What is strategy and how do I build product strategy?

A note for new subscribers: This post is part of a monthly series on my notes on technology product management (this is what I do for a living). You might notice that these posts often link to older posts in the series on LinkedIn even though they are all available on this blog. That is intended for folks who only want to follow future product management related posts. Finally, for all those of you who don’t build tech products for a living, I believe many of these notes have broader applicability. And, I hope you find that to be the case as well…

A quick overview of what we’ve covered on “Notes on Product Management” so far –

What is strategy?

The best definition for strategy that I’ve come across is that good strategy answers 2 questions –

    1. Where should we play?
    2. How will we win?

The “where should we play” question defines our target customer/segment/market and the “how will we win” question tackles how we will differentiate ourselves from our competition.

A clear and well articulated strategy makes it possible to do fewer things better by helping everyone on the team separate signal from noise and easily articulate the trade-offs involved. So, if you’re hearing about or feeling a lack of focus or alignment within your product team, it is likely because of the lack of a coherent strategy.

That said, a well articulated strategy is still just the first step. A well executed strategy is the next step. When a strategy is well executed, it becomes easy for the team to reflect that understanding in their prioritization – i.e. the team can go from understanding the trade-offs to living those trade-offs. A well executed strategy requires the leadership team to align incentives (success metrics, pay, recognition) in a way that makes it easy for folks on the team to make the strategy come alive.

A simple test of this is to ask members of the team a) what they are focusing on and b) what they are not focusing on and why. If you have coherent answers on both, you are witnessing an exceptional example of executing on a strategy.

An example

When Bob Iger took over the CEO of Disney, his strategic vision focused on 3 pillars –

1. Generate the best creative content possible

2. Foster innovation and utilizing the latest technology

3. Expand into new markets around the world

If your first observation is that this isn’t rocket science, you wouldn’t be wrong. That may just be the first takeaway as you’re thinking about strategy – it is easy to articulate a simple strategy. And, it also turns that good strategy is often simple.

Disney, at the time, had a flailing animation division and had fallen behind Pixar (with whom they had a failing partnership) in generating great creative content. They also didn’t have any technological edge to speak of. As a result, the acquisition of Pixar became a relative no brainer – in hindsight at least. Iger and team continued to acquire multiple creative studios with incredible IP – Marvel and Lucasfilm are great examples of this – to continue doubling down on the “best creative content” pillar.

Fast forward to the launch of Disney+ last year and you can see how this strategy came together. Disney+ was made possible by acquisitions above that gave Disney the library of creative content to become a formidable global streaming player right from the get go.

And, the Disney+ launch is also important because it offers a telling story about the difference between a clear strategy and a well executed one. In the year leading up to the creation of Disney+, Bob Iger needed every one of his executives to support this new bet. However, and this is the predicament most leaders of complex businesses face, it is impossible to change behavior when they’re already compensated on how well they manage their existing (successful) businesses.

So, Iger requested approval from the board to move all his executives’ performance based compensation from metrics based on the success of their existing businesses to an evaluation by him on how well they were supporting the Disney+ launch.

That was a master stroke and a demonstration of the art of incentive management by the Obi-Wan Kenobi of CEOs.

So, how does all this apply to me as an Individual Contributor PM?

Your product team could do with a strategy. If you have a clearly defined strategy defined for your organization by your product leader that you are already executing toward, that’s great.

But, if you don’t or if that strategy isn’t yet directly translatable to your team, read on.

Let’s start with the obvious – ideally, every organization has a clear strategy. That strategy, in turn, would enable every product team unit to focus on doing things that ultimately move the needle and win.

But, it doesn’t always work out that way. That isn’t always down to leadership incompetence (though, sometimes, it is). The more complex and large the business, the harder it is for leaders to make statements about focus without risking de-motivation of the areas of the business that aren’t the focus areas at the moment.

So, if you are faced with situations where you are unclear about the strategy, there are 2 things you can do – 1) Ask the leaders (this is the obvious first step) and/or 2) Look at the metrics that matter.

The metrics used to measure success are the simplest manifestation of the strategy. Even when a strategy isn’t articulated clearly, understanding which metrics are emphasized over others helps understand what matters to leadership.

Assuming you have clarity on the organization’s strategy, it is now time to write your own strategy doc.

So, how do I write that strategy doc?

Here is a structure I’ve found useful.

