The 4 key components of product strategy
The vision is the north-star the company is working to achieve. The roadmap specifies the products and features to build to get there. The strategy describes how to build product features to realize that north-star.
According to Bob Caporale, author of Creative Strategy Generation and former Head of Thomas & Betts’ Global Product Management and Technology teams, an effective strategy covers four key components: your customers, your competitors, your business, and the macro environment. I’ll break each of those down and then give you an example of a product strategy.
The foundation of a successful business is a product that customers want. Therefore, the product strategy should first define who your customers are. Many companies serve multiple customer segments. For example, many banks provide services to both consumers and businesses.
Make sure you have a strong understanding of your customers’ needs before setting a long-term product strategy or roadmap. And be willing to adjust as you get feedback from your customers throughout the product lifecycle.
Most companies have direct competitors in their market, or, at least, companies that provide a similar value proposition. The product strategy describes how you position your product to your customers given the other products and services on the market.
In the cloud storage market, Box is more tailored to the needs of large companies than Dropbox. Airbnb provides guests with the opportunity to live like a local, while the major hotels provide a consistent experience across the world.
For-profit companies have shareholders that expect the company to make money and provide a return on investment. The product strategy describes how the product will make money and achieve business goals.
Twitter is a consumer product that monetizes its user base through selling advertising space to brands. Box sells subscriptions to its enterprise customers. Companies employ a variety of different business models. It’s important to define your business so that your team understands how the product facilitates it.
The macro-environment accounts for economic, technological, political, and cultural forces that may affect your market and your product over the short and long-term. The product strategy should account for the below factors as appropriate:
- Emerging markets where your product may have demand
- Emerging technologies that may impact your customers
- Economic forces that may impact your customers’ budgets or needs
- Evolving customer needs and behaviors
Amazon’s product strategy
In 1997, Amazon CEO, Jeff Bezos, published his first letter to the company’s shareholders. The strategy he described has obviously been successful given that Amazon has not only gained significant market share in retail and e-commerce but also built successful products, such as Amazon Web Services, in entirely new markets.
Below are some of my favorite quotes from this letter. You’ll notice how it describes Amazon’s current and target customers, competition and market position, business goals and strategy, and the high-level macro forces that may affect the company in the future.
Bezos shared Amazon’s strategy of continuing to serve existing customers and expanding into large new markets and outlines the company’s high-level product priorities to beat the competition:
“Our goal remains to continue to solidify and extend our brand and customer base. This requires sustained investment in systems and infrastructure to support outstanding customer convenience, selection, and service while we grow. We are planning to add music to our product offering, and over time we believe that other products may be prudent investments. We also believe there are significant opportunities to better serve our customers overseas, such as reducing delivery times and better tailoring the customer experience.”
In terms of business goals, Bezos opts to favor long-term growth over short-term profitability:
“We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.”
In describing the macro forces in Amazon’s market, Bezos emphasizes the importance of personalization, which after 20 years since the letter was published, Amazon seems to be the leader:
“Today, online commerce saves customers money and precious time. Tomorrow, through personalization, online commerce will accelerate the very process of discovery.”