In the level of Product Manager when we talk about strategy we don’t mean only strategy about the product that we manage, but the strategy of alignment with the overall company objectives and goals.
But what is the definition of strategy to start off with?
“High level plan to achieve one or more goals under conditions of uncertainty”
As we can see from the definition, if we break down the element of strategy we can see that uncertainty is a central element and when there is uncertainty it means we don’t have unlimited resources, so we should always do trade-offs with opportunities and objectives. To do these trade-offs you need excellent negotiation and convincing skills, or otherwise storytelling skills.
One of the most influential talks about this is the “focus on why” from Simon Sinek.
Regarding the alignment part, the Product Manager doesn’t decide the company strategies, on the contrary, he has to live and align with these existing strategies of the company. At his best, he can influence the company strategies but it is on the product level which he manages. To do that a Product Manager should align the vision and mission of the company. The way the vision is decided isat a strategic level and is difficult for the PM to change, but for sure he has a say in the mission which is the path he has to follow to achieve the vision.
Characteristics of a good strategy
A good strategy should be measurable. This can be done with tangible and intangible metrics. Have OKRs, KPIs. An example of an intangible metric is to define new cultural values for our employees to be more close to the product we build. This can be achieved by Objectives and key results (OKR) and key performance indicaors (KPI’s)
The secret to a good strategy – use the proper tools
There is not any recipe for the perfect strategy, but actually, the success of it lies in constantly checking if your current strategy is valid. The business environment is rapidly changing and keeping abreast with the changes is a way to control the outcomes. In the agile spirit, strategies are developed iteratively. Usually, we start with where we are currently and then formulate the strategy. For that you can use the tools below:
The acronyms of PESTEL are:
P – political
E – Economic
S – Social
T – technological
E – Environmental
L – Legal
An example is when we scale our products to a new region. We check how our new product will be impacted by the political, economical, social technological, environmental, and legal environment of the region that our product is being launched.
Porter’s 5 Forces
Porter’s 5 forces tool is usually used when we check the competition in the region. And is comprised of the below 5 forces:
- Bargaining power of your customers – an example is when you don’t have a lot of customers – their bargaining power is high
- The threat of substitutes – this is a real thread for you and your competitors actually, and it today’s world way much more.
- The threat of New Entrants – this happens a lot with the new startups when they find that some other company is profitable. How many such start ups is the country potential to accommodate.
- Bargaining Power of Suppliers – if we have one exclusive supplier then we have issues if they rise their prices.
Porter’s Generic Strategies
In Porter’s generic strategies every company is choosing the target of the market, they are able to compete. Companies can choose their strategy according to this matrix. To understand it let’s use some example: Revolut is focused on a broad target of customers and cost leadership, they say that they don’t take commission. On the other side, Instagram is focusing on Differentiation and Broad target, as the app is unique. Tinder app is focusing on narrow target and niche which is singles etc.
The next tool for analyzing the current situation is the SWOT analysis which is a pretty popular tool. You should always combine the SWOT analysis for your company and at the same time do it for the competitors.
The next tool is mostly used to predict future growth opportunities and is called Ansoff growth Matrix:
As we can see the safest area to create our strategy is the first square which is called Market penetration, which means to compete with your products in an existing market, This is the maximize phase of our products when our products are more mature and we try to sell more products to our existing markets. In this phase, you can achieve this by aggressive movements like Convert competitor customers to yours, gain new customers, encourage existing customers to buy more, secure dominance of growth markets, drive out or buy up competitors, which is market penetration,
In the second square, we can see Product development which means that the company creates new products and sell it to an existing market which is the product development square which has medium risk.
More risky is the second level where we enter new markets with existing products. This is hard because although you have a successful product established in a market, you never know how it will work in a new market. For this, you will need a new segmentation strategy and new positioning.What you need to do is being agile to adapt to the new market.
And lastly, the riskiest is to create new products in a new market. This is called diversification and it is usually the riskiest that’s why it is called the suicide cell and in this cell, companies can use diversification strategies. There are 4 combinations and the successful diversification entails managing well risks – horizontal diversification means when we have new products launched for adjustment markets like launching Amazon.in for India market, vertical diversification when moving into value chain or customer’s business when Amazon (An American company) sells Indian services in India, concentric diversification when we have a new product closely related when Amazon is building data warehouses in India, and conglomerate diversification when we have an entirely new product to a new market, like when Amazon is building clothes shops in India.