The Critical Role of Product Strategy When Money Is Scarce (Part 1 — Seed)
A good product strategy is something every company needs. When VCs and customers aren’t throwing money at whatever you tell them, it becomes a critical tool. Here is how a product strategy can help you create business results, even when the market is not in your favor.
Last week I had a pleasant surprise. I sat with an entrepreneur who was helping me with market research for the work I do with startup founders and explained to him what I do. Part of the research is for fine-tuning how I explain the value as well as the service itself to founders and investors. I recently realized that for founders, I might need to refrain from using the word ‘product’ since they then think about the deliverable while my coaching tackles much more than that. So my recent pitch went something like “I help founders connect the product to the business and the go-to-market.”
This phrasing was better than the ‘product consulting’ that I started with but still not quite there. While most people still don’t get what I do exactly (it’s not like I’m selling shampoo that everyone immediately understands what it is), it at least intrigues them to ask more questions. In a way, the fact that it’s unclear is much better than a very clear statement that people understand the wrong way (like ‘product consulting’).
Imagine my surprise when this guy I was sitting with (we met in the real world, over coffee, in a place with other people!) heard my explanation and immediately said — ‘oh, you are doing product strategy’. He was 100% right, but it was the first time that anyone had ever said it to me without me mentioning it first. If I found ‘product consulting’ to be confusing, ‘product strategy consulting’ or ‘product strategy coaching’ made people simply nod and move on. Product strategy is such a vague term for most people. Even extremely experienced product leaders and CEOs might not have witnessed a good product strategy firsthand, since it’s so complicated to build that many companies give it up altogether. So when I talk about product strategy with founders it feels like it’s not something they care about. I am guessing that it’s because they don’t fully understand what it is and how it can help them. As one of the CEOs I worked with told me “I had no idea what we were getting into and the amazing impact it would have on the company”.
This CEO, by the way, approached me when they couldn’t sell the product successfully. They tried multiple pivots but kept moving in circles without any real results. It was only when we created a solid product strategy, that things started to change.
When product strategy is done right it becomes one of the most important tools a company has — both for getting to the results you want and for the company’s everyday conduct. In this series of articles, I’m explaining how it helps companies at various stages since its role changes along the way even if the practice doesn’t.
Which phase is your company at? Do you see the gaps I’m talking about? Leave a comment or share with me in person, I’m happy to hear your thoughts and challenges.
What Is Product Strategy?
Since product strategy is such a vague term, I thought it would make sense to clarify what it means first. But one of the reasons that it’s so unclear is that the term ‘strategy’ itself is often misused. Have you ever read a strategy document or got someone to present to you the strategy and couldn’t figure out what they wanted to say? You are not alone.
Many people confuse strategy with a general direction or vision. However, the definition of strategy is a high-level plan to achieve one or more goals under conditions of uncertainty. It’s a plan. A high-level one, but still a plan that explains how you are going to meet your goals. It means that decisions need to be made about why the chosen plan is better than others.
That’s where the uncertainty part comes into play — you often need to choose between a number of alternatives that you cannot tell for sure where they will take you or if they will succeed. But you still need to choose. It’s hard enough to succeed with one path (even if it’s the correct one), you can’t really succeed by going in all directions at the same time.
A good strategy explains where you are trying to be, how you are planning to get there, and why these are the right goals and plans. As you can imagine, the process refines each of these components until you feel it all makes sense. Sometimes, it’s only when you define the plan that you realize the goals weren’t right or accurately defined, or when you try to find the explanation you realize there are things you don’t know that might change the plan.
Going through these iterations is what I do when I work with founders personally or through the new product-market fit masterclass. If you find it interesting feel free to reach out.
That’s about strategy in general. Product strategy is a special kind of strategy. Unlike what most people think, the product strategy isn’t the strategy of the product department. It’s not even the strategy of the product.
Product Strategy is a high-level plan explaining how the company is going to achieve its business goals by making certain strategic choices about the product, the market, and the brand.
If you feel it touches marketing and sales, you are right. In a company that sells products (and not services or custom projects), the product strategy needs to address not only which product to build but also who are you going to sell to, and why would they buy from you. The goal of the product strategy is to help the company navigate to business success with the product(s), not just building good stuff.
