Your company strategy is sh*t

The root cause of much chaos and drag experienced in product is likely the lack of company strategy. Here is how to address the problem.

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Product people always complain they can't do their jobs because the strategy is unclear. And they are right. However, when you ask them what they mean by “strategy”, no one can tell. The sad reality of my 12-year career building products is that most companies have no coherent company strategy - which means their product strategy is also not.

The strategy is not only bad.

It's non-existent.

But it's not for the lack of trying. Every company has some form of “strategic planning”, vision, goals, list of priorities, yadda yadda yadda. They are most often not a strategy though.

What is “strategy”?

There is much confusion about what it is, which means that often what is called "strategy" or "strategic planning" is anything but.

Strategy is a young discipline, so there is no single accepted definition of strategy. But let's pick 3 influential authors (highlights are my own):

"Strategy is an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition." - Lafley, A. G.; Martin, Roger L.. Playing to Win: How Strategy Really Works

"Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value." - Porter, Michael; What is Strategy?

"Strategy [is] a route to continuing Power in significant markets. Power [is] the set of conditions creating the potential for persistent differential returns [over competitors]." - Helmer, Hamilton. 7 Powers: The Foundations of Business Strategy

On those definitions above, there are two common themes for “what is strategy”:

Sustained advantage over the competition

The goal of strategy is to win the game, not to participate in the game. If you are a general, you don't build a strategy to keep fighting on the battlefield, you build a strategy to win the war.

The way to win is by delivering more shareholder value by having lower costs and/or commanding higher value for similar costs than competitors. But this is not enough to win. This advantage must be hard for competitors to copy, thus being sustained (persistent) over a long period to be material.

In customers' minds, Netflix DVD had more value than Blockbuster because the former didn't charge late-return fees. This advantage was sustained because Blockbuster could not imitate Netflix. After all, it earned about half of its revenue through late fees. It would cripple its business model. Similarly, it was hard for Blockbuster to work in a DVD-by-mail format, because it had all these stores in every corner. What to do with them?

Deliberate choices to deliver unique/superior value

The company needs to deliver more value for the target market than the competition. The goal is not to offer a "me too" product, but a product that wins over competitors.

Netflix's DVD-by-mail business was a subscription business where users didn't need to leave their homes to get movies, didn't pay late return fees, and could watch as much as they wanted with a single monthly subscription. This delivered superior customer value (in the consumers' minds) to the Blockbuster pay-by-rental model.

In short, strategy is a set of deliberate choices to deliver unique and superior value to achieve a sustained advantage over competitors.

These are not a strategy:

…a vision is not a strategy

Vision is a fancy name for “what this company wants to achieve in the future”. It's important for building a strategy, but it's not a strategy. It's a wish. It tells us “what” winning means for the company/product, but it doesn't tell us how to achieve it.

Want proof? Look at these two vision statements:

Figma: make design accessible to everyone.

Canva: empowering the world to design.

These are kind of the same thing. Or, at least, very very similar. However, they have very different strategies about how they are pursuing their vision. They have different theories about how each is going to win.

…a goal is also not a strategy (yes, OKRs aren't either)

According to Richard Rumelt in the book Good Strategy/Bad Strategy, "Many bad strategies are just statements of desire rather than plans for overcoming obstacles." This is mistaking goals for strategy.

The equivalent of mistaking goals for strategy is a sports team coach saying "winning" or "scoring" is the team's strategy to win. Goals are important, but how to proceed to achieve them lies at the heart of strategy.

A typical goal, "grow revenue by X%”, doesn't tell us how. Are we entering a new market? Expand internationally? Increase our prices? Cross-sell? Create a new revenue line? “Grow revenue”, without a theory of how to do it, is just a wish.

…a roadmap is not a strategy too

The roadmap is your theory of how to execute the strategy, not the strategy itself. Using the roadmap as a proxy to the strategy leads to bloated products that serve no one.

As a product leader, how do I build a good strategy?

“How to build strategy” is a topic that often goes to two extremes: either it gets intangible/exoteric, or nitty-gritty fill-in-the-blanks on the template. Neither tends to help us mortals to create a good strategy.

First things first: a clear company strategy is a must-have for any product strategy

Companies with just one product tend to have the same or very similar company and product strategy. As things grow, it's normal to have an overall company strategy and then a strategy for each product. But one thing is certain: if you don't have a company strategy, you will struggle with the product strategy.

Just like a new product feature is just a way to deliver some business outcome, a product strategy is just a way to deliver on the company strategy. This means, that before having a product strategy, you must have a company strategy.

To visualize this, I like the concept of the Product Strategy Stack by

Ravi Mehta

:

Looking at the Product Strategy Stack above it gets really easy to understand why PMs complain about unclear strategy when the company strategy is unclear. Also, the reason why you can't seem to nail product strategy as a product leader. If the top layers are not clear, the bottom ones won't be either.

