Organisations of all shapes and sizes have been moving to increase their agility in response to digital disruption. A 2018 global survey of business and IT executives found that eight in ten businesses were adopting agile in some form. With new competitors emerging and industry boundaries blurring, agility is up there with digital transformation as a corporate priority. Quaint notions of strategists navigating stable year-on-year industry growth with five-year strategic plans have become a relic of a bygone era. We have replaced ‘top down’, ‘command and control’, ‘data driven’ and ‘centralised’ strategy with ‘self-directed’, ‘customer centric’, and ‘decentralised’. It can easily seem that self-directed product teams with mission statements working to agile principles have consigned product strategy to the dustbin of history.
At IE we have been applying agile principles to build digital products that customers love for over ten years. We help our clients embed agile principles in both their digital delivery teams and in parts of their business that may have nothing at all to do with digital products. We are big advocates for agile and the shift it can create in organisational culture. With a proven track record in software delivery, agile has rightly become a strategic focus for many product organisations as well. Applied properly, agile can allow product development teams to deeply connect with customers and iterate solutions that delight them. Organisations who have agile teams prioritising their own backlogs and (possibly, but not always) managing to a product roadmap may question the role of product strategy within their agile way of working.
For as long as there has been agile, there have been passionate debates about what agile is (A process? A culture? An operational strategy?), and how best to apply agile principles (Kanban, Scrum, XP, DevOps, or (whisper it..) SAFe). Whatever your flavour of agile, it’s far more than a simple delivery framework, or a series of steps and rituals that can be mechanically applied.
Agile can certainly drive a step change in how organisations bring new products to market, but does adopting agile principles allow you to also abandon product strategy?
We think not. Agile can do a lot of things, but on its own, it is unlikely that it will enable Product Managers and their leadership teams to execute significant shifts that will alter the competitive position of a product or company.
With the focus agile brings on shipping features based on customer feedback, it can be all too easy to fall into a position of always trying to build a faster horse. As Henry Ford (may have) once said, “If I asked my customers what they wanted, they’d have said a faster horse.” Faster (or better) horses are great, and should always be an objective of product teams, but shouldn’t become the sole focus. In a corporate setting, with a dedicated development team to keep busy (or alternately a need to fight for scarce pooled resources), customer needs to attend to, backlogs to groom and internal stakeholders to manage, ‘making the horse faster’ can overwhelm other priorities.
It is not agile itself that makes it difficult to focus on - and agree to - strategic and differentiation opportunities. However, it can become a side effect inside a large organisation busily implementing agile at scale. We believe taking time to survey the competitive and customer landscape and deciding where to seek new markets or differentiate versus competitors is where a dedicated product strategy process can still play a vital role. Digital disruption means that organisations need to both move quickly to sense and respond to customer needs (‘be more agile’) while at the same time responding to a shifting competitive landscape (‘strategic agility’).
Rita McGrath is one of our favourite strategic thinkers and was among the first to identify this shifting strategic environment, coining the term ‘transient advantage’ to replace ‘sustainable competitive advantage’. Rita has developed a list of statements that can be used to gauge whether your competitive advantage may have been eroded. Ask yourself if any of these statements are true of your product or company:
If you nodded in agreement with four or more of these, that’s a clear warning that you may be facing erosion of your current competitive advantage. If we return to our faster horses analogy - would you always back a faster horse to outrun the factors that are warning signs of eroding competitive advantage? It's always better to have a faster horse, but you also need to be sure you have picked the right race track, race distance, and field that suits your strengths - and that's exactly where strategy comes in. A good product strategy can help you pick the right track and outline a clear plan to stand out in the minds of customers in a crowded field.
Creating differentiation is critical to dealing with the increasing pace of competition. And a product strategy is the ideal mechanism to capture a plan for differentiation. To switch our animal metaphors from horses to cows, and to quote Seth Godin:
"The key to success is to find a way to stand out - to be the purple cow in a field of monochrome Holsteins."
Transient advantage means existing forms of differentiation will be eroded. By extension, new forms of differentiation (and value creation) need to be identified at a much faster pace than has been required in the past.
Alignment and focus is vital for product teams to be successful in a corporate environment. Product teams and Product Managers who focus all their energies on faster horses can lose the confidence of the organisation. Senior leaders (particularly, but not only, those new to agile ways of working) will see lots of agile activity, but without a product strategy they will begin to ask, ‘Where is the value coming from? Where are the initiatives that are going to shift the dial for us in the market?’ As a Product Manager, some warning signs that you have become or are perceived as an optimiser rather than a value creator can include:
Over 15 years ago, Ben Horowitz wrote, “Good product managers know the market, the product, the product line and the competition extremely well and operate from a strong basis of knowledge and confidence.” While the field of product management has evolved a lot since the post was first written, it is still vital to operate from a position of knowledge and confidence, and a good product strategy will create just that. A product strategy will allow both product and senior managers to agree on the most important initiatives - those that are expected to make a meaningful impact on the product trajectory and positioning in the market. Done well, a product strategy is something that can help make everyone more successful - but how do you go about creating one? We like to start by defining product opportunity areas. An Opportunity Area consists of a definition, target segment, competitive posture, timeframe, ambition and success measurements that the product team is playing within.
Within each Opportunity Area you should identify a competitive advantage or opportunity for differentiation - how are you going to be faster, better, different, more relevant, more convenient? This will form the basis of your Marketable Claims - how you plan to craft your advantage into something that will clearly define your offer in the minds of customers. Creating differentiation from competing offers (either sustainable or transient based on industry structure) needs to be a key goal of the product strategy.
Achieving meaningful differentiation requires prioritisation, and this is where Posture is critical. Posture sets out where you plan to lead the market, and where you believe achieving market parity will be sufficient in the eyes of your customers. This is important from two perspectives. Seeking to lead the market within every opportunity area or on every product dimension is generally unrealistic from a resourcing perspective. It can also dilute your marketable claims. To successfully differentiate, it is better to be extremely clear about where you are going to be the best, rather than trying to be good at everything. As Seth Godin says, “Don't try to make a product for everybody, because that is a product for nobody.”
While the product strategy will be driven from the product function, delivering on the strategy will require cross organisational alignment. This can be achieved by first agreeing on the vision, followed by the definition of the product opportunity areas and how they link to the wider corporate strategy. Next comes socialisation and alignment. First socialise the vision with the business, then deep dive to understand the impact on existing platform and channel strategies. At this point it is important to align the channel, digital and IT strategies.
Working hard to create cross-functional alignment will then give you a solid foundation to plan and execute. It is useful to plan out across three horizons for communication purposes, but in-year activities should be the primary focus as they will drive action. Therefore, translating horizon two and three activities into specific in-year activities is critical by defining specific initiatives to deliver on the vision.
At IE many of us have worked inside large corporates and we have seen how outsourced strategy development can contribute to lacklustre alignment and eventual execution. Our strategy development process prioritises co-creation and stakeholder involvement. We not only bring a fresh perspective and a proven framework; we also want to ensure that your strategy is owned by you, embraced by your organisation and implemented successfully.