Product Strategy: What It Is, and How to Nail It
Do you ever find yourself or your team constantly changing directions? Or unsure of where to focus? Most of the time, this occurs because product development teams don’t have a strategy.
When a product organization does have a strategy, they make long-term decisions to increase their profitability. This ultimately succeeds in reducing the frustration that teams may feel from constantly switching their focus, and therefore increases productivity.
What Is Product Strategy?
A product strategy is the plan set to bridge the gap between where an organization wants to go, and where they are now. In the product context, this is a set of strategic ‘bets’ that a company makes to focus on the areas that they believe will best help them to achieve their product vision, typically in the next 3-5 years. It paints the big picture of where the business wants to go.
A product strategy can sometimes be mistaken for a product roadmap or a plan for what will be delivered. However, the strategy should sit as a layer above this. The key to a product strategy is that it states the high-level topics to focus on, but it does not tell teams exactly how to achieve them.
Why Is Product Strategy Important?
Product strategy is important because it allows companies to focus on the most important topics, and it gives teams clarity on direction. This is vital in a company when you are working at scale with a lot of moving parts.
- 42% of managers say they have multiple competing priorities
- Only 22% of employees feel that there is a clear direction for the organization.
- Only 14% of managers are happy with the speed of decision-making at their organization
Without a clear strategy, teams can feel lost and confused. When pain points exist in product organizations, such as priorities changing each quarter or teams competing for resources for different priorities, it is often the symptom of a lack of strategy and clear direction.
A product strategy is essential as it:
- Allows you to pick the bets that really are essential to achieving your goals
- Creates a differentiation strategy for your target market
- Aligns the organization around common goals
- Allows teams to say no to things that are less important
- Stops the product function from being reactive
- Provides teams with clear direction
- Provides everyone in the product department with a clear purpose and goal
Vision without execution is daydreaming.
Bill Gates
Strategy is often the missing piece that allows companies to move towards execution and focus on the areas that will drive profits, while also working efficiently across multiple teams to achieve their objectives.
When Did Product Strategy Become Popular?
The term strategy derives from the Greek strategos. “The strategoi were military leaders and thought about how they would win a battle, before executing on tactics.”
Strategy was popularised in business with the first business research work published in 1962’s ‘Strategy and Structure’ by Alfred D. Chandler Jr.. This was followed by Michael Porter’s work on ‘competitive strategy’ in 1980.
More modern thinking that has deeply influenced product strategy came from the “Lean Start Up”, by Eric Reis in 2011. In the book, Reis focuses heavily on the concept of launching and learning about products. Another influential book is "Measure What Matters" by John Doerr, which introduced the concept of OKRs in 2018.
These works have really transformed the way product teams work, and product strategy goes hand in hand with becoming a more outcome-led organization, helping to differentiate products from competitors.
Product Strategy Examples
Many of the world’s most successful companies have been built on successful product strategies, and knowing exactly where they want to play to win.
Amazon
Amazon has delivered exceptional results through product strategy, including a $10.4 billion profit in Q1 2024. Their vision is ambitious: “Amazon strives to be Earth’s most customer-centric company”. They execute this vision through their strategy and guiding principles — customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.
They balance the customer, operations, innovation, and sustainable growth to execute their strategies. You’ve seen this in everyday life as their shopping experience is seamless. They’re also constantly assessing how to create profit and serve the customer with free shipping.
Their strategy and guiding principles allow an organization (at huge scale) to assess where to invest, and how to do this effectively. As a result, they’re able to combine efforts across different areas of their business.
Apple
Apple is one of the most famous examples of turning a company around with a clear strategy. When Steve Job’s returned to Apple in 1997, he had a clear focus; streamlining Apple’s product line, focusing on core strengths and discontinuing underperforming projects so they could be lean and innovate.
This strategic decision making meant picking out where they thought they could win, and saying no to everything else.
Apple’s strategy in this era was ‘think different.’ This principle led to the successful launches of the iPod, the iTunes store, and, eventually, the iPhone. In every case, they were ahead of the market, capitalizing on trends that would start to appear, and strategically building on their own ecosystem for success, ultimately leading to a company valued at over $2 trillion in 2021.
