Crafting an Effective Product Strategy

88% of executives believe that customers and employees are changing faster than they can change their business, according to research by Accenture. The challenge is that far too many choices need to be made at a senior level.

Many companies are turning to the product model and decentralized work structures as a way to keep up with market demand. By empowering teams to make decisions closer to the customer and fostering a more agile approach to product development, organizations hope to become more responsive and adaptive.

However, this decentralization of decision-making power is not without its risks. As teams gain more autonomy, there's an increased potential for misalignment between their actions and leadership expectations. This disconnect can lead to:

1. Wasted resources on features that don't drive business outcomes

2. Frustrated team members who feel their work lacks purpose

3. Missed market opportunities due to lack of focus

4. Difficulty in measuring and demonstrating product success

This is where a high-quality strategy becomes not just important, but essential. A well-crafted, clearly communicated strategy serves as a unifying force, providing teams with the context they need to make decisions that are both autonomous and aligned.

Bad Strategy

Before diving into what makes an effective product strategy, it's crucial to understand common pitfalls. Here are three anti-patterns to avoid:

The Feature List

A lot of companies confuse their strategy for their product roadmap. While the features on the roadmap might be valuable, features describe the “what”, but not the “why”. When the inevitable low-level product decisions arise, teams do not have much context to make effective decisions.

A Set of Goals

Another common mistake is setting a broad goal without a clear plan to achieve it. For instance:

"Our strategy is to become the #1 health app in the market."
“Our strategy is to break $100m in revenue”

While ambitious, this "strategy" lacks actionable steps. It doesn't provide guidance on how to achieve this position or what metrics will define success.

The Technology-First Approach

This anti-pattern prioritizes using the latest technology without considering its relevance to user needs or business goals.

"Our strategy is to incorporate AI into our dog food delivery app."

While companies can raise their value temporarily by jumping on the latest hype bandwagon, starting with the technology rather than user needs or business objectives often leads to solutions in search of a problem. Ultimately the hype will fade and the wasted effort will be exposed.

The “Everything for Everyone” Approach

This anti-pattern occurs when a company tries to be everything to everyone. Management has refused to prioritise leaving teams with trying to please too many customer segments or markets simultaneously.

When you attempt to serve too many customer needs simultaneously, you dilute your value proposition and spread resources too thin. A product strategy requires tough decisions about who you are building for and why.

Effective Strategy Formats

Many books have been written about how to define a product strategy, but there are two that I particularly like: "Playing to Win" by A.G. Lafley and Roger L. Martin, and "Good Strategy/Bad Strategy" by Richard Rumelt. Let’s put the lessons from tehse books into action.

1. The Diagnosis

There is a reason why your product is not already as successful as you want it to be. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the market and product as critical. It's about gaining a clear understanding of the challenge at hand.

A good diagnosis starts with the data. Let’s use a health tech example:

• 60% of adults in our target market have at least one chronic condition

• 78% of smartphone users have at least one health app installed

• Only 29% of health app users report sustained engagement after 30 days

• 82% of users cite personalized recommendations as a key factor in app retention

From this data we can distill some insights:

• There's a large potential user base for chronic condition management apps

• While initial adoption of health apps is high, long-term engagement is a significant challenge

• Personalization appears to be a key driver of sustained app usage

2. The Guiding Policy

The guiding policy is an overall approach chosen to overcome the obstacles identified in the diagnosis. It's not a goal or a vision, but a general method of dealing with the situation. The key elements of a good guiding policy are that it addresses the insights about your problem, it provides a unique approach that differentiates you from the competition, it creates leverage by focusing efforts in a particular area and it is explicit on what will be done and what will not be done.

• A health app that provides truly personalized recommendations based on individual health data will achieve higher long-term engagement (Differentiation)

• Focusing on chronic condition management rather than general wellness will allow us to create more tailored and impactful solutions. (Focus and Prioritization)

3. Coherent Actions

Coherent actions are the coordinated steps you'll take to carry out the guiding policy. They should be feasible, coordinated with each other, and designed to work together in accomplishing the guiding policy.

The actions need to address four key questions, which we borrow from the Playing to Win book:

Where to Play?

• We will target our app specifically to individuals managing chronic conditions, rather than the general wellness market

• Geographic Focus: Initially, English-speaking countries (US, UK, Canada, Australia)

• Distribution Channels: Apple App Store and Google Play Store

Where NOT to play?

• We won't expand into general wellness or fitness tracking

• We won't develop hardware devices (e.g., wearables)

How to Win?

• We will focus on developing an AI-driven recommendation engine that provides personalized health insights and suggestions

• Foster a supportive community of users sharing similar health challenges

How NOT to win?

• We won't offer direct medical advice or diagnoses

• We won't prioritize short-term monetization over user trust and engagement

It is important to note that the actions are not defining what the teams will need to build down to the feature level but it is helping teams to know where to focus their efforts. This is the delicate balance that the strategy needs to perform: aligning teams with the overall direction without being overly descriptive and removing autonomy. By including the diagnosis and the policies in the strategy it also provides teams with the “why” behind the “what”.

The DIBBs Format

Diagnosis, Policies and Coherent Actions don’t really roll off the tongue. That’s why at Spotify they created a new framework called DIBBs for documenting and communicating the product strategy.

• Data: What facts and figures inform your strategy?

• Insights: What meaningful patterns or conclusions can you draw from the data?

• Beliefs: Based on your insights, what do you believe to be true about your market or customers? This is the guiding policy.

• Bets: What strategic choices are you making based on these beliefs? They used the term bets for their coherent actions as they wanted to highlight that the ideas still had untested assumptions that would need to be validated.

Conclusion

Crafting an effective product strategy is a critical skill for product managers. By avoiding common anti-patterns and embracing a structured approach that combines clear strategic choices with data-driven insights, you can create a roadmap that aligns your team, satisfies leadership, and drives meaningful outcomes for your users and business.

Remember these key points:

1. A good strategy makes clear choices and trade-offs

2. Use data and insights to inform your strategic bets

3. Clearly articulate what you will and won't do

4. Align your strategy with overarching business goals

As you apply these principles to your own products, remember that strategy development is an ongoing process. Stay curious, remain open to new insights, and don't be afraid to make bold choices. Your product strategy should be a living document that evolves with your product, your users, and your market.

By following this approach, you'll be well-equipped to create a product strategy that not only guides your team but also drives real value for your users and your business. Good luck, and happy strategizing!