase conversion 2x”) or a list of activities (“The list of 40 strategic projects for this year”).

The strategy is supposed to help us clarify the problems we are trying to solve to accomplish our vision.

• If it is too high level, it gives us no clarity nor alignment among teams on where to focus our efforts. With “Increase conversion 2x”, you will undoubtedly see teams making efforts, but the lack of alignment will result in a lot of small increments that do not add up to your desired goal.
• If it is a list of activities, it focuses on the solution rather than the problems to tackle. This goes against the idea of empowered product teams, and it will likely reduce the impact you expected and the level of innovation achieved.

A right level of granularity should align the units towards the same challenges. Let’s take, for instance, “Increase conversion 2x by personalizing the purchase experience”:

• The product listing team will personalize the products sort order considering past user behavior
• The product description team will include similar options that were purchased by others that match the current user’s profile
• The product reviews team will highlight reviews of social friends (considering social login)
• The product checkout will remember payments and shipment preferences

Each squad understands the problem we are trying to solve and contributes to the primary goal.

Note: the last example still is too high level, but helps clarify the point.

Why is Product Strategy important

Why should we care?

Product strategy is the link between the vision and what the teams will work on. Is how to define goals and assign resources.

In the previous section, I hinted at a lot of benefits of having a strategy, but the real benefit is the F word.

FOCUS!

• Make a serious choice of what problems you will tackle (and share that with stakeholders).
• Clearly say what you will not work on
• Align teams (not only product teams) towards the same goal

One of the most amazing things of a clear strategy is how many useless conversations it can end in just seconds, without a baseless “benefits” discussions or hurt feelings. For instance, “I love that idea, but it does not align with our current strategy. Goodbye!”. On the other hand, if there is no clear strategy, every stakeholder can claim “we really need to add this strategic solution” and push it to the product team without any real prioritization or discovery work.

Is strategy just for top leadership?

One unrelated topic I wanted to cover is that every leader in the product organization, including the Product Manager, Product Designer, and Tech Lead, should care about the strategy. Leaders of the product organization ARE responsible for articulating the strategy. If there is a lack of strategy for the product you are working with, you can take the lead and propose one, or if you have a worthy insight that you believe can improve the current strategy, share it! Even if you are wrong, it will probably spark a very fruitful conversation with your manager, and you will gain further strategic context understanding (and maybe set yourself up for a future promotion!).

Let’s see some tools to help you do it!

How to create a great Product Strategy

I divide the work needed to formulate the strategy into three steps (plus prep work).

0. Gather information

Hopefully, obtaining data about the user, the business, the market, competitors, macroeconomic conditions, etcetera, is an ongoing process for your team rather than a step in this process.

Nevertheless, it is essential to have defined roles responsible for preparing this information for the strategy sessions, making sure you capture what you need, and everyone reads it before the kick-off.

A proposed way to distribute information responsibility.

Besides preparing the raw information for everyone to read, each responsible should create syntheses, graphics, and any other tool that helps quickly understand the document. Think about including these summaries in the strategy document so everyone can understand the background of the decisions.

A quick side note on gathering market information: there are plenty of resources to collect information. I usually split them into: Local vs. Global and General vs. Industry-Specific. Some options are the statistic institutes of either country’s governments or global organizations (like World Bank), and private research firms like Gartner or McKinsey.

No excuses, there is plenty of market information available

1. Generate insights

You may be a visionary leader full of insights. But for the rest of us mortals, it is better to have a few tools and techniques to generate different options and tools to spark ideas and “aha” moments.

• Tool1: Core value proposition + Blue Ocean ERRC

Identify your core value differentiation by benchmarking against other players. You can use many benchmarking tools, Porter’s forces analysis, or simply achieve it through a bar chart with the core offer values:

Then you can apply the ERRC model from Blue Ocean Strategy to decide what factors to focus on:

Following this example: Can you focus on improving and securing that differentiation? Should you focus on leveling other aspects?

• Tool 2: Opportunity Solution Tree (first part)

This tool helps you organize your options.

Considering the vision we want to pursue, and the information gathered, collectively complete the first part of the Opportunity Solution Tree, listing desired outcomes and their potential opportunities.

Why This Opportunity Solution Tree is Changing the Way Product Teams Work | Product Talk

• Tool 3: 3 Horizons of Growth — McKinsey

This popular tool helps you visualize not only the current opportunities but also the emerging ones and the ones that you can experiment with for future growth.

To avoid concentrating all your strategic initiatives in maintaining the current business, and to ensure future growth, your strategy should clearly articulate what you are doing for horizons 2 and 3.

Draw in a whiteboard the horizons, and use post-it notes to complete ideas for each.

Enduring Ideas: The three horizons of growth

• Tool 4: Lego’s innovation Matrix

This incredible matrix allows everyone to think about different possible dimensions of product growth. I believe it is an excellent tool to spark ideas and force you to consider more directions (Lego used it to make sure they were filling all the boxes with their portfolio!)