Netflix
Although they already had a successful business model that involved posting DVDs to your mailbox, Netflix eventually made one of the most successful corporate strategy shifts ever. In 2007, they decided to launch an on-demand streaming service.
Instead of waiting for the DVD rental market to die, Netflix capitalized on technology and made a strategic bet to get ahead of the market and establish an early dominant position.
The strategy at Netflix has continued to evolve, as they thought about how to maximize revenue. Netflix recently moved from one account that everyone could share to different subscription fees and introducing adverts—a bet that they hadn’t taken for years.
The Netflix story shows the importance of making strategic bets and moves early in the game to dominate a market while constantly re-assessing your positioning and approach to attract and retain the right audience.
Southwest Airlines
At a business strategy level, Southwest Airlines made a clear strategic decision to compete on cost. They made their strategy clear by focusing on robust routes, brand appeal, and a superior financial position. This enabled them to maintain profitability for over four decades, a rare achievement in the airline industry. They were able to maintain a strategic low-cost position through their combination of strategic bets. For example, by focusing on robust routes, they were not just reliant on one space. They also put a huge emphasis on hiring the right people and providing optimum customer service so that customers were receiving great value for money, even at a low cost.
Southwest Airlines is a great example of where different strategic pillars align to provide overall success.
Benefits of a Solid Product Strategy
A good product strategy is essential to a modern product business. Whether you’re just starting out or operating at scale, a good product strategy will give you the clarity you need to know how to divide your focus and attain success.
The main benefits of a good product strategy are:
- Improved Results: A strong product strategy provides organizations with the knowledge on how to create differentiation and what they can do to grow market share, profit, customer retention, and more.
- Empowerment: With a strong strategy in place, teams can be empowered at scale and have the knowledge that they’re moving in the right direction.
- Engagement: Everyone in product has clarity on what they’re working on and why.
- Prioritization: Teams are able to say no to things that do not contribute to the strategy.
- Communication: Product can communicate with the overall business to clearly state what they are working on, and why.
- Alignment: Clear strategic direction helps product teams to align to achieve core goals.
- Effective resource allocation: When a company has a strategy, they can allocate the right teams and skill sets to bridge the gap between the current state and desired state.
Product Strategy Pitfalls
The disadvantages of having a product strategy usually lie in poor execution, or lack of understanding. If a company creates a product strategy, communicates this at scale, and then changes tact—they are likely to decrease trust within the organization.
Other drawbacks could be:
- Time: Creating a strategy takes time, and requires upfront research and analysis from different areas of the business.
- Poor decision-making: If a product organization creates a strategy without the right inputs, then they are likely to make poor strategic decisions that will not lead to the expected results.
- Reduction in short-term flexibility: If a company chooses to create and stick to a strategy, it needs to be focused on the long-term results. When going through your idea management process, these ideally should relate to the strategy, which might mean some quick-wins are harder to prioritize.
Product Strategy Components
A strong product strategy is made up of 3 main parts:
- Inputs
- The strategy itself
- The plan
Use this product strategy framework to create an effective product strategy.
Inputs
Without the right inputs, a product strategy could be built on top of false assumptions. To gain the most value from a product strategy, you want to know:
- Your business goals
- Your key success metrics (North Star Metric or KPIs)
- Understand the competitive landscape and your competitive positioning (use a SWOT analysis, Porter’s 5 forces or PESTEL analysis)
- Your target market/target audience
- Understand user needs and desires
- Your value proposition
- Understand your current capabilities
With this context, you will be able to work on a strategy and decide where you want your focus to be.
Strategy
This is the essential piece of the puzzle. This is where you will take all of the above context and decide which opportunities you really want to focus on to win. The overall question is ‘what mountains do we want to scale?’ An essential part of strategy is also deciding what you will say no to doing.
These are the questions that you need to answer:
- In which areas do we want to “win” to achieve our overall aim?
- What are our main opportunities? Which of these bets are we most likely to win at?
- Where are your products at in the product life cycle? What focus do they need?
- Do we want to create new products? Or grow the ones that currently exist?
- What is our go-to-market plan?
- What are our current capabilities and integrations in this space?
- What gaps do we need to focus on to achieve our goals?
This should leave you with 3-5 key strategic pillars that you can focus on.
High-level Plan
You will not be able to achieve every aspect of your strategy at once, so it is essential to work out what you want to focus on first.
