Everyone has an idea for the next killer product. How many times have you seen an app or even a new physical product and thought “of course, that’s how I was going to build it!” All products start out as someone’s idea—maybe your idea. A great idea may be enough to inspire a product, but the idea itself is not a business. A great idea may be tied to a horrible financial model, or to an uneconomic market. What happens if you don’t realize your mistake until after it is built and launched? If you wrote a stellar product strategy to support your great idea, you don’t have to worry about that.
The question is how to create that strategy. Great products are simply the monetization vehicle of a successful business. A successful business gets paid money by customers to solve a problem at a rate that covers all its costs and provides profits.
Launching a new product and building a great business are related but are not the same thing. Product strategy done well is really about building a sustainable and profitable business around a product, not building a product and hoping you can turn it into a business someday. It’s really about theft. Let me explain.
Product Strategy Is Really a Game of Theft
Product strategy is really about building a business around an idea. All product strategy should start with theft, not with a list of nice features or a high fidelity mockup of a stunning product that nobody will ever purchase.
Our inclination as product-people is always to focus 90% of our time designing the ultimate product and possibly the remainder looking for a way to sell it. Or even better, we leave sales or marketing to figure out how to get people to spend money to buy our fancy new gadget. (After all, it’s gorgeous, priced well, and has all these features.)
Here’s how to step it up and build the strategy that will lead your team to win the game.
Step 1: Find Out Where You Can Steal Money
The first step in any good product strategy should focus on piracy. You need to determine whose revenue you are going to steal. There are very few problems in life that businesses and consumers are not already spending money on solving. Take a look at what options you have in the marketplace right now that can satisfy the exact same needs that your idea will address. (trust me, your idea is not so unique that nobody is selling something that solves the same problem—you just have to look around.)
Make a list of every possible solution that satisfies the same need that you are trying to address at every price point. Some solutions will be cheap, maybe even free. There are also expensive ways to solve your problem.
If your idea is to become a successful business, it must take those resources from something that already exists. Knowing exactly where those dollars are going and what they are being spent on is the only reliable way to determine the potential business viability of your idea. Or for you product purists, to find that elusive “product-market fit” which is just a fancy way of saying: we found out where we can steal money.
Step 2: Prioritize Your Heist
Once you have a list of all the options you can think of and all the possible price points, you have to prioritize which of those solutions your product will steal revenue from. I’m dead serious. Your product must be able to siphon money away from all—or most—of the competing choices with as little effort as possible if you hope to be profitable.
If it costs you $1.50 to steal $0.75 of revenue from your market, that is not going to be successful. Unless of course, your goal is to take investors’ money without considering how likely it is that you will be able to return it.
Blueprint of A Successful Heist
Take Uber for example. They started with a great idea: take unused capacity (black car services which spend 90% of their time idle) and allow the owners/operators to monetize that excess capacity. You may think that their revenue was created and that the fact that the service didn’t exist before means that somehow they fabricated their revenue. The truth is it came at the expense of taxi services, shuttles, and other forms of transportation. They figured out how to steal those revenue streams by offering features that consumers valued more than the other forms of transportation they were used to using.
Recently, I arrived at an airport and needed a ride to my hotel. I stood outside by a curb for over 20 minutes waiting for my second uber driver to arrive (the first one couldn’t find me.) During that time, I noticed a few taxis carrying passengers to their destinations and more Uber and Lyft drivers than there were travellers. I had at least two people in unmarked vans stop and ask me if I needed a ride. But there I sat, waiting for Edward—my Uber driver. It wasn’t the price that kept me waiting: I paid more for my Uber than any other option. It wasn’t the time, either, as it took five times longer to ultimately connect with Edward. Lastly, it wasn’t the brand: I simultaneously tried to book Lyft.
The reason Uber captured my money that day was because they prioritized three features I valued:
- Edward had exactly the car I wanted for the trip (I had a ton of luggage but wanted a nice ride).
- I never carry cash and I knew that payment wouldn’t be awkward.
- And finally, the app gave me the illusion of control over the whole process.
There were plenty of other options at different price points, but it was the combination of those three elements that kept me waiting by the curb (with my wife completely annoyed) so that I could get everything I wanted. They were able to steal money from the taxi companies, the vanpools, and the creepy guy with an unmarked kidnapper van because they had more reasons for me to spend my money with them than with the competition.
Uber knew exactly where their money was going to come from and they prioritized all of their resources to capturing as much of it as possible. Don’t believe me? Ask a taxi driver in NYC how much his/her medallion is worth today vs. what they paid to acquire it before ridesharing was a thing.
Step 3: Overwhelm the Security System
Businesses and industries that are profitable generally have some security systems in place to keep you from stealing their money. The reigning business on the market may have a substandard product, but they will have created barriers to entry that reduce the likelihood of someone with a new idea taking their customers.