Product Strategy at Seed Stage
Responsibility: Founders
Goal: Find (initial) product-market fit
Finding product-market fit is a journey (hence the name of my guide “Speed-Up the Journey to Product-Market Fit”). This journey includes a lot of trial and error, by definition. But it doesn’t mean that this trial and error needs to be done blindly.
In the seed stage, startups are a great promise. They found something that seemed to interest people and presented the technical capabilities to solve that problem. Note that this might vary depending on the vertical and the business model (for example a bootstrap company would go further before raising money if at all, and a biotech startup might need to get FDA approval and go through several rounds of clinical trials before it can start selling), and also depending on the market conditions (in 2021 seed could mean that you are only starting). But most startups I talk to at the seed stage are somewhere there: they went through enough market research and talked to enough people about their idea to learn that it’s interesting and could be of value. They demonstrated the technology and core principles and are about to start working with a few design partners.
But now a big question arises: what is the actual product that we are about to sell? Our technology is so powerful, it can do many things, what is the best product to build with it?
I witnessed it firsthand at Twiggle. I was employee #13. I joined them as the VP of Product at that exact stage, days after the seed round, when the founders were talking to potential customers who loved the idea and wanted to start working with us. But we didn’t have a product at hand, only an extremely powerful e-commerce search technology.
The product the founders had in mind was naturally a smart e-commerce search engine. There were two problems with it: first, an e-commerce search engine needs to account for so much more than great results (which is what Twiggle’s technology did phenomenally well): It needed to consider the availability of products, discounts, and paid promotions. It needed to recommend related products, and it needed to run extremely fast as this has a direct impact on revenue. We didn’t have all of that, but that wasn’t even the major issue.
The bigger problem with the idea of a search engine as the product was that our customers wouldn’t want that. While they understood the importance of search (Alibaba who was one of our investors had at the time over 1,000 engineers and data scientists working on its search engine), they didn’t want to replace it with a technology coming from a startup or even a mature company. The trend that we saw in the market was that these potential customers were all in the process of removing their 3rd party search engines in favor of ones they built in-house based on open-source solutions like Solr and Elastic. It wasn’t just for the quick technology to build on top of, they wanted control. Suggesting that they take a 3rd party product as an end-to-end solution simply couldn’t work. It wasn’t what the market needed, and therefore couldn’t lead to any real sales, even if the market conditions were great and people were throwing money at whatever they saw.
Instead, I suggested that Twiggle’s product would be an API that comes on top of your in-house search engine and helps you improve your results. When people heard this unique approach they were thrilled and wanted to move forward.
It’s important to note that we could have learned that this is not what people are looking for with blind trial and error. We could have tried to sell a search engine, develop it, add features that are obviously missing, and then pivot when we see no results. But looking at what we already knew at this point allowed us to dismiss a route that had no potential from the get-go, and allowed us to get results and raise more money
Deep understanding of our customers on the one hand and our business and technology on the other are at the heart of a product strategy. This is how you can make sure all the dots are connected, in a way that makes sense.
It also entails specific strategic choices. Everything I wrote above makes sense for relatively large e-commerce companies. Smaller ones might want an end-to-end search solution since they don’t have the expertise to build their own search in-house. We could have gone that route, but we chose not to, not only for business reasons and ACV but also since the smaller the shop is the less complex is their ability to deliver great search results. If you only sell shirts, for example, your search engine won’t show laptop sleeves whenever someone searches for a shirt with long sleeves.
A product strategy at this stage helps you connect the dots between what the market needs and the product that you are building so that you build the right product, and more importantly — understand exactly why this is the right product, what assumptions you were making, and why it all makes sense.
Honestly, that’s what it does at other stages too, but then other roles are added on top of it. I’ll talk about the later stages next week, so stay tuned.
Our free e-book “ Speed-Up the Journey to Product-Market Fit” — an executive’s guide to strategic product management is waiting for you at www.infinify.com/ebook
Originally published at https://infinify.com on October 4, 2023.
