You all know of that often-told business story which talks about the success rate for startups. 1 out of every 10 will make a big impact on the market (some will even reach that coveted 1 billion USD valuation), while the other 9 get shut down along the way or fade into obscurity.
It’s a great story that clearly describes the complex endeavour of turning an idea into a successful, healthy and rapidly-growing company, but I’ve got a bone to pick with it. You see, this story often puts an extreme emphasis on that 1 in 10 statistic, instead of explaining that business success is not a coin flip. Ending up as a part of the ‘1 in 10’ or the ‘9 in 10’ group is not about luck, chance or being at the right place at the right time (although it doesn’t hurt to have some of that), but about the planning and preparation you do before you go all-in.
By building and scaling our own digital products over the last 10 years, as well through our continuous work with dozens of clients who’ve come to us with business ideas and the objective to turn them into successful digital products — we saw that one of the crucial aspects of that preparation is a product strategy. Regardless of the fact if we were working on a core product for a freshly launched startup, or a large enterprise’s new standalone endeavour, creating a well-rounded product strategy was the key differentiator between products that pushed on through with ease and the ones whose success was sandbagged.
So let’s explore what product strategy is, why you need it and what it consists of.
First things first — what is a digital product?
Before we jump straight into product strategy, let’s first briefly explain what exactly is a digital product.
The definition we like to use at Bornfight says that a digital product is software which simplifies human actions and activities through a platform such as a mobile or a web application — it provides them with utility and ideally enables them to achieve continuous and repeatable success.
In short, a digital product is a piece of software that solves users’ problems.
What is a product strategy?
When it comes to product strategy, there are a bunch of definitions, but the one that really stands out to me is the definition which says that product strategy is a guide that will enable you to get your product into the maximum number of hands.
It’s clear, it’s direct, it’s catchy… but it also enables us to dig deeper into the details.
I like to think of product strategy as a guide that plays a major role in your startup’s business decisions and strategic planning — because it describes how it affects the impact that you want your company to have on the market over the years.
A good product strategy describes:
- your startup’s current situation
- the future outcome you’re looking to achieve
- what steps will you be taking to get to that point
- what you need to focus on the most
- how does your startup fit into the market
- who your startup is and isn’t for
- who do you compete with and how do you win
- what problem does it solve for users
- what kind of an impact does your startup have on users
In short, a product strategy is a baseline that you’ll use to measure the success of your product or a startup, as well as a signpost that will keep you on the right track throughout different product phases.
Why does your startup need a product strategy?
In addition to increasing your startup’s chance of achieving success on the market, having a structured product strategy will also provide you with a number of benefits that will simplify your work during the later phases of your startup’s lifecycle.
It lets you have a long-term vision for your startup
A product strategy acts as a north star that will guide your tactics and activities towards your primary goal — towards that impact you want your startup to make on the market.
Identify your startup’s main targets
Through your product strategy, you will define who your product is for, who it isn’t for, which markets will you look to dominate and which ones will you avoid. And in addition to who, you’ll also define how you’ll do that.
Define how your startup should develop
Your startup’s product strategy will enable you to create a product roadmap which will define concrete steps you’ll want to make to achieve market success — from defining your product’s functionalities and marketing strategies to growth tactics and even exit strategies. All of this is built upon and guided by your product strategy.
To learn more about building a digital product with understanding, check out our blog conveniently named “Building a product with understanding”.
Prepare your startup to beat the competition
Unless you’re targeting a very specific niche or have a standout product that is the only of its kind, you’ll have to deal with competition — which means finding a way to keep your edge over them. When done right, your product strategy will enable you to detect where your strengths lie, what are your weaknesses, what is it that you do better than them and which of their weaknesses can you take advantage of.
Key pillars of a product strategy
When it comes to building your product strategy, there are numerous approaches — while some swear by the barebones approach and the flexibility it offers, others say that a rich and detailed experience is the only way to structure a product strategy that will keep you on the right track.
Whatever route you take, always make sure to include these 6 components as they will serve as the foundation for your product’s or startup’s development:
- Product vision
- Outcomes + challenges
- Markets + targets
- Competition + differentiators
- Initiatives + capabilities
- Key metrics
A strong and inspiring vision that clearly defines the ‘why’ behind your product or startup is the backbone of your product strategy. It needs to describe the big picture or that one overarching goal you wish to achieve — because you will use it as a north star that guides your team, and aligns your stakeholders and investors around the approach you want to take in order to achieve market success.
A well-defined product vision needs to tell the story about the future state of a product that you want to achieve and to clearly communicate why your product or startup exists. It needs to speak not just to you as a CEO or a Founder, but even more importantly, it needs to speak to your team, your stakeholders, potential investors and target users. And all of that needs to be done in one direct, clear and concise sentence.
To make this vision-crafting process easier, you need to support it with market research and dig deep into the needs of your users.
A good rule of thumb for creating your product vision is to start only when you fully understand:
- who are your customers
- what are your customers’ needs
- what is your primary goal
- what opportunities can you encounter on the way to achieving that goal
- what challenges can you encounter on the way to achieving that goal
- who will you be competing against
- how will you win
All of these elements can be detected and defined during a product discovery workshop, so feel free to check out our FREE PRODUCT DISCOVERY EBOOK to learn more about the way these workshops supercharge your product’s part to market success.
Outcomes + challenges
To create a successful product strategy, you need to know what goals do you want to achieve, as well as what potential issues, problems or challenges could you face on your business journey.
