Business Strategy vs. Product Strategy

In keeping with my recent theme of product planning, I'd like to focus in this article on an

important distinction and source of frustration in many companies, and that has to do with the

differences between business strategy and product strategy.

Many companies confuse or blur the two, and the result is easy to spot. The senior executives

want to focus on the business strategy, but they find they are forced to make decisions at a level

far below where they're comfortable or usually even interested, such as which specific products,

projects and even features to invest in, and what the interdependencies are between these features

and projects, and often what is on the actual page and how to resolve conflicts.

And on the other side, the product managers feel like they don't understand the reasons behind

decisions that directly impact their products, they feel like the strategy is guard-railing every few

months, and they don't feel empowered to do their jobs.

Very often I'll attend a product planning session with senior executives and they're being

presented with lots of detailed product plans but without the business context. When I ask where

the business strategy is, I'll often get a blank look. The team wants to make more money so these

are the features they want to add, or so their reasoning goes.

Business strategy is about identifying your business objectives and deciding where to invest to

best achieve those objectives. For example, moving from a direct sales model (your own sales

force selling directly to customers) to an online sales model (your customers buy from your site)

is a business strategy. Deciding whether to charge for your services with subscriptions or

transactions fees or whether you have an advertising-based revenue model is a business strategy.

Deciding to move into an adjacent market is a business strategy.

Now, clearly there are some big product implications to each of these business strategies. But

they are not one in the same. There are lots of ways to sell online, lots of ways to monetize value,

and lots of ways to develop or acquire and integrate an adjacent offering. The product strategy

speaks to how you hope to deliver on the business strategy.

Moreover, while the business may believe something is a great business opportunity, you don't

yet know if your company can successfully deliver on this opportunity. Maybe it will cost too

much to build. Maybe customers won't value it enough to pay for it. Maybe it'll be too

complicated for users to deal with. This is where product strategy and especially product

discovery come into play.

The business maintains a portfolio of investments, and the business can and should adjust that

portfolio mix as businesses and markets develop.

Take as an example Amazon. They've got a portfolio of investments including their core e-

commerce offerings by category, they've got third-party selling, they've got an infrastructure

technology (cloud computing) business, and they've even got their own growing consumer

electronics business (love that Kindle 2). I especially like Amazon as an example because they

illustrate so many points of good business strategies (and good product strategies).

Amazon may have made their business in selling hardcopy books and they've been a great

innovator there, but instead of spending all their time trying to protect that business, they've also

got an investment that could one day revolutionize that entire business. To Amazon's credit, they

realize that if they don't pursue this someone else probably will. Similarly, they have worked

hard to create innovative technologies to allow them to provide a differentiated e-commerce

customer experience, yet they also have been leaders in making that technology available to

others (Amazon Web Services) because it's possible that cloud computing business will one day

be even

larger than what they can ever do themselves as an online retailer.

That's a business strategy and you can see their portfolio planning. Now each of these businesses

has one or more product strategies. As an Amazon user you can see the evolution of the e-

commerce retailing business. You can also see the evolution of the Amazon Web Services

product line; every few months another piece of the puzzle is launched. You can see the

evolution of the electronic reader and the supporting technologies.

Think of it this way. The business strategy and business portfolio planning provides a budget and

a set of business metrics. The product organization then lives within that budget to pursue as

aggressively as possible the best ways to hit those business metrics.

Some product strategies will prove more successful than others, and this will impact the business

portfolio planning. And not every business of course will resonate with customers, so a big part

of business strategy is knowing when to continue to invest and knowing when to cut your losses

so that you can invest elsewhere.

Two key techniques to help with these investment decisions are Opportunity

Assessments (see http://www.svpg.com/blog/files/assessing_product_opportunities.html) and

Product Discovery (seehttp://www.svpg.com/blog/files/product-discovery.html). What's most

important however is to make sure you're asking the right questions and making the hard

decisions (see http://www.svpg.com/blog/files/seven-deadly-sins-of-product-planning.html).

So business owners and senior executives are responsible for the business strategy and the

business portfolio planning, and the product organization (especially the directors of product

management) are responsible for the product strategy and the product portfolio planning. Keep

these two concepts straight and I think you'll find that you will have more clarity and

understanding in terms of objectives and responsibilities, as well as better managed business and

product portfolios.