The Innovation Matrix

• Good old brainstorm

Of course, you can be less fancy and just run a regular idea gathering session :)

2. Select

“Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.”― Richard Rumelt, Good Strategy Bad Strategy

Now it’s time to focus on the most promising strategic drivers.

You can simply select by debate, dot voting, or because the information gathered identifies which is the most significant opportunity. But there also are a few tools to help you identify the strongest candidates.

Keep in mind that selecting is about focus and positioning. We want to create alignment towards the differentiation we wish to have on the market based on the insights and opportunities detected.

• Tool 5: DHM (Delight, Hard to copy, Margin Enhancing) by Gibson Biddle

By analyzing how the identified opportunities can benefit the user, your differentiation, or the bottom line, you may determine which is more important to focus on at this moment.

Part of Gibson’s 12 part series to define strategy, DHM is a rapid and straightforward framework to spot the ones with higher impact.

#2 From DHM to Product Strategy

• Tool 6: Google’s 70/20/10 rule

The basic idea of this “paradigm” is that you should allocate 70% of resources in “now strategy” (or core business), 20% in near-term growth (like adjacent opportunities), and 10% in future potentially disruptive ideas (moonshots).

This tool would help you select the right mix of opportunities to make sure you’re investing in creating future value.

The 70–20–10 Rule for Innovation

• Tool 7: GLEe model by Gibson Biddle

Back to Gibson’s tools: this model helps you identify what you need to Get Big on, Lead and Expand.

I find it interesting because it mixes a few ideas:

• “Get Big on” is an excellent follow up for thinking about your core value and how to increase it.
• “Lead” helps you select opportunities that are new and growing and that if missed, it may kill your business (as in the infamous Kodak example).
• “Expand” is similar to the 20% of the 70/20/10 or the second time horizon in the McKinsey model.

#8 The GLEe Model

• Tool 8: Strengthen the core

Finally, you can focus on those opportunities you can enter or expand to, that will enhance the core of your business.

A clear example is the Apple ecosystem. When apple created services like Apple Music, Apple Books, iCloud, etcetera, it also strengthened the sales of their devices and its use. (In 2019 Apple was generating more revenue in services that in MAC, Ipads or wearables)

3. Synthesize

You have reviewed the information, generated insights, and selected the most promising paths. Now it’s time to formulate an artifact that you can use for communication and will make your strategy clear and memorable.

It will most likely be a document or presentation (or both), but a few tools can help you think about how to present it.

• All previous diagrams

We have seen several tools that are mostly graphical and can be included in the document for clarity.

• Tool 9: The “drivers” model

Using the selected opportunities, choose around 3 “drivers” that will be the core ideas of the strategy. They should be solid ideas that fit in 1 or 2 words.

For each of the “drivers”, select a key result (metric and target number) and describe in a paragraph what you want to achieve and why is it important. This context is necessary to later let the teams use it as the context for day to day decisions.

You can include a supporting principle. For example, last year, we used “Data tracking” as a supporting principle, as we were trying to build new data analysis capabilities for all our products.

• Tool 10: Kernel model

From Richard Rumelt’s book, this model states that there is a particular way to summarize a strategy coherently and compellingly. It provides a logical order to the concepts of your strategy while helping you describe it with the correct level of granularity.

“Kernel, Diagnosis, Guiding policy, Coherent actions”

Start by deciding what’s the fundamental core (Kernel).

The “Diagnosis” provides insights on how things currently are. It should explain a compelling “why”.

The “Guiding policy” is a description of the direction to move towards, without stating any specific action. It should help everyone in the organization make decisions that help to move towards the goal even in situations not covered by the strategy definition.

Only after these three levels, you get to the set of coherent high-level actions, as a final level of the strategy description.

Book review: “Good strategy. Bad Strategy”

(Good book summary by MAA1)

• “Strategy is choice. Strategy means saying no to certain kinds of things” — Michael Porter.

Let’s wrap up not with a tool but with a concept. No matter how you synthesize your strategy, keep in mind that saying what you will not do is as important as saying what you will do.

The biggest mistake is trying to include everything or being ambiguous.

Summary

In the next article, I will be talking about communication and feedback. Subscribe or Follow me to be the first one to read it :)

Resources

• I’m writing a book to describe the process to successfully create and link the Product Strategy, Roadmaps, and OKRs.

If you want access to the pre-launch free section, you can have it here.

• Product Strategy Template: this is a short document that captures the essence of the process described.
• Part II and III are now available — follow up with the last 2 steps of the process

Executing Product Strategy like Patton: using OKRs, Comms, and Pivots to succeed

Strategic clairvoyance: how to predict your product strategy’s success

• A previous (short) article about Strategy synthesis and communication:

What can Pablo Picasso teach us about Product Strategy?

• Marty Cagan’s — 5 post on Product Strategy
• Gibson Biddle’s — 12 tools to define Product Strategy
• Good Strategy/Bad Strategy: The Difference and Why It Matters — by Richard Rumelt

Next week I’ll be publishing a new post with tools and templates for communication and feedback. Subscribe here and join +1200 readers to be the first to know when it’s out!

Note: this story was originally published in LeanExperimentation.com.