Strategize: Product Strategy and Product Roadmap Practices for the Digital Age

by Roman Pichler

a successful strategy for a product involves two steps: finding the right overall strategy and deciding how best to implement it.

The product strategy describes how the long-term goal is attained; it includes the product’s value proposition, market, key features, and business goals. The product roadmap shows how the product strategy is put into action by stating specific releases with dates, goals, and features.

the product strategy states how the vision will be realized, and the product roadmap states how the strategy will be implemented. The product backlog contains the details necessary to develop the product as outlined in the roadmap, such as epics, user stories, and other requirements. Note that the relationships between the elements

Doing the right thing is more important than doing the thing right. Peter Drucker

STRATEGY FOUNDATIONS

Understand What a Product Strategy

To achieve this, user stories have to be written, design sketches have to be created, and architecture and technology decisions have to be made. While attention to the details is necessary to create a successful product, it is easy to get lost in them.

A product strategy is a high-level plan that helps you realize your vision or overarching goal. It explains who the product is for, and why people would want to buy and use it; what the product is, and what makes it stands out; and what the business goals are, and why it is worthwhile for your company to invest in it.

The market describes the target customers and users of your product: the people who are likely to buy and use it. The needs comprise the main problem your product solves or the primary benefit it provides.

The key features and differentiators are those aspects of your product that are crucial to creating value for the customers and users and that entice people to choose it over competing offerings.

The business goals capture how your product is going to benefit your company, and why it is worthwhile for the company to invest in the product. Is it going to generate revenue, help sell another product or service, reduce costs, or increase brand equity? Being clear on the business goals allows you to select the right key performance indicators (KPIs) to measure your product’s performance.

Note that a product strategy is not a fixed plan or something you only create for a new product: it changes

as your product grows and matures. As a consequence, you should review and adjust your product strategy on a regular basis—at least once a quarter as a rule of thumb.

The vision is the ultimate reason for creating your product; it describes the positive change the product should bring about.

Truly important

On the positive side, if you are enthusiastic about your product, then this will help you do a great job and inspire others. Say I want to create an app that helps people become aware of what, when, and how much they eat. My vision, then, could be to help people live more healthily; the strategy would be to create an app that monitors their food intake in conjunction with a smart watch, fitness band, or smart food scales. Figure 3 illustrates this relationship.

An effective vision has four qualities: it is big, shared, inspiring, and concise.

With a big vision in place, I can explore alternatives, such as writing a book on healthy eating or offering mindfulness classes that teach people to become aware of their eating habits.

if you struggle to find a valid strategy, then this could indicate that your vision is a hazy, unattainable dream that you should wake up from.

Let the Business Strategy Guide the Product Strategy

To put it a different way, the product vision should be in line with the overall company vision, and the product strategy should help implement the business strategy.

Products are value-creating vehicles. In order to generate value, a product has to offer something new; it has to innovate to a greater or lesser extent.

Core Innovations Core innovations optimize existing products for established markets; they draw on the skills and assets your company already has in place, and they make incremental changes to current products.

Adjacent Innovations Adjacent innovations involve leveraging something your company does well into a new space—for example, taking an existing product to a market that’s new to the company or creating a new product for an existing market.

Adjacent innovations allow you to open up new revenue sources,

but they require fresh insights into customer needs, demand trends, market structure, competitive dynamics, technologies, and other market variables.

Disruptive Innovations

While disruptive products often use disruptive technologies—for example, the touch screen in the case of the iPhone, and the Internet in the case of Amazon—a disruptive technology does not necessarily create a disruptive innovation.

Instead, a disruptive innovation typically solves a customer

problem in a better, more convenient, or cheaper way than exi...

While disruptive innovations are crucial for enabling future growth and securing the long-term prosperity of your business, most established companies struggle to leverage such innovations effectively. To achieve disruption and to do different things, a company has to do things differently and therefore disrupt itself—at least to a certain extent. It has to discontinue some of the practices that have helped it succeed in its established markets, acquire new skills, find new business models, and often embrace—and in some cases develop—new technologies, such as the touch screen for the iPhone and the motion controller for the Wii. The effort to create a valid product strategy is significantly higher than for adjacent innovations; it may take you several months to find a product that is beneficial, technically feasible, and economically viable.

