Product Strategy Explained in Practical Terms

If you thought there were a million ways to define product management, product strategy might have it beat by a longshot. Forget about the differences from company to company. Just think about how many ways product strategy is defined within your own organization. It’s the number one thing that makes product strategy both challenging and frustrating at the same time.

Unfortunately, there’s no universally accepted definition of product strategy and therefore no consistent way to craft one that meets everyone’s expectations. If you’re a product manager, this is one of your biggest stressors.

I wrote this post with two objectives in mind. First, to create a definition of product strategy that’s simple and practical, and second, to get product managers thinking about the bigger picture and whether a full blown strategy is essential and/or beneficial for every product.

Here we go.

The Definition of Product Strategy

The objectives of a product strategy are twofold. First, it should articulate the quantifiable value your proposed product investments will deliver to the market/customers, and second, it should be able to quantify the financial and strategic value those investments will return back to your own organization.

Let’s start with the basics. A product strategy at its most fundamental level should answer the following five questions:

1. Which market segments currently represent our sweet spots?
2. Which market segments will be most lucrative over the next 1–3 years?
3. What are the top business priorities of target customers in those markets, why are those priorities critical to their success, and which ones are most lucrative for us to pursue with product solutions?
4. What go-to-market tactics are required to ensure successful execution of the strategy and market success?
5. What are the financial and strategic contributions of the strategy back to our organization?

On the surface it seems pretty straight forward, right? And if your organization only had one product, product strategy would be pretty straight forward!

Let’s take the definition above and play it out in the real world when you have multiple products.

The Logic vs. the Practicality of a Strategy for Every Product

In theory, a strategy for every product is rock solid. Stakeholders, customers and buyers alike need to know what lies ahead and the value for them. But it begs the question, does it require a full-blown strategy for each product?

Let’s look at the practical side of developing a full blown strategy for each product.

First and foremost, how many individual product strategies can your organization realistically execute to meet its financial and strategic goals?

This is the biggest part of product strategy that never gets talked about, and it just might be the biggest hurdle every product management team and every organization faces.

In addition to product management and engineering, a complete product strategy has to account for execution by marketing, sales, customer on-boarding, customer support and customer success, plus a few back office functions that also play a critical role.

Imagine you have 10, 20 or 50 products. Even if product management and engineering could execute that many strategies in terms of new products and features, how can the rest of the organization possibly carry the load required to execute that many strategies?

The sheer number of market segments you’d be targeting across that many products would spread you so thin as an organization you’d be hard pressed to make a significant impact in any one of them. It’s the number one reason so many organizations struggle to hit their numbers and continuously change their strategic priorities throughout the year.

Marketing/Product Marketing Capacity

Imagine marketing and product marketing trying to uniquely position each product for each market and executing awareness and demand generation activities for that many products and markets. What if a lot of your products target the same markets and customers? How many times are you going to hit each customer/prospect with a different marketing message for each product?

Sales Execution

On to sales. Can your sales organization execute sales plans and meet revenue targets for every product across all markets? Perhaps the most important thing to keep in mind when it comes to sales is, they sell what they’re most comfortable with and they don’t care which products get them to their quota.

Even more difficult and stressful, the more product strategies you have, the more you’re competing with fellow product managers for mindshare with sales. The best sales teams on the planet can’t absorb that much.

Customer Success

Can each customer success manager execute his or her part of 10, 20 or 50 product strategies for each customer based on the number of products they use?

Revenue Projections

Let’s keep piling on for a minute. There’s no realistic way to project revenue for 10, 20 or 50 products because no one really knows what the market is going to buy at that level of granularity.

Here’s the other thing I noticed in all my years as a practitioner. If our company was hitting its numbers on the product side, no one cared about the individual numbers for each product. The only exception was new products and the extent to which they met their projected revenue targets.

If you’re looking at product strategy practically, a full blown strategy for each product places an enormous burden on every part of the organization that in most cases, it can’t possibly carry.

Multiple Product Strategies or One Market Strategy?

Back to our original question, does a strategy for each product make practical sense or would your organization be better served to have a single market strategy with supporting priorities for each product?

Before we answer that question, let’s look at the basic constructs of a market strategy and how it compares to a product strategy.

The Definition of Market Strategy

A market strategy always starts with your organization’s strategic and financial goals whereas a product strategy shouldn’t. Here’s why.

If the focus of your product strategy starts with your own goals, by default, customer value becomes secondary. That can take your product strategy down a misguided path because you run the risk of convincing yourself target customers value something that’s important to you just as much as you do! It’s rarely the case.

The market strategy itself defines how your organization will meet its financial and strategic goals, and just like the name implies, it’s based on the “market segments” that are most conducive to the organization meeting its goals across all products (the portfolio).

In its most basic form, a market strategy answers the following five questions:

1. Which market segments (by name) are most conducive to meeting our organization’s goals over the next 1–3 years, and what’s the projected (financial & strategic) contribution from each?

The important thing to remember here is you’re doing this for the portfolio, not each product. It’s far more scientific and accurate to quantify market potential and forecast revenue by market segment than it is by product. It also takes product revenue goals out of the equation, making revenue projections easier and more predictable.

2. What are the top business priorities of target customers in those markets, why are those priorities critical to their success, and which ones are most lucrative for our organization to pursue financially and strategically?

It’s the same question we had to answer with a product strategy except now you’re doing it for each market segment without regard to any one product. The key here is to pretend your products don’t exist when you’re doing target customer discovery.

3. What’s the role of each product relative to the top business priorities of our target customers?

This is where product vision and a 1–3 year strategic roadmap become critical to your market strategy. Every product will have a well-defined role relative to the market strategy. Product priorities now have stronger legs and there’s a lot more at stake when you start changing them on a whim.