- Where are the biggest opportunities?
- Is one area dependent on another?
- Do any of the strategic pillars have a time constraint, or an opportunity to capatilize on right now?
- Which product development teams will focus on which product initiatives?
When you have clear priorities, you can split them up by year. You should then use these to break down your OKRs per quarter.
You will also gain a lot of value at this stage by aligning the right teams and resources around your strategic pillars to execute them effectively.
You can use this one-page template to input these insights:
How To Get Started With Product Strategy
Getting started with Product Strategy can feel like a daunting task. It’s an exercise that product leaders felt like they needed to complete in private, trying to make it perfect before sharing it with their audience. The reality is actually the opposite. The best product strategies are co-created, getting buy-in and insight as you go.
Follow these tips to get started:
1. Get your inputs ready
Your inputs feed everything that you need to create a strong product strategy. If you don’t already have all of the insights you need, get these answers before you attempt to create a product strategy.
2. Work out who should be feeding into your strategy
Do you need insight from senior stakeholders? Does your sales team have some strong inputs? Perhaps you need to check your product capabilities with different product development teams. Get these partners lined up to support you with your strategy creation.
3. Create a product strategy ‘first draft’
Don’t worry about your strategy being perfect. Instead, think about it as a state of bets you’re looking to make. You will test and learn along the way.
4. Review your strategy with key partners to get feedback
Is the strategy clear? Does the direction make sense? Does your key audience agree with the priorities and importance of the strategic bets you want to place?
5. Implement your strategy
Often this looks like:
- Setting up the right teams to work on the right initiatives
- Highlighting that these are ‘strategic bets’ to the teams
- Creating clear product goals
- Team members generating the best ideas to win with the strategy
- Understanding which product features to develop
- Feeding these into a product backlog
You can use different tools to help assess how teams are working against the strategy. For example, idea management tools, and roadmap tools.
6. Refine your strategy (if you need to)
Ideally, your strategy won’t change. Once created, where you want your focus to be to achieve your goals should remain stable. However, if you made some open bets, and it turns out they weren’t the right place to focus on, feel free to change your approach.
Be open, listen to feedback, and respond to youe team, business and customer needs.
Leveraging Product Management Tools
Having the right tools can help you to create, communicate, and execute your product strategy.
Creating your product strategy:
Miro – To collaborate and outline the insights that your strategy should include.
Zeda.io – For product discovery, using AI insights to feed your strategy inputs.
Collato – AI tool to feed your insights and summarize them into a draft strategy.
Communicating & executing on your product strategy:
ProductPlan – Best for creating & communicating high-level product roadmaps and plans.
Jira – For team implementation and linking back to strategic goals.
Product Strategy Tips
Product strategy can be difficult to create and even more challenging to execute. Around 90% of organizations fail to execute their strategy.
This is often due to:
- A lack of alignment with business goals
- Strategic objectives not being truly aligned with areas that will add value
- Poor communication, or a gap between the strategy and the day-to-day work
Lack of alignment with business goals
To solve this, you need to identify clear product success metrics and how your strategic goals tie back to this. You can look at metrics like AARRR or NSM. You also want to ensure that you’re using the business strategy (if one exists) to outline your product strategy.
Strategic objectives not being truly aligned with areas that will add value
To win in this space, you need to understand the market, and what your customers need to make sure you’ll be delivering on valuable areas.
You can use frameworks like SWOT to highlight the landscape you’re operating in, and look at the total addressable market for areas that you care about.
You should also use tools that allow you to assess your data and what is currently happening with your products.
With all of this insight, you identify gaps between where you are now and where you truly want to be to achieve your goals.
Poor communication, or a gap between the strategy and the day-to-day work
Once you have a strategy, your work isn’t yet complete. You need to break this down into more tangible topics that teams can focus on and ensure they’re generating the right ideas to execute against this.
Teams can use techniques like a UX design research process, product and service design, mock-ups, and design feedback to ensure that their ideas truly solve the customer problem and deliver the value expected from the strategy.
Here are more tips on how to create an effective product strategy.
Further Learning
- Product Growth Strategy - Learn how to grow your products.
- Product Pricing Strategy - Learn how to price your products for growth.
- How To Ensure Your Product Strategy Is Effective - How to audit your product strategy.
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