The Role of Product Strategy in Achieving Business Goals

As a coach, one of the most common challenges I encounter in organisations is distinguishing between a business strategy and a product strategy. I often see product strategies written using business strategy approaches. These are two very different entities, and I feel that reaching each requires a unique approach.?

Business strategy is built around the purpose, mission and values of an organisation, while product strategy revolves around the products problems, benefits, value, and differentiation. However, the two visions & strategies are interrelated, and a well-defined product strategy should align with and support the business strategy, helping to meet broader organisational objectives. The business strategy is the context within which the product strategy content occurs. Your contexts GIVES YOU your content!

Not having a clear strategy at any level can lead to disastrous outcomes, such as:

• Lack of clarity and focus: When everything in the backlog and every project is deemed a high priority, it’s a sign of strategic ambiguity.
• Order-taking: Teams waiting to be told what to do without considering the impact on users, businesses, or future trends. Particularly prevalent in organisations that operate in hierarchical, project oriented organisations.
• Random projects: Developing features based on the demands of the loudest customers, agencies, ministers, or leaders without validating through discovery.
• Prioritisation Issues: Teams can't prioritise easily and have a thousand projects or backlogs that have blown out of control; this is definitely a big issue
• Teams seeing what sticks: Teams working on whatever seems interesting rather than delivering on a broader purpose.
• Latest cool thing syndrome: Chasing trendy technologies or ideas without evaluating their relevance or value.
• Poor customer and organisational outcomes: Delivering no value to customers or the business.
• Top-down management: Over-reliance on management for decision-making or teams reluctant to make decisions themselves.
• Bottom-up management: Teams making all the decisions with little management input, resulting in a lack of focus or direction.
• Lack of organisational alignment: Leaders and teams working on separate agendas, neglecting the overall system's needs.
• Low team engagement: Lack of motivation, understanding, and alignment within teams.
• Wasting resources: Burnout of cash, time, and resources by delivering features that no one uses. Particularly prevalent in that project operating/feature factory model.

Why is Product Strategy Confusing?

One of the biggest hurdles in developing a clear product strategy is defining the product; knowing exactly what the product is. In some cases, the product is the business (e.g., Netflix), while in others, the business consists of many products (e.g., government agencies). These distinctions can create complexities that make strategy work daunting, especially when there are other challenges like bureaucracy (common in government). So the first step you want to get clear about is, where and what is the product; a product strategy always sits with the product and secondly what is the direction that you are all going to (vision of the future).

Inconsistent Definition of Strategy

If you ask five people to define strategy, you’ll likely get five different answers. Definitions range from broad company vision to a roadmap, or action plan. There is no one-size-fits-all approach, but certain best practice patterns can guide the development of a sound strategy. ?Rumelt (Good Strategy Bad Strategy, 2017) vividly describes strategy as a?multifaceted discipline intertwining problem-solving, decision-making, and leadership?that identifies the most significant obstacles to progress and orchestrate a coherent set of actions to overcome them.

I would agree with that definition, but also include the following. A product strategy also?communicates how you will deliver value, what you need to do to win, and the desired end-state you wish to achieve. It involves making choices; this customer over that, this market over that, this work over that. It’s about saying "no" more than "yes" because if everything is a priority, nothing is. I would say stick to 1-3 strategic goals, no more; not 5, or 8, but 3 or less. A good strategy is debated and a great product manager facilitates that debate with the team. They do not sit in a room alone and write up a strategy, then give it to their teams to implement; they farm for debate with the team and together inside of the debate, you HEAR the strategy. It only occurs once you listen to ALL of the perspectives (desirability, feasibility & viability) that will deliver value. It is a dialogue, not a monologue. It also takes time; you cannot do it in 45 mins, you will usually need about 4 hours just to focus in and debate on strategic goals. Another 3 for debate around the vision, so put the time aside to do it properly. A strong strategy is explicitly documented and provides a framework for decision-making, prioritisation, and alignment. It allows teams to make informed decisions, act in the product's best interest, and take the necessary steps to achieve the vision. It is also tested; lean into further discovery to ensure that your strategy is robust and the targets you are aiming for are viable.

Business Strategy vs. Product Strategy

These two strategies are often confused, but they have distinct objectives. While they overlap, each plays a different role.?