With a market strategy, every product roadmap is analogous to a load-bearing wall in your house. Mess with it and you start compromising the structural integrity of the whole house.

4. Go-to-market tactics?

With a market strategy, every discipline in your organization has a coordinated to-do list that ensures your organization can successfully execute its strategy. It’s no longer just a product thing. Now you have one synchronized cross-functional execution plan for the entire organization instead of unrealistically expecting every discipline to support every strategy for every product.

5. Marrying the corporate strategy to the market strategy.

There’s a good reason product managers often struggle to connect the dots between the corporate strategy and their individual product strategies. There’s an enormous gap that sits between the two. Your market strategy is the missing piece.

If you look at it from the bottom up, product priorities support the market strategy and the market strategy supports the corporate strategy. From the top down, the corporate strategy is supported by the market strategy, and the market strategy is supported by product priorities and the execution to-do lists across all other disciplines.

Here’s the thing most people don’t realize. There’s tremendous overlap between your corporate strategy and your market strategy whereas there’s little to no overlap between an individual product strategy and the corporate strategy, hence the importance of the market strategy.

The Ripple Effect of Multiple Product Strategies

I won’t go as far as saying it’s a fool’s errand to create a full blown strategy for each product, but if you’re going to do it, prepare yourself for a lot of unnecessary redundancies from product to product, lack of resources across other disciplines and mediocre to poor execution of every strategy, plus a lot of stops, starts and changes in priorities to hit your numbers.

Should each product have a long-term vision and plans with accompanying priorities? Absolutely, positively, 100%. But that doesn’t constitute a strategy for every product.

Here’s why a strategy for each product doesn’t make sense for most organizations, plus it gets everyone totally stressed out.

• Product strategies are usually done in silos which means you’re collectively spreading your organization too thin because every product is potentially going in a different direction with differing views of the same markets.
• Every product team is competing for resources in engineering, marketing and sales which means they’re essentially cannibalizing one another.
• Product strategies are too narrowly focused. What’s best for every product usually isn’t the best or most valuable thing for your target customers or your own organization. I emphasize “usually.”
• And last but not least, look at each product from the customer’s perspective. On their own, they don’t have that much strategic value when compared to the value of multiple integrated products working together.

Think about it. The reason you have or want to have all your products integrated on a single platform is because from the customer’s perspective, the whole portfolio has a lot more strategic value than the sum of the individual products.

The strategic value of your portfolio is helping customers eliminate organizational silos in their own business so they can operate more seamlessly and better serve their customers. It’s a lot more difficult to help customers eliminate silos when you’re creating product strategies in your own silos.

The Ripple Effect of a Single Market Strategy

Fewer Redundancies Across Product Teams

Can you imagine the redundancies and busywork you’d eliminate in product management if you had a single market strategy with a supporting roadmap for each product?

There would be a single effort for the portfolio to do market research and gather top-down customer business needs instead of doing market research and discovery through the lens of each product.

That means each product manager could be hyper-focused on user and product requirements that have the biggest impact on those higher level customer business outcomes. Result: products and features with more strategic customer value.

Fewer Stops, Starts and Shifting Priorities

Back to the load-bearing wall example. The goal of your market strategy is to maximize your revenue/growth/retention opportunities in chosen market segments. Every product plays a pivotal role in the market strategy. If you start messing with product priorities for the one big sales deal or the customer that constantly threatens to leave you, you compromise the structural integrity of your market strategy.

There are always exceptions. Make them for the right reasons and don’t make a habit of making exceptions the rule.

Directional Clarity for Every Product

As a product manager, there’s nothing worse than not understanding the role of your product relative to the company strategy. The market strategy gives you that clarity many times over because your priorities are tied directly to one or more market segments and the desired outcomes (yours and the customer’s) in each segment.

Stronger Collaboration Across the Board

A market strategy pushes your company into divide and conquer mode. To purposely sound like a broken record, every part of your organization has its to-do list to ensure successful execution of a single market strategy.

Easier to Forecast Revenue and Keep Pace With the Market

It’s a whole lot easier to forecast revenue by market segment because you can get reliable growth/adoption/replacement rates and rationalize them to the size and productivity of your salesforce. A big part of the market strategy is to make sure your growth keeps pace with or exceeds market growth rates. Otherwise, you’re giving away market share.

Easier to Allocate Resources

Market segment priorities (segments most conducive to meeting your corporate goals) shape the priorities across engineering, marketing sales and customer success and other disciplines. No more competition for resources among product teams!

The Bottom Line on Market Strategy vs. Product Strategy

Think about the momentum your organization might be sacrificing if you’re trying to execute 10, 20 or 50 product strategies versus one market strategy that’s essentially a set of turn-by-turn directions that take you to your company’s financial and strategic destination.

Here’s the bottom line when it comes to product strategy and market strategy.

Given the current landscape of your organization and where you’re headed, determine if your success will come easier with a strategy for each product or one market strategy for all products.

Whichever route you decide to take, just make sure you have a common definition for product/market strategy and you’re using a consistent approach or framework to create and execute it.

As your strategy comes to fruition and you’re seeing results, be sure to celebrate those successes along the way. Also, don’t forget to celebrate all the things you decided NOT to do, the distractions. They’re equally important and likely the biggest reason you’re succeeding with the strategy you’re executing!

If you want the best practices and templates to create a product or market strategy that sticks and simultaneously elevate the stature of product management, please contact us to discuss a personalized product strategy workshop for your team.

Subscribe to The Product Vibe Monthly to have our best-practice publications sent directly to your inbox.