One neat feature of the Product Strategy Stack is that if you focus on a given item, you can ask “how?” by walking one level below and “why?” by walking to the level above.

PS: I am not super convinced that “Product Goals” should come after “Product Roadmap” as

Ravi Mehta

explains in the article. I tend to switch them but I am not going to argue that here, I think both can work given one is careful. Try and see.

No company strategy? DON'T start by creating one

When the company strategy is not defined or unclear, some product people tend to try to create one by themselves. This is a nice exercise, but a bit of a waste of time (unless you are a founder or have founder-level powers).

There must be some theory about how this company is going to win. And it often is in the heads of the CEO and other C-level/founders. So, get it out of their heads and write it down. But how?

You can put the relevant people in a room and conduct a workshop. I would avoid that though. Unless you are dealing with a particular type of people, this can be seen as a waste of the executive's time. Which is not conducive to a great workshop. In 15 minutes everyone is on Slack and it's over for you.

I prefer to have a consultant-style approach: have some 1:1s with the relevant people. Explain that you are trying to understand (not create) the company strategy. Then ask questions and let people talk. Which questions? Here are some examples:

1. Do we have a vision/mission written somewhere? What are they?

2. If the company would be wildly successful, what would it be that we achieved?

3. What is our main target market today? Do you see this shifting to other targets in the future?

4. What problem does this target market have that we are solving? How do we intend to solve this problem? And why would they choose us instead of the competition?

5. By the way, who are our main competitors? In what are they better/worse than us? Are there indirect competitors (like substitutes)?

6. To beat the competition, what do we need to be really good at? What doesn't matter that much for us to be good at?

You get the gist.

Writing the company strategy down

After the conversations, it's time to compile a written output of what is the strategy (according to them). Show them the output. Likely there are things wrong or that the different C-level people disagree, iterate until they are satisfied.

You can write a 2-pager doc, make a Figjam/Miro diagram, or anything you want as long as the choices are clear. I hate fill-in-the-blank templates, but one format that I find very good is the Strategic Choices Cascade from the book Playing to Win. It gives the right amount of guidance, but at the same time is not stifling. It is still very much based on deep thought and research.

The Strategic Choices Cascade tries to answer five interrelated questions:

1. What is your winning aspiration? The purpose of your enterprise, its motivating aspiration.

2. Where will you play? A playing field where you can achieve that aspiration.

3. How will you win? The way you will win on the chosen playing field.

4. What capabilities must be in place? The set and configuration of capabilities required to win in the chosen way.

5. What management systems are required? The systems and measures that enable the capabilities and support the choices.

Here is an example for Netflix:

This is just an illustrative example made with my assumptions.

The real work begins now: assessing the strategy

Writing it down doesn't mean it is a good strategy or even a coherent one. The real magic happens when you evaluate the assumptions that hold the strategy together. If this is not done properly, this is where you will be stuck in the mud by infinite C-level disagreement. See, a strategy can only be proven successful after it's implemented. This means people will have different opinions about what might work or not. If you engage in arguing opinions, you will lose (unless you are the CEO).

Instead of arguing opinions and having each person defend their idea, do the smart thing: discuss the assumptions that hold a strategy together.

To do so, you ask “given these strategic choices here, what we believe must be true for it to work?”

This takes people away from the mindset of defending their ideas and attacking others’ ideas, to discuss what facts must be true for it to work. It's subtle, but it works.

To give some direction to the discussion, it's useful to evaluate the assumptions thinking of 4 criteria:

1. Industry Analysis. What must we believe about the strategically distinct segments and the target attractiveness?

2. Customer/Channel value. What must we believe our end customers and channels value?

3. Relative Position. How must we believe our capabilities and costs stack up against competitors?

4. Competition Response. How do we believe must competitors react or try to counter our choices?

Again, the (non-exhaustive) Netflix example:

Your goal should be to get to an agreement about each statement. I like painting them with the traffic light system: red means the statement is false, yellow it's a maybe, and green that the assumption is true.

If you can get C-level to agree on the assumptions, then any red assumption needs to go. Which means considering different strategic choices. It's a highly creative and iterative process to get to the company strategy. If you have some green and some yellow, you need to design tests for the yellow ones.

PS: assuming the assumptions are crucial. If they are not crucial, you don't need to write them down.

You have a business strategy, now what?

If you played your cards right, you should get on the other side with a clear business strategy that was built together and agreed with the C-level.

I bet you will find it much easier to define your product strategy now. You look at the strategy, assess where are the big levers/opportunities/problems, and define some strategic priorities and sequencing. It's bread-and-butter product work.

Don't shy away from repeating the process and building a strategic choices cascade and assumption testing for each product. If you want to do it, do it. But if you understand your customers, competitors, and industry well, it will feel almost intuitive to define 3-4 big strategic product initiatives.