Product Strategy

Let's walk through building a product strategy, from surfacing problems to taking actions that solve them. There are situations where it's appropriate to start with Understanding the Target Customer before Defining the Problem, depending on the context.

Table of Contents:

Strategy Inputs:

1) Business Goals

Output Metrics: the roads that lead to revenue

Your business has a goal, just like your target customer. Output metrics lead to revenue, the actions you take should impact output metrics.

For this exercise, let's focus on this business goal: Increase signups.

Your business goal will drive your strategy. For example, if the goal is to increase signups from a new customer segment, then you will need to solve problems that create value. If you are seeking to reduce churn, then you may want to double down on existing solutions by reducing the time or effort it takes to reach value that is already provided. The answer will depend on the context of your situation.

2) Surface Problems

If you walked up to someone on the street and asked, "What problem are you experiencing?" how would they respond? This is the problem statement we want to define. Perhaps something is inaccessible, too expensive, or takes too much time. Each product you work on helps solve a problem. What is that problem?

Problem statement types and examples:

For this exercise, let's focus on this problem statement: It takes too much time to cook healthy meals.

Gather Evidence: is this problem real?

Start by gathering evidence to validate your assumption that this problem exists before moving forward.

3) Customer Understanding

It may sound counterintuitive, but instead of solving this problem for everyone, start by solving for a narrow customer segment.

The Small Pond Approach: who are you going to target?

Think of the ideal customer segment as a small pond containing 1 type of fish where the fish inside often communicate with each other. The pond should be big enough to support your business, but small enough so the ripples made by your target customers reach every corner. The goal is to have the fish jumping into your boat, but you'll first need word of mouth about your product's value (the ripples) spreading throughout the pond.

Choose a pond before you start fishing (the pond represents your target customer segment):

For this exercise, let's focus on this target customer: Fitness enthusiasts with limited time (Millennials aged 25-39).

Why should you choose a narrow customer segment? Imagine choosing 3 ponds with 3 different types of fish, fish A uses different lingo than fish B and C. The value fish A needs won't translate to fish B and C, and the value fish B needs won't translate to fish A and C. If fish A loves your product then their word of mouth (ripples) won't reach fish B or C. Or worse, you may be creating a product that has 3 features solving 3 different problems, 1 problem for fish A, 1 for fish B, and 1 for fish C, resulting in "feature shock": cramming too many features into a single confusing and expensive product.

If you've caught enough fish in your target small pond then you can move on to the next adjacent pond.

Gather Evidence: is this problem real for your target customer?

Once you've chose your target customer (small pond) you can start to gather evidence to validate your assumption that this problem exists for them.

Not only is it important to know if the problem exists, but (depending on your business goal) it's going to be important to know if your target customers would receive value from the benefit your product would offer, if built. Would offering this benefit (solving this problem) be worth paying for? If yes, then how much? Is offering this benefit a must-have or nice-to-have? You can save yourself a lot of time and effort by validating these assumptions now.

Understand the Context of your Target Customer: what is really going on in their life that is pushing them to want to solve this problem?

Your target customers are going to be like-minded people in similar contextual situations. What is going on in their life? What situation is driving them to want to solve this problem?

Their Goal: what are they trying to accomplish?

Your target customers should have a common goal. Learn this by asking questions until you reach the goal. For example, if you're focused on the problem "It takes too much time to cook healthy meals", then ask: "Why do you want to eat healthy meals?" If you're targeting multiple ponds then you'll find that different target customers have different goals.

For this exercise, let's focus on this target customer goal: I want to eat healthy meals to optimize my performance, stay in peak condition, and align with my fitness goals.

Getting to the Root of their Problem

Next, break the problem down to its root cause. Do this by asking "Why?" until you reach the core issue, something actionable. For example: "Why does it takes too much time to cook healthy meals?"

Now decide which problems that, when solved, will help your target customers achieve their goal and your business achieve its goal. These are the problems you should focus on solving now. Out of these problems, you will then need to prioritize which problems to focus on first. For example, we may choose to avoid solving the problem regarding not having the right tools or appliances, or the problem regarding feeling overwhelmed by the need to track macro and micronutrient content.

In general, it is a good practice to focus your strategy on only solving a few problems at a time. 3 problems is a good rule of thumb. Your business may refer to them as your 3 strategic pillars, or 3 initiatives.

Hiring Criteria: what does your target customer need in a product?

What should you account for when building a product for this user segment? Consider their taste in products.

Firing Criteria: why would your target customer stop using a product?

What should you avoid when building a product for this user segment?

Creating Personas

Personas help humanize the target customer segment by personifying the context we've learned. You're fishing in a pond of these personas. These are the fish to catch:

4) Competitor Understanding

What products enable your target customer to eat healthy meals to optimize their performance, stay in peak condition, and align with their fitness goals? Your competition should include everyone that solves this problem. Where will you fit in this market? For example:

Learn the direction competitors are moving in by staying up-to-date with their product releases, release notes, updates, changelog, etc. Consider how you might differentiate yourself from competitors when prioritizing which strategic actions to take. Use your target customer hiring and firing criteria to guide you.

