The benefits of a product strategy are undeniable!
The benefits of a product strategy are undeniable!
The benefits of a product strategy are many! However, as a concept it can be understood in many different ways. For some it is a roadmap for the next release of their product. For another, a product strategy is a vision for the development of their industry over the next ten years. Often it is a magical plan for the future that everyone knows, but no one has seen. This blog discusses the hallmarks of a missing product strategy as well as the benefits of having a working product strategy.
Three major problems caused by a missing product strategy:
- Evolution of the company stops
- The company’s messages towards customers are not understandable and they do not stand out from the competition
- Decision-making is a difficult and slow process
The company’s change projects stop
If the direction of action in developing the offering is not clear, it is understandable that different views will emerge. The doers begin to realize themselves. Often this is realized when different functions of the company have a completely different view of the direction. Sales are driven by the customers’ short-term wishes, product development focuses on technical refinements (or re-doing things they already can), and product management halts when the target state is unknown.
The change, say a business model enabled by digitization, affects the entire organization. If there is no common understanding of what the steps are, there is a high probability that change will not happen. Change always requires time and effort also in relation to the product portfolio.
Without a product strategy, the offering can only develop incrementally. We can add functionality X and customer desire Y, and measure our performance in each quarter’s financials. But if we only see the current situation, the company will not be able to respond to the changes in the market and environment.
Longer leaps (compare McKinsey’s horizons) will not occur if the focus is only on the present. Then the question is, how long will we stay in the competition?
The company’s messages towards customers do not stand out from the competition
When making a purchasing decision, the customer assesses the ability of the producer to meet future needs. Finding a new supplier is often a longer process than we would like. Purchasing efficiency is reduced if there are a large number of suppliers and the average purchase is small. Nor does the buyer make his decisions objectively, but wants to work with reputable companies. What better tool to convince the customer than a presentation of what kind of challenges the customer himself will face later? And how we as a supplier have already begun to prepare for it.
Predicting the future is difficult. When using long term roadmaps, it is advisable to raise the level of abstraction the further the events are. An outlook of the operations for about 12 months, an outlook of what kind of challenges we will be solving in about 24 months, and after that, just an outline of the development and phenomena in the customer’s context.
Without a proper product strategy, we compete with the same arguments as our competitors. This leaves only one differentiator – the price. This is often manifested by reading win-loss analyses. 80% of the time the reason for the loss was a lower competitor price. While many important factors influence purchasing decisions, the benefit of a product strategy is that it helps to create a distinctive offering, which reduces the importance of the price tag. The benefits of a product strategy are undeniable in this respect too.
Who would want to compete only on the price?
How can marketing and sales help you to sell your product if you cannot clearly communicate your strengths? The first rule of product marketing is to capitalize on your strengths. How can you do good product marketing if you don’t know what your strength is? A company’s competitive advantage is usually reflected in its products and it is the backbone of the product strategy. Or at least a theme that is somehow present in all products. How can a marketing campaign succeed if you can’t tell your marketing partner which customer segments to target?
Products are successful when they are made to meet the needs of a limited customer segment, and marketing and sales are targeted to those same segments. A good product strategy also defines the customer segments you want to reach, and thus marketing gets the raw material they need for their work.
Difficulty and slowness of decision-making
If we don’t know where we’re going, the wishes of (individual) customers drive our product too much. Product business is standardization, you have invested in product development and in return the same product is delivered as it is to multiple customers. The customer’s wishes are taken into consideration, but as a rule we provide our own solutions to the customer’s problems and needs (because the customer may not know the best solution to their problems). With a good product strategy, we can proactively respond to the customers’ needs, enabling us to present solutions to the needs before the customers come up with their own solutions.
If individual customers get too much influence over our development, a “two-customer” solution with a product business cost structure and project business volumes will emerge.
If a product strategy does not guide product related decision-making, decisions will not be made. They are often referred to a management team, which can be a bottleneck for decision-making. Of course, when developing a product strategy, the strengths and conditions come from all of the company’s operations.
Indeed, a product strategy is a common plan that affects the operation of all departments more or less. That’s why the benefits of a product strategy are so significant.
However, it is good to remember that when developing products, decisions are based primarily on the needs of the customer and the market. The management team’s best expertise is usually in finance, human resource management or production, so they do not necessarily have answers what is needed in the market next. The product strategy answers these questions.
Without an effective product strategy, decision-making slips away from where it is best placed. One of the most important principles of modern management is that decisions are made where the best information is available to make them. This principle requires that the framework is easily and comprehensibly accessible for all. In terms of developing the offering, the former is easiest to communicate with a product strategy presented in the form of a roadmap.
What is included in a good product strategy?
The product strategy includes a long-term goal. What does ”long-term” mean then? The timeline varies according to the maturity of the company and the length of the product life cycles:
- The direction of a start-up company may be determined by the requirements of the next funding round looking ahead to a period of 6–12 months.
- The life cycle of a new aircraft model is many decades, so the product strategy should cover 5–20 years.
- Typically, a 3–5 year period is useful.
The product strategy includes the means to achieve the desired goal. The product strategy includes a description of how we go from our present state to our desired goal. The product strategy is not, however, written in stone, and towards the end of the planning period, things are not dealt with on a detailed level.
A good product strategy also documents what we don’t do – which protects product development from unnecessary requests in particular.
Assumptions are made when creating a product strategy, because we always have an incomplete picture of the future. It is of utmost importance that the most important assumptions are logged and get at least some simple metrics. Regularly monitoring the metrics can change the product strategy to better reflect reality.
The most important benefits of a product strategy:
The benefits of a product strategy are undeniable. They include, among others:
- possibility for change and evolution of the company’s offering – the market and the environment changes regardless of us
- the message of the company towards the customers becomes clearer – we not only compete on price but our customers will appreciate us more.
- the slowness of decision-making does not cause losses and decisions turn towards a common goal – goals can be realized.
Interested in improving your product strategy? Check out our Product Management services here!
Antti is an experienced Product Manager who has taken care of a wide range of products at different stages of the life cycle. As a consultant, he has trained product managers, developed product strategies and helped companies manage products at all stages of their life cycle. Antti has been actively involved in building a product manager community in Finland.