In this article, I’ll only discuss product strategy. Other disciplines, such as pricing strategy, finance strategy, or marketing strategy are out of scope.
The dictionary defines “strategy” as “a plan of action or policy designed to achieve a major or overall aim.” A team, division, or company’s strategy is the plan by which the organization will achieve its long-term objectives. I would also amend this definition slightly, to the following:
A strategy is a plan of action designed to achieve the organization’s overall objective using the finite resources available to the organization.
Plan of action. A strategy delineates what the organization will actually do on a week-to-week, quarter-to-quarter, or year-to-year basis.
Overall objective. A strategy is the plan to achieve the organization’s top-level objectives. This naturally implies a long-term plan. It does not make sense to talk about a strategy for “next quarter” or “next sprint”. Short-term plans are tactics, not strategy.
Finite resources. A coherent strategy operates within the resource constraints of the organization. Certainly, it is reasonable for an organization to require incremental resources to execute on a strategy, but these are still finite, not unbounded.
Note that this definition does not make mention of competitors. Strategies arose from military contexts, where the objective is usually to defeat an enemy. I think this is the reason why people over-index on competitors when developing a strategy. A sound strategy should certainly take competitors into account. In particular, a strategy should be resilient to the actions of competitors. If a company reacts to every move made by a competitor, then I’d say that company does not really have a strategy it believes in. But a strategy’s raison d’être is not about competitors, it’s about achieving the organization’s top-line goal.
If you crack open a textbook on competitive strategy from business school programs, you’ll find the classical frameworks on corporate strategy, such as “Porter’s Five Forces”, “Strengths-Weakness-Opportunities-Threats (SWOT)”, game theoretic analyses and so on. These frameworks are useful checklists when sketching out a high level understanding of the dynamics in an industry. They are less useful when you need to construct your own strategic plan.
Another trap that I see PMs fall into when thinking about strategy is constructing grand medieval cities full of “castles” and “moats” (or “flywheels” and “networks”). All of this stuff is valuable and worth thinking deeply about, but it comes after achieving your product goal. Your strategic goal is not to win a three-dimensional chess game with your competitors. Your strategic goal is to serve your customers in the best possible way.
The purpose of a strategy is to achieve your product goals for your customers.
How do you craft your strategy?
Your strategy will be different depending on whether you are building a zero-to-one product, your version 1 entry into existing product category, or a version N of your product line. In each case, your fundamental goal is to build something that your customers will adopt, but the approach will differ.
There is a large body of best practices in the startup literature on approaches to finding product/market fit for zero-to-one product categories. Ultimately, you want to get contact with real customers as soon as possible in order to learn and iterate.
- For on-device or cloud-based apps, build a minimally viable product and get it out in the market.
- For systems software (operating systems, infrastructure, etc), start fishfooding or dogfooding with internal customers via toy applications.
- For hardware products, rapidly build looks-like, feels-like, and works-like prototypes and proofs-of-experiences that you can test internally or with focus groups.
There are no standard best strategic practices for Version 1 entries into an existing category. Every situation is unique and likely requires a uniquely crafted strategy. However, some examples:
- Invest in feature parity or feature superiority with existing products, and leverage other advantages you may have, such as better distribution.
- Perfectly serve a subset of the market that is not being fully addressed by incumbents and grow from there.
- Build a product that is simply 10x or 100x better than what exists already, as measured on a dimension such as speed, quality, convenience, etc.
If you are building version N of your already successful product, then you have a lot of data and feedback from your customers. Leverage that information into your product roadmap.
- Deeply observe your customers (who agree to participate in focus groups) and learn their pain points. Leverage diary studies, lab observations, etc.
- Ask them what they want (but take their answers with a grain of salt, they will likely want a faster horse, not a car). A good approach here is to understand their needs and “jobs-to-be-done”, rather than asking them for feature requests.
- Product analytics and instrumentation can teach you a lot. Slice and dice your data using hypotheses-driven techniques to extract insights that may not be immediately obvious from focus groups and interviews.
Revisiting medieval cities
Once you have a successful product in market (“economic castle”), it is worth building defenses around your product (“moats”). Ideally, the moats you build also improve the experience and value for your customers. For example, same-side or cross-side network effects result in the product delivering more value for everyone, the more users it has. Economies of scale give you cost structure advantages that only you can pass on to your customers. Tight integration across a suite of products can deliver a more seamless user experience, but also reduces incentives for your customers to substitute your product with that of a competitor.