5) Define Hypotheses

A problem well stated is a problem half solved. Define your hypothesis using the following formula:

The Big Bets (Hypotheses)

At this point, you should have collected enough evidence (whether that be through surveys, interviews, field studies, etc), to come up with a hypothesis. Let's assume we collected enough evidence and came up with the following hypotheses:

For this exercise, let's focus on this hypothesis as our top priority: It takes too much time to cook healthy meals because the process requires specialized ingredients.

6) Guiding Policy

You should decide where to focus your effort before you decide what to build. This decision depends on whether your product has reached "Product Market Fit" (PMF) or not. For example:

Input Metrics: focusing on the "Aha!" moment, the key action signaling value was received

Often called the "North Star" metric. You will increase your output metric by increasing how often users complete this key action, this "Aha!" moment. The action represents when a user has received the value your product offers. It is the action you want users to complete ASAP when first using your product. Choose a value-representing action that creates network effects (completing this action makes the product better for all target customers) and/or switching costs (completing this action makes it painful for the target customer to switch to a competitor). For example:

For this exercise, let's assume we've reached PMF, so our guiding policy will be: Focus on building network effects by increasing cooked recipes.

Strategy Outputs:

Let's summarize what we know so far:

7) Paint Vision

What does a world look like when these problems are solved? A vision paints a picture of the destination you're trying to reach so your team and customers know what direction the product is moving in.

Our vision is below:

Evangelize your vision. Share your vision. Communicate your vision. A tactic I use is changing my video meeting background to include my vision's text so everyone I meet with will know the future we're trying to build.

8) Choose Actions

We know where we're headed, but how are we going to get there? You will want to work with your team to define which actions to take. What is built should be found at the intersection of customer-centric actions (solving user problems) and technology-led actions (using your tech stack). Each action has the goal of impacting input metrics that move output metrics. Additionally, actions should factor in your user segments' hiring and firing criteria and, if possible, differentiate your product from competitors.

Use Inflections: what "new thing" has been introduced to the world?

What "new thing" was introduced? How can that "new thing" empower your product? Inflections come from technological advances, regulatory changes, or belief shifts. Inflections are waves of change in an industry or population, use them to your advantage! For example:

Define Use Cases: how will your target customer use your product to achieve their goal?

Consider the use cases of your product. How will your target customer use your product to achieve their goal? For example:

Brainstorm Ideas: how might we solve these problems?

Work with your team to surface ideas for what to build next. Start by asking this question: "Using the information we know, how might we {solve this problem}?"

List out all of the brainstorm ideas for the problem. For example, to reduce the time it takes for Gym-Goer Gabes to cook healthy meals without requiring specialized ingredients we can build:

Validate Ideas: can we build this?

Validate your assumptions on if the proposed idea is feasible and viable.

Prioritize Ideas: which ideas are most impactful?

Prioritization is a balance of reach, impact, and effort:

Prioritize Counter-Positioning: playing offense

How can your ideas position yourself against the competition? Emphasize hiring criteria, firing criteria, and competitive differentiation in your projects. Consider how you might position your product:

9) Execution

Gather requirements, provide context, get commitments, assemble resources, and build valuable products with your team.

10) Go-to-Market

How are you going to bring your product to market? How will your target customers learn about the benefit you're offering them? As mentioned when discussing the small pond approach to targeting customer segments: The goal is to have the fish jumping into your boat, but you'll first need word of mouth about your product's value (the ripples) spreading throughout the pond. Your go-to-market strategy should be aimed at increasing word of mouth (increasing the ripples within your target pond) to create real virality. How might you approach this?

System Awareness: where would you find your target customers?

Consider what system you might use to find your target customers and expose them to your product, for example:

Novelty within that System: how can you catch the attention of your target customers?

What novelty can you add within the system that is used by your target customers to catch their attention? For example:

Even better if the novelty has some disagreeableness to really start a buzz. For example, if you test an ad and find that 50% of the viewers hate that ad, then you may be on your way to generating a go-to-market strategy that will really get people talking. For example:

The best novelty ideas are never-before-seen.

Repeat Visibility within that System: how can you convince your target customers to try your product?

Your target customers need to be exposed to your marketing message at least 3+ times to be convinced to try your product.

Credibility: how can you gain credibility within your target customers?

Most importantly, if your target customers don't find you to be credible then your go-to-market strategy won't catch on. Find ways to gain credibility within your target customers, for example:

Getting your 1st target customers

If you're finding it hard to get your target customers then consider doing things that don't scale to acquire them. Give your target customers the push they need to get started. If you accurately validated the value of your product earlier in this process then you may need to do some extra work to find that 1st fish who will create the first ripple in your pond.