Product Strategy: A Practical Guide
As a long time product leader and now product leadership consultant, I've helped numerous organizations shape their product strategies across different contexts – from B2B2C marketplaces and B2C consumer platforms to B2B SaaS companies looking to escape commoditized markets. Through these experiences, I've developed a practical perspective on what makes product strategy work in the real world, beyond the theoretical frameworks and buzzwords that often dominate the conversation.
Understanding Product Strategy in Context
First, it's important to recognize that product strategy doesn't exist in isolation. It's part of what I call "product direction" – a broader context that includes vision and objectives. While product strategy is crucial, it needs to align with and support these other elements to be truly effective.
The fundamental purpose of a product strategy is to provide clarity on several key aspects:
How to get from your current position to your vision
What your playing field is
What crucial hypotheses need testing
What you will and won't focus on
How you'll measure success
What Makes a Good Product Strategy?
In my experience, the effectiveness of a product strategy isn't determined by its format or length. Whether it's a 50-page document or a series of workshop outcomes captured in Miro, what matters most is the thinking behind it and how well it guides decision-making.
A good product strategy:
Is clear about the difficult decisions you need to make
Acknowledges uncertainties instead of pretending they don't exist
Strikes a balance between ambition and realism
Explicitly states what you won't do – this is often as important as what you will do
Common Pitfalls to Avoid
On the flip side, I've observed several characteristics that consistently lead to ineffective strategies:
1. Perfectionism Paralysis: Taking too long to create the strategy in pursuit of perfection. There will always be uncertainty – it's better to have a good direction than no direction at all.
2. Stakeholder Pleasing: Trying to impress stakeholders by saying yes to everything without addressing actual challenges or making tough decisions.
3. Empty Rhetoric: Relying on an incoherent collection of powerful-sounding words without substance.
4. Poor Implementation: Having a strategy that looks good on paper but isn't followed through or properly implemented.
Starting Your Strategy Work
When beginning strategy work, I focus on two fundamental aspects:
1. Understanding the Current State: I still find value in traditional tools like SWOT analysis. While it might seem old-school, it's a framework most people understand and can engage with effectively. The key is not just doing it yourself but discussing it with others to gain diverse perspectives.
2. Clarifying the Destination: You need some form of vision – whether it's an elaborate illustration or a simple aspirational description – to guide your strategic direction.
A crucial question I always ask at the start is: "What is most important to clarify with this strategy?" The answer varies significantly based on context. For a company in a commoditized market, it might be defining a credible differentiation strategy. For a mature company, it could be addressing challenging legacy systems.
Balancing Short-term Opportunities with Long-term Strategy
One of the most common challenges I encounter is the tension between adhering to long-term strategy and capitalizing on short-term business opportunities to keep your organization economically healthy. This is a reality for most companies, and I don't see it as a contradiction. Instead, I believe a good strategy should explicitly address how to handle such situations.
The key is to:
1. Make explicit how you'll deal with short-term opportunities
2. Define criteria for what opportunities you will and won't consider
3. Establish a clear process for evaluation
4. Frame short-term decisions appropriately to maintain strategic alignment
When communicating about short-term opportunities, it's crucial to frame them explicitly as such - especially when they don’t fit with your strategy. This helps prevent confusion and maintains team confidence in the overall strategy. You might even find ways to position these opportunities as learning experiences that contribute to your strategic direction or challenge you to rethink it.
Keeping Strategy Alive
A common misconception is that strategy must be a perfect, unchanging document. In reality, it should be a living guide that evolves with your organization and market conditions. I recommend:
Establishing a quarterly review rhythm with your product leadership team
Integrating strategy reviews into existing rituals like OKR reviews or quarterly business reviews
Keeping the review group small and focused
Regularly assessing if your core hypotheses still hold true
Working with Commercial Teams
One often overlooked aspect of product strategy is the importance of alignment with commercial teams. This is particularly crucial when defining your target users or ideal customer profile (ICP). Commercial teams bring valuable insights about market potential and willingness to pay, making this a natural area for collaboration.
The key isn't necessarily having perfect data or extensive market research (though these help if available). What's most important is reaching an agreement with your commercial teams about who you're targeting and ensuring everyone is moving in the same direction. And if there’s disagreement it’s critical to escalate the strategic discussion and (re-)establish a shared direction.
Effective Communication
Strategy communication isn't a one-time event – it's an ongoing process that requires different approaches for different audiences. Internally, the most effective approach is to:
1. Consistently reference the strategy in daily decisions and discussions
2. Help people understand what it means for their specific role
3. Repeat key messages, as people typically need multiple exposures to fully grasp strategic concepts
4. Use the language and context that resonates with each audience
For external stakeholders like boards or investors, I've found that cohesive text documents often work better than PowerPoint presentations. They force you to make explicit connections between different elements and provide a better foundation for meaningful challenge and discussion.
Measuring Strategic Success
When evaluating your strategy's effectiveness, look for two key indicators:
1. Organizational Understanding: Watch how people justify decisions or propose ideas. Do they naturally reference the strategy? If not, it might indicate that the strategy hasn't been effectively communicated or internalized.
2. Progress on Critical Hypotheses: Focus on the fundamental assumptions that need to be true for your strategy to succeed. Develop leading indicators to track progress on these core hypotheses.
Learning from Pivots
Sometimes, the hardest part of strategy isn't creating it but knowing when to change it. I learned this the hard way, during my early days at XING, where I was responsible for building (and later sunsetting) a multi-event app based on an unvalidated core assumption about organizer behaviour. This experience taught me the importance of:
Explicitly stating and testing core assumptions early
Being willing to acknowledge when initial hypotheses prove wrong
Having the courage to pivot when data suggests a different direction
Not letting sunk costs prevent necessary strategic changes
Getting started with Product Strategy
For product managers looking to develop their strategic skills, I recommend:
1. Start by understanding how strategy fits into the broader context of product direction (the Decision Stack by Martin Eriksson is a helpful mental model)
2. Keep it simple: focus on your situation, destination, and key choices
3. Make it social: engage with peers, leadership, and stakeholders rather than working in isolation
4. Use guiding questions rather than rigid templates
5. Focus on practical application rather than theoretical perfection
Conclusion
Product strategy doesn't need to be overwhelming or overly complex. The key is to provide clear direction while acknowledging uncertainties, make tough choices explicit, and ensure the strategy lives through consistent communication and application. Remember: a good strategy that's well-implemented is far more valuable than a perfect strategy that sits in a drawer.
Many thanks to Nils Stotz for our recent conversation on Product Strategy & giving me a good opportunity to reflect on my experiences and perspective. Many thanks to Martin Eriksson & Petra Wille for your feedback.