Business Strategy

This is about defining the organisation’s objectives and creating a comprehensive plan to achieve them. It includes the "product" but also considers marketing, sales, operations, and more. Senior leadership is responsible for establishing and communicating the business strategy across the organisation, with input and feedback from teams.?Roger L. Martin and A.G. Lafley, in their book Playing to Win, outlined a process for defining a business strategy based on their learnings from Procter & Gamble. They proposed five key questions to create a strong business strategy:

1. What is your winning aspiration? - Your vision should centre on customer success, not profit targets, which can lead to negative side effects.
2. Where will you play? - This determines the markets and geographies you'll target, balancing cost, revenue, and engagement.
3. How will you win? - Identify your competitive advantage—will you win by being the cheapest or by providing the most differentiated product?
4. What capabilities are required? - Define the capabilities needed to support your strategy, from customer relationships to marketing strength.
5. What is the management structure required? - Decide on the optimal structure to support your strategy, balancing roles and responsibilities.

Product Strategy

In contrast, a product strategy is a high-level plan that outlines the organisation’s goals for the product, focusing on the most important problems to solve. It gives teams the context they need to execute. A product strategy includes understanding the market, the target customer’s needs, the key problems to solve, and the solutions that will bring attention and deliver value. Organisations do not make and sell a product. They make and sell value. An organisation with a good strategy brings their?unique value?to the forefront.

Key Components of a Product Strategy

A successful product strategy defines five key areas:

1. Customer segments/archetypes: Identify and prioritise the subgroups within a market.
2. Customer value proposition: Solve for the customer’s job to be done, the problems, pains, and gains of each segment.
3. Key features or benefits: Define the essential features that deliver the core value proposition, not every single product feature.
4. Channel and relationship: Specify how customers will interact with your business and how you will build relationships with them.
5. Pricing: In private enterprises, pricing impacts value perception, while in government, pricing may not be as relevant.

POOR Communication

Another reason for strategy failure is poor communication; both before a strategy is formed and after it’s established. Strategy must not be a closed-door exercise. Teams need the context to make autonomous decisions aligned with strategic goals. Teams need to debate, together about their strategy; it doesn't happen in a vacuum inside someone's head; it happens in a healthy dialogue where different perspectives are shared. Leaders and product managers alike should actively share and iterate on strategy, seeking feedback from across the organisation. Leaders should also spend a healthy amount of time sharing and discussing their strategic choices with the entire organisation, hopefully in a regular cadence such as quarterly; alignment happens inside of communication where leaders are sharing context; this also affects good decision making. Communication about your strategy is critical!

Multi-Tiered Strategy

The final complexity that I see organisations struggle with is a multi-tiered strategy in large enterprises. Like an onion, a vision and strategy can have many layers. In large enterprises, strategies operate at multiple levels: enterprise, business units, regions and teams. A clear alignment from the top to the bottom and across is essential to ensure decisions made at every level contribute to the enterprise's overarching objectives. At each level, the same principles apply but with a broader outlook the higher up you get in the organisation.?Each level may belong to a business unit which needs to balance a portfolio of investments and dependencies. An enterprise level organisation may also have several different business units.?Whatever your structure, the decisions made at the bottom of the tree should roll up to deliver on the objectives of the enterprise. This is harder to achieve than it looks. Plus, whatever decisions you make at the top of the tree, should cascade all the way down and through the organisation in terms of alignment delivering on the vision and strategy. Vision and strategy are easy, but at the same time, they are really complex because you have to understand the organisational structure, the future you are living into and the definition of “the product/s”, particularly for a product strategy, which sits with THE product.

If you lack a clear product strategy, don’t panic. Start by determining whether you’re working on a business, or product strategy. Ensure your strategy cascades up, down and aligns sideways, through the organisation; aligning with higher-level objectives. Tools like the Business Model Canvas and Value Proposition Canvas can help you visualise and communicate your product strategy effectively.?Lastly, link your outcome roadmap to your strategic objectives and customer goals, allowing flexibility to adapt to changing market conditions.

In summary, building a cohesive product strategy takes effort and debate, but it is essential for aligning teams, delivering value, and achieving business success.