I. Outcomes:

User/Customer Problem: Attempt to synthesize the top user problem you are seeking to solve. And, if you are representing a multi-sided marketplace, lay out the top problem for both sides of the marketplace. Stick to one overarching problem to avoid a laundry list – the purpose of this exercise is to bring focus.

Outcomes you are seeking to drive: Lay out the top 2 “true north” metrics you choose to drive along with a guardrail metric or two. 2 things to keep in mind when choosing these metrics –

1. The true north metrics would ideally be the metrics that matter to your organization. If you have no way of moving those metrics, add “Signposts” that you can move and that you believe will eventually move the true north.

2. Be thoughtful about guardrails/negative metrics and companion metrics. A negative metric if your strategy involves sending customers more email would be unsubscribe rate. Once you’ve got negative metrics sorted, take care to ensure you have companion metrics. Great metrics often work in pairs – e.g. depth and breadth metrics (Weekly active users and time spent per login), revenue and RoI.

If the outcome section reminds you of the problem statement, that’s exactly what it is. Product managers are problem managers.

II. Strategy: Let’s go back to the two questions we laid out when we started – “where do we play?” and “how will we win?” Outside of cases when IC PMs are hired to work on a venture bet, the answer to the “where do we play” question should generally be part of the organization’s strategy. This answer defines the audience whose problems you solve as part of your roadmap.

Our focus, then, is figuring out how to win. And, we do that by taking a stand on where we will focus our team’s energy. It is helpful to articulate these focuses in the form of 1-3 themes or pillars that all contribute to the desired end outcome. These themes work well when they connect to a journey – e.g. acquire -> retain -> monetize – or similar. They can also work well when they clearly ladder up to solve the top user problems you’ve set out to solve.

When done well, the strategy helps everyone understand exactly what we are doing and not doing. So, if you find yourself attempting to organize a catch all list of everything without needing to make hard, sometimes painful, trade-offs, that is not a strategy. That is just a list.

A great way to bring this section to life is to illustrate the user/customer experience 12 or 18 months later after successfully executing on your strategy. Doing so can help folks on the team clearly visualize what success looks like.

An important note – a collection of product principles is not a strategy: It is easy to confuse a strategy with a collection of product principles. Your strategy helps you create a focused plan to ensure you are the go-to solution for the problems of the audience you choose to serve. Product principles, on the other hand, are the values of a product. Product principles are best agreed upon at the level of the entire organization and are analogous to the values of a company. You rarely change them and they represent the choices you make without considering the trade-offs involved. You commit to them because you believe they are the right thing to do.

III. Roadmap: The next step is to lay out what this means in terms of feature ideas. The goal here isn’t to have product specs ready – not yet at least. Instead, the goal should be to get a low definition set of ideas that both feel right and have the team excited. (We’ll aim to cover roadmaps in detail in the next post)

Write all this out in a 1 page document. If you’re not able to synthesize your strategy in a page (with 0.5 inch margins :-)), then you don’t have a clear strategy.

The final test of a clear strategy is that it will make it easy for every member of the team to differentiate between ideas that matter and ideas that don’t. And, if that’s happening, we’re through with the first step.

How, then, do we move to the more important step – moving from well articulated strategy to well executed strategy if we don’t control the incentives of the product team?

By winning the team’s hearts and minds.

This, in turn, happens when we involve folks on our team early and often. Get started with the door wide open (i.e. ask everyone for opinions and ideas), then write your first draft with the door closed, and edit and revise with the door wide open again.

The more the team is (and feels) involved, the more likely it is to be successful.

Therein lies the magic of the strategy creation process. When it is done well, it helps get the entire team aligned and rowing in the same direction. That in turn magically resolves disagreements that might otherwise have showed up in future product specs and prioritization discussions.

If we’re then able to celebrate instances when team members execute in ways that support the strategy, we make it all the more likely that the strategic process we followed has ensured these ideas have now moved from theory to practice.

Do this often enough and the odds are good that we’ll end up building a track record that includes a run of valuable and successful products.

A career and life sidebar: The test of a good strategy within the product team applies just as well to our life and career. If we’re able to consistently articulate what we focused on alongside what we are not focused on, we’re making great progress toward being effective.

And, if we’ve picked focus areas consistent to who we are and who we want to be while being comfortable with the trade-offs we are making as a result of those choices, we’re on the path toward the only kind of success that can leave us feeling fulfilled – the kind that we intentionally chose for ourselves.