How to build a product strategy

Make building product strategies easy - Part 6 in "Building a product saga"

TL;DR

A good product strategy clarifies how your product will stand out in the market in ways that will give you pricing power and make prioritization decisions easier.

Documenting your strategy in a simple and structured way helps you communicate and reference your strategy to various audiences more easily and effectively.

Key items to document are:

1. The market problem you’re looking to solve

2. Your differentiation (what makes you special)

3. Your buyers ranked (based on addressability and adoption likelihood)

4. Your users ranked (based on addressability and adoption likelihood)

5. Market table stakes (common expectations in your market)

6. Key activities, resources, and partners you need to deliver your table stake and differentiating values

7. Pricing model (how you will make money and how scaling impacts your revenue)

8. Cost structure (how does scaling impact your costs)

The items force you to consider all the key elements in a strategy and guide your teams in their decision-making and prioritization process.

The structure helps you determine what you should build, when, and how much effort you should invest in it. So you avoid overengineering your solution while still creating pricing power.

Story so far…

During a recent lull in my career, I decided to use the product management approach I have honed over the past 20 years to start a new business helping others. So far, I have broken down my potential customers into specific buyers and user personas. I also quickly scanned the alternatives and potential competitors out in the market. Now, I am ready to sit down and determine my product and business strategy.

Generated with ChatGPT-4 and DALL-E3

Problems with strategy

Everyone expects a business or product leader to craft a strategy for their respective business or product. This is so universal you can’t look at a job description without it being front and center. However, we rarely discuss what a strategy should include and how it is recorded, reviewed, and shared.

This lack of clarity on documenting, sharing, and describing a strategy often leaves the team confused about where they’re trying to go and how they should prioritize their work.

So, what do we do to fix this problem?

Strategy Position Document

To ensure I consider all the relevant elements when building a strategy, I first want to have a template so I know what information I need to write down and, by extension, issues and things to consider. Also, it makes it easier for me to explain my ideas to others to collect feedback and collaborate with them.

Strategy Position Document combines elements from many approaches, stripped down to keep it simple and easy to use.

It includes concepts from Pragmatic Marketing, Lean Start-up, Business Model Canvas, and elements I found useful in my 20+ years of product experience.

To make it easy, rather than using a canvas like Lean or Business Model Canvas, it is a simple document with section titles. You can translate it into a visual presentation once you have jotted down the information.

Let’s go through each element in detail.

Name

Everything needs a name, including your business or your product. There are many different approaches to naming, and they all have benefits and drawbacks. My only advice is to keep it simple so it’s easy for you to remember and say. Nothing is worse than getting tongue-tied when saying your product’s name.

Problem Statement

The problem statement summarizes the market problem you’re trying to address. This helps set the context for your business or product. Too often, a product fails not because the idea was bad but because the team failed to understand the purpose and dissipated their energy on less important things.

A good format is “In the xxx market today, there is a problem … “

Differentiation

Differentiation is what makes your product or business special and different from everyone else, and even more importantly, why they should care about that difference.

Without meaningful differentiation, you will be in a race to the bottom. With it, you can have pricing power that can help you to drive greater profit in the long run.

Also, by clearly stating your differentiation, your teams will know where they should 10x their efforts to really make your differentiation shine.

Ranked Buyers

Buyers are people who pay for your business and product. Listing the personas or segments relevant to your market will help your teams put their work in context. In addition, if you rank them based on the most addressable to the least addressable (it takes more work to support them), it will help your team to know which buyers to market to and sell to now vs. who to start preparing for.

Ranked Users

Users are people who use your product or directly receive services from your business. Listing the personas or segments relevant to your market will help your teams put their work in context. In addition, if you rank them based on the most addressable to the least addressable (it takes more work to support them), it will help your team know which users they should support now and who to consider in the future.

Table Stakes

Table stakes are the basic set of values that your target market expects from a business/service provider or product. This helps you to know what checkbox items your buyers and users expect, without which they are unlikely to consider it an option.

This information helps your teams to know where they don’t need to be perfect but just good enough—helping them to conserve their energy and resources to focus on your differentiation.

Key Activities

If you have specific activities that you need to perform or develop capabilities for to support your differentiation, record it here. For example, these could be "Industrial and User Experience Design" and "Material Manufacturing" for Apple.

This helps you to think about what activities you should keep in-house and which you can outsource or partner with to ensure the long-term delivery of your differentiation.

Key Resources

If you have specific resources that you need to deliver differentiations, record them here. For example, an AI-based marketing solution will need good and unique data sets to help build the predictive model they will offer.

This helps your team ensure you are collecting and maintaining the resources you need to deliver your differentiation.

Key Partners

If you have specific partners that you need to deliver your differentiation, record them here. For example, if you're offering a computer security solution, a key partner might be the security community, where you can be altered of new security holes in key software to address them quickly and ahead of the market.

Keeping track of your key partners helps your team to know which relationship they need to maintain and strengthen to ensure you can deliver your differentiation.

Cost Structure

It's important to record any key cost structure you need to either build or deliver your solution so you understand some of the issues involved. It's important to remember when you design your roadmap and solution, especially if you have high upfront sunk cost but high leverage once you hit a certain volume threshold. Or if your unit cost per sale is steady or increasing, you will need to know that, too.

Pricing Model

Here, you can take a quick stab at the pricing model you plan for your business or product. Subscription only, Freemium, One-time purchase, any add-on or bonuses. Including the pricing model to see how it matches your cost and how it might impact your bottom line is important.

Next Steps

Now that I have a template and know what I should consider when thinking through my strategy, I am ready to start building my business strategy.

Want a quick diagnostic to see if your product strategy is causing you to leave money on the table? Contact me at john.wu@simplifying.work to learn more.