This is a guest post written by Tom West, Co-founder and CEO at HyperHQ. Hyper is a team of people who’ve all built extraordinary technology businesses. Tom shares his knowledge of crossing the gap between idea to live product.
Any good story has a destination, and a plot direction of where it’s heading that keeps you gripped and reading for more than just the first chapter. The same goes for a product strategy. It tells a story of where the product will end up and paints a picture of your final vision for your creation. A good product strategy is essential to determine the direction and allocation of your product efforts. It’s a strategic vision of what you’re going to do to get your dream from A to B.
A product strategy will draw on three elements. They’re easy to flesh out if you ask yourself these questions:
- What am I selling?
- Whom am I selling to?
- How do I know I can sell it successfully?
In a more formal sense, you need to identify your product and your market, and then set product metrics initialised as goals for you and your team. As a startup innovator, time is money, and lack thereof constitutes short-term failure. Instead of months of market research and analytics, use the simple approach of stating your ideas and your vision behind it and present your primary strategy. Identify your risks and address them as you morph and change your strategy to withstand or avoid these risks as you refine your product strategy.
Defining Your Target Customer
Sometimes, creating a product that appeals to everyone – like Facebook or YouTube can seem like you’ve struck a goldmine, however in the post Technological gold rush era where all the crazy giant successful ideas have run dry, trying to appeal to absolutely everyone just isn’t effective anymore.
You need to clearly identify a niche of users you want to appeal to or a specific slew of people that you’re solving a problem for.
The Components of Product Strategy
1. Who is Your Customer?
Often, when founders begin their process of defining their product strategy, they start with a vague or overly ambitious target audience and serve multiple customer segments. Ideally, your product would suit the needs of every customer, but it’s more likely that your solution will serve the needs of one or a few types of customers. Ultimately, the value lies in understanding a customers’ needs and delivering the best product to suit those needs. When conducting market research, your ‘home base’ or repeating reference point should be your customer’s needs – this is before you set a long-term product strategy. Keep your product strategy open to adjustment as you get feedback from users.
Most ‘original’ ideas have several similar ideas already flourishing in the market. It is inevitable that you will have at least one competitor, either direct or similar. The product strategy describes how you position your product to your customers, given the other products and services on the market.
Within this product strategy, including a point of difference or a niche within the market that you plan to corner gives you an advantage and that you’re mitigating risk.
Any company that intends to make some kind of money needs to describe how they plan to achieve this through their product – this is a key part of product strategy. Money keeps the lights on!
Whether your service is free (you plan to charge for advertising space), or you’re selling a subscription-based product, it’s essential to define your business model, so that your team and potential investors understand how the product facilitates.
4. Macro Environment
The macro-environment describes the economic, technological, political, and cultural forces that affect your market and your product over time. Your product strategy should account for the below factors as appropriate:
- Emerging markets where your product may have demand.
- Emerging technologies that may impact your customers.
- Economic forces that may impact your customers’ budgets or needs.
- Evolving customer needs and behaviours.
Key Performance Indicators (KPIs)
A major benefit of ensuring you have a thorough and extensive product strategy is the mindset it gives you. Being able to concisely and effectively summarise your vision and goals for the future enables you to logically work through other elements of your entrepreneurial journey. A sort of strategy within product strategy is a KPI. For your own knowledge and as an integral element of your pitch, it’s important to have a grip on how you plan to measure success once you start developing your product and deploying it for demonstration.
KPIs are metrics that help you gauge if your product strategy is working. Without KPIs you’ll only be estimating how you perceive the success of your product; similarly, if you choose the wrong KPIs, you still won’t be able to quantify your success in an effective way.
Here are a few guidelines on picking KPIs that’ll help you measure and relay your product strategy progression.
Avoid Shallow/Vanity Metrics
Avoid metrics that make your product look great on just the exterior. Obviously, you want your metrics to demonstrate an excellent performing product strategy, however, avoid ‘vanity metrics’ – these are KPIs that make your product look great but bring no tangible value to your product strategy. For instance, don’t just measure how many people download your app, measure how many people uninstall the app, the in-app usage or the in-app purchases.
Use Ratios and Ranges
Rather than using stringent and awfully specific and static figures – for example, ‘our prospective revenue is $X in the prospective financial year’, use ranges and ratios that give an informed estimation of your metrics, it’s far more useful to measure progress against – for example, stating that your ‘prospective revenue in the upcoming financial year is 5-10% higher than last year’.
Don’t Measure Just Because You Can
It’s tempting to just to analyse everything possible about your product, throw it all in an analyser tool and trust the results. Instead, be selective of the metrics you’d like to employ based on your goals. This will make your feedback more succinct and targeted instead of wasting time and energy into analysing every single bit of data you’ve extracted.
Use Qualitative and Quantitative KPIs
To get the full picture of the outcome of your product strategy, it’s important to measure both qualitative and quantitative KPIs; it’s key to not focus on just one category exclusively. Whilst user engagement and customer feedback may be great, your revenue may be dismal and has to be addressed. A strong mix of both metrics helps you build an impenetrable pitch to investors and stakeholders.
Use Prospective KPIs and Don’t Focus on the Past
Metrics of profit, loss and revenue are measurements of the past and don’t give much prospective indication of success. Employing lagging or leading indicators of future ambitions or goals in conjunction with retrospective analyses like revenue help you gauge where you’re going in comparison to how well you’ve previously done.
Product strategy is the concentrated version of the grand dream you contemplate over in the future. It’s important to understand your product, target customer and the metrics by which you’ll measure success. Present something clean and direct to potential investors or stakeholders that shows you have a solid understanding of your background and future ambitions!