The journey of every great product starts with a strategy. As far as product management is concerned, it’s mostly about creating a winning product strategy, followed by flawless execution. By clearly defining goals and pin-pointing where they need to end up, product managers lead their teams towards success.
However, that’s easier said than done.
Developing an effective product strategy from scratch can be difficult.
Depending on the industry, the region you’re in, and many other factors, coming up with a new strategy from scratch isn’t always easy.
It’s true that in most cases, product managers can iterate existing strategies because “they’ve always worked.”
There’s nothing wrong with that.
During the course of their career, a product manager may help develop hundreds of new products. Considering that, they should know about the different types of product strategies.
If you’re a PM looking for inspiration to ignite the product roadmap for your idea – keep reading. In this article, I’ll take you through some of the most popular types of product strategies.
I’ll also provide a quick refresher on the concept and purpose of product strategies.
Let’s get started.
What is a Product Strategy
You can jump straight to the types of product strategies, however, I recommend going through everything to solidify the concepts.
As I’ve previously mentioned in some of my posts, there’s a lot of vagueness surrounding product management.
The main reason: every organization perceives this area differently.
The concept of product strategy is no different. There is no one universal definition.
However, most product managers would agree with this explanation: product strategy is the ultimate blueprint that guides business teams towards achieving broader goals, by creating solutions based on the requirements of the market.
In the simplest sense, a product strategy helps you determine the end-destination of your product i.e. the product vision.
An effective product strategy should be able to answer the following questions:
- Who are we targeting?
- What problems are we solving?
- Is it all connected to the broader business goals?
- How can we solve this problem in the best way possible? What’s our value proposition?
- Where do we want to see our products in the long-run?
Some companies use traditional templates while creating a product strategy, while others prefer not to follow formal formats.
As long as the end-goal is fulfilled – it doesn’t really matter.
What Comes Next: The Product Roadmap
Your product strategies should be created keeping the broader business objective in mind.
Everything that you plan must ultimately revolve around your business goals. I’ll expand more on that shortly.
Once you’re done creating a strategy i.e. a blueprint that lays down the foundations for the product development process, what’s next?
The actual steps that you’re going to take to execute that strategy, of course.
In other words, you’re going to develop a product roadmap.
This pyramid explains where the product strategy fits in the big picture:
As you can see, all three parts work together to make product development happen.
The Key Components of a Product Strategy
Before diving into the specific types, I’d like to briefly discuss the key components of a product strategy.
Any good product strategy should consist of the following:
Without goals, it’s impossible to create any sort of business strategy.
In most companies, product managers don’t have the authority to set goals. These are usually determined and communicated by the higher (C-level) management.
These “business objectives” aren’t the specific problems that you’re going to solve, nor the specific product features that you’re going to develop – rather, they act as a north star that guides the entire organization.
The PMs (keeping these business objectives as a reference point) come up with new ways to add value by going after opportunities in the market.
In simple words, the overall strategy should align with the business goals.
If they don’t, the company risks losing sight of the long-term vision.
The broader objectives will remain the same over a long period – it is the product vision that should change from project to project.
Target Market Definition
Next on the list of core components is the actual definition of your target market.
Providing clarity on who exactly you’re planning on selling to can narrow down your focus and help you create a clear strategy.
You can describe your target market in any way you want. Use demographical, psychographic, behavioral, and even geographical variables to pin down who you want to target.
Remember, you can’t be everything for everyone, because of which, you need to specify a market segment that you’re going to capture.
If you’re in B2B, describe the ideal business prospects.
In the end, just focus on doing whatever you can to effectively communicate the target market definition, since it will help you target the right problems, with the right solutions.
One of the key responsibilities of all product managers is to carefully study the market.
This involves surveying potential customers i.e. the target market, performing competitive analysis, and observing trends.
By collecting all of that information, product managers then identify the specific customer needs.
Here are some typical examples of market needs:
- An agile solution to manage facilities (such as UpKeep)
- A single platform to manage subscription analytics (such as ProfitWell)
- A cheap alternative to public transport and personal vehicles (such as Uber)
They’re then added to the overall product strategy, used to solidify the direction and then come up with ideas for new products.
Possible Solution(s) to Fulfill Those Needs
All great products have one thing in common – they provide practical solutions and/or value to the target customers.
Once the product manager identifies the market needs (and communicates them), they start brainstorming concepts for new products.
This phase of the product strategy includes the description of the new tangible or intangible solution that the business will provide.
The product teams also determine the overall value proposition at this stage, which involves the features, pricing, and positioning.
All of the above combined, allows product teams to establish a clearly-defined product roadmap.
