Product leaders should focus more on what to build, not how

What exactly do you mean by Product Strategy?

In building great products and companies, there are hundreds of things you can do to achieve success.  Product strategy provides focus and helps teams to decide what to say “yes” to, and in 90% of the cases, what to say “no” to. Product strategy provides companies with focus-- a critical component for success.

You can think of product strategies as high-level hypotheses to answer the question: “How can we delight our customers in hard-to-copy, margin-enhancing ways.”  The meaning of “delight” is self-evident, but often hard to discover. The “margin-enhancing” piece is a fancy way of saying, “make money to build shareholder value.”  The most interesting part is determining the “hard to copy” elements. If you successfully build hard to copy things, you find yourself in a magical place where you don’t really have to think about competition -- you can focus on delighting your customers instead.

In the world of technology products, there are four main things that make products hard to copy:

• Network effects.  For instance, Netflix has built a huge device ecosystem.  Every hardware device on the face of the planet is magically wired to deliver Netflix content to their screen.  For customers, this means “watch anytime, anywhere.” It’s very hard, however, for competitors to achieve this same network effect.
• Unique technology.  Netflix has lots of unique technology, but one of its key hard to copy advantages is its personalization technology. Today, Netflix knows the tastes of 165 million members worldwide.  This makes it substantially easier for members to find movies they love.
• Economies of scale.  This means that once a company gets big, they have a large financial advantage over smaller competitors.  This past year, Netflix was able to invest $20B in original content as it amortized this investment across 165 million members. For perspective “poor Amazon” (I love saying that!) could only invest half this amount.
• Brand.  Over time, if you build a great product, company, and a relationship with your customers, you build a trusted brand that provides a huge hard to copy advantage.

“The magic of product strategy is when you have a successful hypothesis -- a product strategy -- that delights customers, in hard to copy margin-enhancing ways. ”

Personalization at Netflix is a great example of this. Personalization delights customers by making it easier for members to find movies they love, the technology is very hard to copy, and the technology helps enhance the business by enabling Netflix to “right-size” its investments in original content.  A rough example: Netflix forecasted 100M members would watch “Stranger Things” so it invested $500M in the series. And the team estimated that “Bojack Horseman” would have 10M viewers, so it invested $50M in this content. No other streaming company can invest in original content with the same precision as Netflix-- a huge business advantage for the company.

So, short answer: think of product strategy as forming high-level hypotheses about how your product will delight customers in hard to copy, margin-enhancing ways.

Why should people care about Product Strategy?

I focus a lot on helping product leaders to define their product strategy. The product strategy has the following components:

• A long-term product vision that enables the company to Get big, to Lead into future areas, and to Expand further from there. I call this the GLEe model.
• A set of high-level hypotheses -- the product strategies -- along with metrics that define their progress, and tactics (projects against these strategies). I call this the SMT model.
• A four-quarter rolling roadmap that lets employees, investors, and board members see how all of these elements fit together.

Why do I focus on arming product leaders with product strategy tools, models, and frameworks?  I find it dramatically increases the odds of a company’s success. It has worked for me at four different companies (Creative Wonders, The Learning Company, Netflix, Chegg) and at lots of other companies that I advise (NerdWallet, Life360, Metromile, Reddit).

Another answer: There’s lots of focus today on how people build stuff --- agile methodologies, etc.  That’s a fine thing. But I am trying to bring more focus back to WHAT product leaders choose to build.

Last: Product strategy is a critical leadership tool -- it helps product leaders communicate an inspired vision of the future and enables the team to see how they will get there in an achievable, step by step way.

What are some of the key challenges that can be addressed by adopting a product mindset?

My language for this concept is to build an organization that is customer-obsessed.  It really comes back to how I define the product leader’s job: your job is to delight customers in hard to copy, margin-enhancing ways.

There are lots of other potential “drivers” for companies.  They can be sales-driven, data-driven, product-driven -- you name it.  What I find that works best, however, is to be customer-driven. I call this customer obsession.  What this means is putting the customer at the center of everything you do to delight customers in hard-to-copy, margin-enhancing ways. Companies that learn to do this occupy a rare world where they are aware of competitors but don’t really need to worry too much about them -- because of all the hard to copy advantages they have amassed.  Netflix lives in this rare space today-- it’s a good place to be.

What are the building blocks of a strong Product Strategy?

I have touched on this concept lightly already:

Define your long-term product vision using the GLEe model.  For Netflix, this was:

• Get Big on DVDs
• Lead streaming
• Expand worldwide, then
• Expand further into original content.

Define your set of high-level hypotheses -- your product strategies-- along with the metrics you’ll use to measure progress and the tactics or projects you identify against each strategy.  While there were multiple product strategies at Netflix: Simplify, Personalize, Build a Device Ecosystem, etc., below, I tease out one example of how SMT applies to personalization:

• Strategy: Personalization
• Metric: % of members who rate at least 50 titles in their first six weeks, RMSE (Root Mean Squared Error or the delta between how much Netflix anticipates you’ll enjoy a movie and your actual rating)
• Tactics: Netflix Prize, Collaborative filtering, Ratings Wizard (among dozens of others)

The last step is to build out a rolling four-quarter roadmap. The roadmap defines the high-level product strategies and how the tactics against each will roll out over time.  This is a helpful way to communicate how all of the Product Strategy elements fit together in a way that employees, investors, and board members can easily understand.

At the all-day product strategy workshop, we will use pre-formatted Google Slides in a step by step way to define a company’s product strategy. You’ll present this work to others then we’ll spend an hour simulating a quarterly product strategy workshop -- the meeting I invented at Netflix to ensure strategy was front and center on an ongoing basis.  The simulation is a ton of fun as we’ll do a bunch of “What would you do?” cases that will provoke fun debates and help everyone to see how product strategy impacts day to day decision-making.

If you could offer businesses one piece of advice, what would it be?

Focus, focus, focus!  Every company that I work with struggles with this.  Most companies try to do way too much and their work appears haphazard and the teams are confused about how it all fits together. And, occasionally, some companies are too focused -- they are essentially betting the company on one key hypothesis. Product Strategy helps to define the balancing act between doing too much and putting all your chips on just one number on the roulette wheel.

Did I mention this is hard?  Product leaders are expected to invent the future and there’s a maze of constraints and challenges put in our way.  I focus a lot on Product Strategy as a means to make the path clearer -- and to dramatically improve the odds of a company’s success.