Additionally, customers’ own behavior can be a deterrent to new products. You have to overcome built-in biases and patterns of consumption that are ingrained in their everyday lives. If that’s not enough to keep a new product at bay, the existing solution provider may have created regulatory hurdles to keep innovative solutions from catching fire, all to maintain the status quo.
To breach these and other security mechanisms, your product strategy must have a minimum of three undeniable reasons why the majority of consumers you want to steal would gladly spend money with you vs. the other guys.
To return to our heist example, Uber gives you choice, control (predictability), and frictionless payment, just to name a few. None of the other transportation options can match all of their features, which is why other forms of transportation are shrinking and services like Uber are stealing their revenue. They figured out how to overcome all of the various security measures that were constructed to keep them from taking away money that was flowing to existing businesses. Your product strategy must consider each of the barriers you will face and have an answer that will compel consumers to alter their behavior.
If your product doesn’t have at least three credible reasons for people to spend money with you instead of what already exists, you’re wasting your time. Find another idea and repeat the process. If your service is cheaper than the other guy, that will capture some of the revenue available some of the time. If your product saves time, that may also be compelling for still more of the consumers. But you had better have a third reason (or more) that makes not using your product seem ridiculous to consumers. That’s the way to build a serious business.
Step 4: Start with Petty Theft
If you are planning a large graft, your first job is to become adept at taking something small. In your prioritized list of marks, find the most vulnerable and execute your initial caper. Just like a good burglar, your first set of tools and methods may be crude, but if you have strategized well up to this point, the only way to grow is to start testing your delivery.
The market will tell you if you’re on the right track in executing your petty theft: you should be able to do so profitably. It shouldn’t take an excessive amount of convincing to get your customer to fork over their hard-earned dough. Look for early market signals and barriers that you may not have uncovered when you were strategizing in your underground lair. No amount of theorizing can prepare you for all of the obstacles you will encounter when you ask someone to spend money on your fancy new widget.
Evaluate how much effort it took to convince your customer to spend their money with you. Was it like taking candy from a baby, or more like wrestling a bone away from a hungry rottweiler? If you are honest with yourself, your first few jobs will teach you how much harder you will have to work to pull off the big job. Consumers will surprise you. The three undeniable reasons for buying your product may turn out not to be as compelling as your product vision suggested. Learn as much as you can about why people do and do not want to buy your product: we call this feedback. Take what you learn and incorporate it into your next attempt.
Step 5: Assemble Your Crew
All good heists involve multiple people with different specialties. Your product strategy crew should include the following skillsets:
- Product Management
If you don’t have these skills or enough people on your team to fill each role individually, or in other words if you work at a startup, congratulations: it’s going to have to be you! But seriously, you need to view your strategic plan through all of the above lenses. Each discipline has a perspective that will address specific barriers to overcome.
How to Build Your Crew
Take a look at what you have learned thus far. Which barriers are the most formidable and what type of person, ally, insider, or confederate will it take to overcome these impediments? Can you partner with another provider to gain access to your targets faster, cheaper, more efficiently?
It is unlikely you will have all of the tools you need at the beginning. A good crew is comprised of members that are experts at overcoming individual barriers. The combination of their skillsets, when well marshalled, will address the missing components to pulling your next job.
If you have been able to accomplish some petty theft, it’s time for bigger jobs. Assemble your crew and set your sights on something larger. Adding people (or costs) means that you will have to take down larger scores.
There is no honor among thieves and if as a group you do not produce enough success to sustain everyone, they will jump ship—or worse, stay on your crew and give only minimal effort. This is how you get caught, or in business terms, how you waste a bunch of capital on a sub-optimal business. Each additional crew member should allow you to boost your productivity by 3x their cost. That’s how you run an efficient business and also how you know if your product is viable.
Step 6: Take Down the Big Score
At this point, you’ve found your market, overcome most of the barriers, assembled a crew of talented pickpockets, and made some stake money. It’s time to plan the big one.
Your big score can come from many sources. A single enterprise client, or thousands of small businesses, may offer you enough revenue opportunities to feed your entire team. Your product strategy must evolve as you move through the lifecycle. The features, messaging, positioning, pricing, etc. may evolve over time as you further develop experience in your market. Most good strategies develop as more information is gathered and the picture becomes clearer.
Your roadmap will evolve as well to focus on the segments of your business that are the most important—that drive profitable growth. Knowing which features to drop and what to say no to becomes even more important as you scale your business to keep costs from eroding your margins.
Good product strategy matures to prevent theft of your revenue and the cycle repeats.
If you need a bit of help putting the steps of your successful strategy into action, get some support! Whether you’re new to product management, hunting for your first role, or are a product veteran looking to hone your craft, we’d love to help. Schedule a free career coaching session with our team of in-house experts to talk over the finer points of strategy.