You can’t launch a successful solution overnight without proper product planning.
As I mentioned earlier, there are many ways a company can go about creating a product strategy.
However, the end-success depends on many micro and macro factors. What worked for one company, might not necessarily work for the other.
Whatever the case, there are certain tried-and-tested ways to create an effective product strategy.
For clarity, I’ve categorized the strategies by:
- Product Development
- Market Share
Let’s see what they mean.
Product Strategy Categorized by Development
A company can create a product strategy on the basis of how they want to develop the solution in question.
These may vary from product to product, but the following types cover everything:
1. Create a Novel Solution
This approach is the riskiest one.
The focus is to address an existing problem, create a never-before-seen solution, and capitalize on the market opportunity.
The result? You’ll either end up disrupting the industry and making history, or you’ll end up nowhere – in most cases, there’s nothing in between.
Major tech companies, such as Apple and Airbnb, to name a few, took the risk and created new products (the iPhone and a platform for peer-to-peer lodging). Today, the innovation speaks for their success.
If you’re a tech company, you should consider referring to the technology adaption lifecycle to gauge the acceptance of your new product.
It uses something known as “Rogers’ bell curve” to break down the customers into four categories, like so:
The model can also help you with the product marketing and product lifecycle management.
2. Improve Existing Solutions/Taking a New Angle
Another approach to product strategy is to take an existing solution, and improve upon it.
Some of the world’s leading companies, including Google and Facebook, were created using this approach.
Sure, they had to evolve over time by using customer feedback, but they initially started out as better alternatives to existing products – Facebook for Myspace, and Google for Yahoo.
With in-depth market research, you can find out the flaws in existing solutions, and capitalize on it by introducing a better solution.
You can also take a new angle by creating a product that simplifies a problem. A good example is Lumen5 – an online video creator that helps create high-level videos, without relying on complicated software.
3. Feature Reduction
At times, the sheer number of features of a product itself – that’s initially meant as a USP – gets in the way of acceptance.
Take a high-level project management software as an example: Not everyone is going to use all of the features.
To improve the customer experience, a promising route is to reduce the amount of features in existing solutions, and come up with a lean product.
A classic example is the Google Keyword Planner. It’s a keyword research tool that doubles down on one thing – finding the right keywords for Google Ads campaign, taking out the unnecessary clutter of other platforms, such as SEMrush and Ahrefs.
4. Backward Invention
Another popular product strategy is backward invention.
Companies with successful products in developed regions usually use this strategy.
It involves creating a less complex (or a dumbed-down) version of an existing product. The intention is to penetrate a new market that’s relatively less developed than the existing one.
The backward invention strategy is similar to feature reduction.
However, it may also warrant a complete re-engineering of the product, with brand new features, to ensure wide-scale acceptance in the new market.
Product Strategy Categorized by Market Share
Another way to categorize product strategies is on the basis of market research and available resources.
These may overlap with the product strategy types above, however, the core concepts are a little different.
Here are 4 more ways businesses can approach their product strategies, based on where they currently stand in the market:
Companies that lead the market i.e. those that dominate the market share, usually have a lot of resources at their disposal.
They capitalize on this abundance and heavily invest in the development of new products.
Take Tesla as an example. In terms of sales of battery-powered EVs, it’s the current market leader in the US.
All things aside, the stable cash-flow certainly plays a major role in helping the company consistently innovate.
The same is the case with Apple when it comes to the smartphone market in the US.
Companies with below average market share, don’t usually drive their product strategies with innovation.
That’s because they don’t have to – that’s just the way their brands are positioned.
Naturally, they don’t invest much in research and development.
Instead, their product strategy revolves around following the industry leaders, and trying to re-engineer whatever they roll out.
A good example is that of project/team management tools. I won’t name them specifically, but over the years, a lot of companies have emerged with sub-standard platforms – essentially copying a few of the original ones.
Challengers, like the market leaders, focus more on innovating rather than following.
They too have a lot of budget to invest in product development.
However, they still don’t have enough market shares as the leaders, of course.
The immediate goal of a challenger business is to snatch the number one spot from the leaders, and that’s what their product strategies aim to do.
Last, but not least, a niche product strategy targets a segment within a segment.
Businesses using this approach don’t want to conquer the broader market. They just want to be known for one specific aspect of it.
A great example of a niche product is August – an app that lets homeowners provide keyless access to their property. The product is targeted to people who use Airbnb and other similar lodging services.
There are no right or wrong ways to create the perfect product strategy.
As long as every component plays its role in providing clarity on the end-goal or the vision, you’re well on your way to creating a successful product.