The Building Blocks of an Impactful Product Strategy
Sep 3, 2023
The Importance of Strategy Building Blocks
Many companies demonstrate good habits when creating strategies, but what they often miss can be critical. For example, a technology company may pride itself on analytical rigor but fail to accurately diagnose the difficulties a targeted customer group may face in providing reasonable returns. Similarly, a beer company may focus on industry structure in its core business but make a losing bet on a related business, such as wine, due to failing to forecast declining returns caused by structural shifts. These examples highlight the need to ground strategy development efforts in good product management.
The building blocks of strategy help companies make strategic choices and carry them through to operational reality. They consist of:
Diagnose: Gain deep insight into the starting position of the company and understand where and why it creates or destroys value.
Forecast: Develop a point of view on how the future may unfold.
Search: Combine insights into the company's starting position with a perspective on the future to develop and explore alternative ways to win.
Choose: Decide which alternative strategy to pursue.
Commit: Create an action plan and reallocate resources to deliver the chosen strategy.
Frame: Ensure that the team properly identifies and agrees on the questions asked and the decisions made during the strategy development process.
Evolve: Constantly monitor and refresh the strategy as conditions change and new information becomes available.
By understanding and effectively applying these building blocks, companies can create strategies that are grounded in thorough analysis and well-aligned with their goals.
Myth-Busting and Penetrating Insights
Developing a successful strategy also requires challenging received corporate wisdom and questioning existing hypotheses. By dispassionately identifying the elements that contribute to performance and discounting factors contaminated by perceptions of the company's supposed greatness, companies can gain penetrating insights. This requires curiosity and a willingness to test new ideas, rather than just confirming existing hypotheses.
For example, a global retailer revisited its strategy after experiencing five years of strong earnings. While many believed the positive results were due to good execution and a successful store format refresh, the leader of the business suspected that there might be more to the story. By engaging the company's strategy team and other executives in discussions and analysis, important insights were revealed. These insights showed that while overall performance was good, there were underlying problems, such as a decline in the productivity of older stores and the loss of mainstream customers to a cheaper competitor. By questioning the received wisdom and engaging in thoughtful debate, the leadership team was able to arrive at a sharp diagnosis and develop a focused strategy for addressing these issues.
The Value of Grappling and Debating
Creating an impactful product strategy requires more than just number crunching and analysis. It requires stimulating productive debates among executives to generate better decisions. By grappling with the issues and engaging in thoughtful argument, companies can make less biased decisions and ensure that relevant stakeholders are on board with the strategy.
However, getting executives to grapple with the issues can be messy and may involve revisiting fundamental beliefs about the company's past and future. But without these necessary debates, companies may end up with strategies that are rubber-stamped and flawed, leading to implementation challenges or competitive disadvantages.
For example, a retailer's strategy team engaged the company's broader leadership group in discussions to share observations and insights. Instead of presenting management with a summary report and recommendations, the team designed a series of think tanks, where the senior managers worked through a profit-deconstruction exercise. The analysis was tabled at certain points, allowing the management team to draw out conclusions and identify further questions. This approach ensured that the decision-making process was inclusive and that new ideas could be challenged by the leadership team. Through these debates, the team arrived at a sharp diagnosis and developed a focused strategy for delivering value products and reinforcing the company's market position.
Finishing Strong: Implementation and Proximate Goals
A good strategy is incomplete without successful implementation. No matter how brilliant a strategy may be, it cannot be effectively executed unless the people responsible for its implementation understand what they need to do differently and have the necessary resources. Setting proximate goals that connect to the longer-term strategy is crucial for translating the strategy into actionable steps.
Companies often struggle with setting proximate goals and ensuring successful implementation. Employees may resist change if they do not understand the connection between their actions and the long-term strategy. For instance, an Asian telecommunications company aimed to move its target customer base from big business to the midmarket and standardize its products. However, this required salespeople to say no to new business from large and complex clients to redirect efforts toward midmarket customers. Without properly preparing the organization for these changes, employees resisted the strategy, leading to implementation challenges.
To overcome this, companies must create tangible proximate goals that align with the longer-term strategy. This involves changing employees' goals, realigning budgets, and communicating the importance of the transition. By connecting the future vision to the present and providing clear guidance, companies can ensure successful implementation and drive organizational commitment to the strategy.
In conclusion, creating an impactful product strategy requires a thorough understanding of the building blocks of strategy, the ability to challenge received corporate wisdom, and the willingness to engage in debates and grapple with the issues. By focusing on these key elements, companies can develop strategies that outperform the market and drive sustainable success. It is essential to approach strategy development as a journey rather than a project and you can learn more about it in our Product Management course. With a rigorous and complete approach to product strategy, companies can boost their odds of creating strategies that truly make a difference.
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