Succeeding with disruptive innovations requires an entrepreneurial mind-set and the ability to experiment, to make mistakes, and to fail.

Be aware that creating a reliable financial forecast is impossible for disruptive innovations. Requiring a solid business case can prevent you from creating disruptive products. It’s often better to use the risk of inaction—the danger of not investing in a disruptive product and therefore losing out on future revenue and profits.

For revenue-generating products, for example, revenue is commonly used, but if your product exists to sell another product or service, then the number of active users might be the appropriate metric to track.

Before the launch your primary goal is to find a valid product strategy—a strategy that results in a product that is beneficial, feasible, and economically viable.

Don’t make the mistake of trying to launch the perfect product. No product is impeccable from day one.

The trick is therefore to launch a good-enough product, a product that does a good job of meeting the primary customer need, and to subsequently adapt and enhance it.

After the launch your objective is to achieve PMF and to experience growth as quickly as possible. How long this is likely to take you and how much effort it will require, depends on your product’s innovation type.

Adjacent products, however, tend to require a shorter introduction stage, as they address an existing market and compete with established products. You can therefore usually learn about the customer and user needs and how best to address them during the research and validation work you do in the development stage.

With both disruptive and adjacent products, make sure you track the product performance and monitor how your product’s business benefits develop. If they are flat or rise only slowly, then you should investigate why the uptake is poor. Consider changing your product, or even killing it. The former may entail enhancing or adding features, or it can require a more drastic change, such as pivoting or unbundling the product.

If you see a positive market response to your newly launched product, then don’t make the mistake of overoptimizing your product for the early market. The initial customers and users of a new tech product are usually happy to put up with a few teething issues as long as they will gain an advantage from using it. To get into the mainstream market, you have to satisfy much higher expectations; you have to provide a product that works flawlessly and is easy to obtain, install, and update. As a consequence, the transition to the growth stage may not be a small, incremental step. Instead, your product may face a gap or chasm between the early and the mainstream market that you have to overcome

Very important

For a revenue-generating product, you should have reached the break-even point by now and should be benefiting from a positive cash flow. Your strategy now needs to focus on penetrating the market, sustaining the growth, and fending off competitors. Therefore, you have to find ways to attract more customers and users and clearly differentiate your product, since competitors may start to copy some of its features. At the same time, you have to manage the growth and deal with a product that serves an ever-growing audience, is becoming increasingly feature-rich, and requires more and more people to develop it. You may want to start unbundling your product and promote features to products in their own right, or you could employ product variants.

Common Business Models Common business models for digital products include subscription, freemium, advertising, and bait and hook. A subscription business model requires customers to pay a subscription price to access the product, as is the case for Microsoft Office and Adobe Photoshop. Freemium means giving away a basic version for free but

charging for premium features, as Spotify and Skype do. Advertising generates revenue from in-app or online ads—a business model employed, for example, by YouTube, Facebook, and many news websites. Bait and hook provides a free or discounted product and generates revenue from selling another product or service that locks in the customer. Take, for instance, iTunes: while the product itself is free, it is only truly useful when combined with a comparatively expensive iPod, iPhone, or iPad. Once you have started using Apple products, you are locked into the Apple ecosystem.

Business Model vs. Business Case

In order to choose the right KPIs, use the business goals stated in the product strategy. For example, if your product directly generates revenue, then revenue is likely to be a key indicator. But knowing the business goals is not enough. To effectively apply the indicators, analyze the data you collect, and take the right actions, the goals must be measurable.

One helpful technique for addressing this challenge is to work with ratios and ranges (Croll and Yoskovitz 2013).

Choosing Relevant Indicators

Avoid vanity metrics, which are measures that make your product look good but don’t add value

Rather than measuring downloads, I should choose a relevant and helpful metric, such as daily active usage or referral rate. Whenever you select an indicator, check if the indicator actually measures performance or just makes your product look good.

Don’t measure everything that can be measured, and don’t blindly trust an analytics tool to collect the right data. Instead, use the business goals to choose a small number of metrics that truly help you understand how your product performs.