When it comes to outcomes, think of them as near-term achievements that:
- provide a boost to your business
- provide specific value to your users
- act as a step towards your vision
You’ll want to make them specific and measurable, but don’t be afraid to go into even more details and add the other parts of the S.M.A.R.T. acronym.
And on the other side, we have challenges. They are different internal and external situations that can delay, sidetrack or even completely prevent you from achieving your set outcomes, and your primary goal.
Through your research, as well as market, user and competition analysis, you’ll want to detect possible problems that you could encounter, identify the impact they could have on your business and find a viable solution that will enable you to continue with your normal operations.
Creating this premortem-like analysis and preparation will enable you to act more rapidly and to efficiently handle any challenge if it happens in the future, because you’ll have the needed contingency plans in place.
By preparing for trouble ahead of time, you’ll be able to minimize its impact on your business or even completely avoid it.
Markets + targets
Creating a product strategy without a proper understanding of the market you’ll be playing on, your target personas or their needs is like driving full speed in the wrong direction. If, for any reason, you end up having time to properly do only 1 of these 6 key elements, make sure that this is the one you focus on the most.
User and market research are key if you want to create a successful product strategy, because they will enable you to discover your users’ real needs and the problems they’re facing — this will let you know how your product or startup can fit into their lives.
To do this part well, you need to define:
- which markets you will be targeting and why
- which markets you won’t be targeting and why
- are you targeting an existing market, or are you creating a new one
- who is in your primary user group
- what are the needs of your users
- what problems can your product or startup solve for your users
So how will you gather all of this information? Assumption is the mother of all failures, so don’t assume — go talk to people. Conduct user research as that will result in the best possible insights. And feel free to go into as much detail as you can — dig deep and create a granular description of both the markets you want to target and your primary user groups in those markets. Also, keep in mind that, depending on your product, you can have more than 1 user group that you’ll be targeting.
When done right, the market + target aspect of your product strategy will describe who will be using your product and what that means for your business. It will also help you with future positioning and show you how your product or startup stands when compared to competition.
Competition + differentiators
If you’re launching a new product or startup, there’s a high chance you’ll be entering an already established market — and that means you’ll be facing some competition. Your goal, of course, is to beat that competition by being better than them — offering a better product, providing more value, having a simpler solution, fitting their needs better…
In order to be better, you first need to know who you’ll be going up again and how you can win. And that’s where this part of the product strategy comes into play.
The first activity you’ll want to do is a detailed competitor analysis — and I really mean detailed. Don’t just list out your competitors and the products they’re offering, but go deep. Identify both your direct, as well as indirect competitors, start using their products to fully understand their strengths and weaknesses, get information on their business activities, the way they set up their teams, how they conduct sales activities, promotion, positioning, what value are they providing
Put an extreme focus on two specific aspects:
- areas in which you can outperform them — this is how you attack and win
- areas where they outperform you — this is what you need to defend and improve
Once you’ve done a detailed analysis of the competition, put it all into a matrix-like document. This will be your battlefield and it will show you where and how you need to position your product to make the strongest impact and get it into the maximum number of hands. This matrix will also enable you to more easily define your unique selling proposition (your primary differentiator that will lead you towards success), as well as any other competitive advantages you could leverage to defeat your competition or stay a step ahead of them.
Initiatives + capabilities
Initiatives + capabilities describe a high-level set of actions you’ll want to conduct to achieve set goals, and it also includes an overview of the team you’ll need in order to conduct those initiatives.
You can think of initiatives as projects or milestones that should be accomplished within a specified period of time. They can be high-level and conceptual as their objective is to guide the team through the stages of your product’s or startup’s growth — they shouldn’t be a task list.
When it comes to defining initiatives, make sure they reflect the vision and goals of your product or startup, and that they also take into account the opportunities, the challenges and the competitors that will be on your path to market success.
The capabilities aspect of this element supports the initiatives aspect by defining the team you need to have in order to reach the main goal, and what they need to excel at in order for your product or startup to boost its competitive advantage.
This is where you’ll define the need for:
- specific types of specialists you’ll want to have in your core team
- types of external associates you’ll want to employ
- your core management team
- additional stakeholders
- potential partners and future investors
If your product is more complex, creating a dedicated hiring plan that will support your skill map is also a big plus.
On the business side, capabilities can include defining:
- what your business needs to be really good at
- which services will you require
- if and how a part of the product or service needs to be enhanced
- if a part of the product needs to be removed
The final piece of this product strategy puzzle are the metrics that will provide you with the information on how your product or startup is performing and is it achieving expected results.
To do this part properly, define a set of qualitative or quantitative key performance indicators (KPIs) that will enable you to continuously track and monitor the effectiveness of your team, your initiatives and your product in general.
Your goal with this is to:
- analyze the actions you have conducted
- understand their level of effectiveness
- understand their impact on set goals
- dig deep into emerging problems and challenges
- explore how these problems were solved or need to be solved
- detect how much investment (money, time, resources) is needed for a specific action to be effective
By having a continuous pulse check on all of these aspects, you will be able to detect if your product or startup is achieving its goals at a predicted rate. It’ll also enable you to define new opportunities for growth, put in place improvement tactics, pivot as needed or even completely discard some of the actions you conducted or planned on doing.
Basics — CHECK
With this article we’ve covered maybe 5% of product strategy and even less of what it takes to build a successful startup, but we’ve now created a solid foundation for the next steps. So make sure to follow us in the following weeks when we’ll dig even deeper into each of these key pillars of product strategy and learn how to define them.