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Is your product market strategy value-enabling or value-limiting?
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Formulating and implementing product market strategy
Given its central impact, formulating and implementing an optimal product market strategy is a top priority for innovation-driven companies. But as noted above, this is a difficult challenge for many. So how should you go about it?
Through extensive experience with dozens of companies over the past six years, we have evolved the following simple but powerful approach:
1. Define the urgency of reviewing your product market strategy, and the specific issues to address.
- Determine the urgency to review either your overall product market strategy, or selected product markets.
- Begin by working with your management team to identify the set of key issues your business is facing, and which of them can be traced back to questionable product or market strategy decisions.
- Using this as input, define the specific product market issues to be addressed. Use the generic portfolio and product market lists above as a starting point.
2. Form a cross-functional product market strategy team.
- Form a team with representatives from engineering, product management, operations, marketing and sales.
- Conduct a kick-off workshop to work through the issues. Identify “low hanging fruit” - immediate decisions you can make. Identify areas where additional input is required.
- Schedule regular sessions, perhaps every two weeks, for the product market strategy team to meet. Drive all product market strategy discussions to this working group.
3. Conduct internal and external analysis to enable fact-based discussion and decision making. Examples might include the following:
- Understand your product market economics: develop a product market matrix, showing past, current and future market size, market share, revenue and margin for each product market combination.
- Evaluate your market options. Assess key elements of market attractiveness (depth of felt need, size, growth, competitive intensity, etc.) versus your core capabilities. Use the analysis to prioritize your target markets.
- Conduct customer research, to truly understand both core and buying customer needs. Learn what is really important to your customers – what actually leads to a purchase decision.
- Understand your competitors in detail, specifically your competitors’ offerings, and how well they meet customer needs versus your own.
- Summarize your current product and service offerings in terms of key benefits and positioning. Compare your offerings with customer needs and competitive offerings. Identify areas to address.
- Explore a range of pricing options. Consider the impact of upfront payment versus an annuity model. Look at some of the recently identified “free pricing” models. Evaluate impact in terms of customer acceptance and your company’s economics.
4. Based on the above analyses, identify and evaluate product market options, and select the new strategies:
- Summarize and synthesize your analyses into a limited set of robust, internally consistent options for both individual product markets, as well as for your total portfolio of products and markets.
- Define your evaluation criteria, such as short term impact, long term potential, fit with core capabilities, and evaluate each option against these criteria.
- Look for ways to harmonize and reduce the number of options, for example through timing (we’ll do this now and that later), or through fitting the options into an overarching framework (these three product options could all be modules of one solution running on a common platform).
- Make final selections of market focus and product direction.
4. Develop an implementation plan, and track and regularly review progress:
- Translate the new strategies into functional action plans: what are the implications for engineering, operations, marketing, sales and service? Define specific tasks, responsibilities and timelines.
- Establish metrics to add to your normal operational metrics so you can track implementation of the new strategies.
- Review progress frequently, and discuss implementation issues in the cross-functional product market strategy team.
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Surprisingly, despite its central importance, many companies struggle with the question of “which products should we offer to which markets?” Don’t let this deter you. Time and again, we have seen those companies who recognize and have the courage to resolve their core product or market problems experience a tangible unleashing of energy, productivity and success. The result? A transformation in your company’s ability to achieve its growth and valuation goals.
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About the Authors
Michael Lurie is the CEO and founder of the Agile Strategy Institute, a research, education and consulting organization, and the creator of its original core body of knowledge. He is also the founder of the Agile Strategy Alliance, a non-profit professional association for executives, board members and advisors interested in learning and practicing agile strategy.
Additional Reading
Ansoff, H. Igor. Strategic Management.
Originally published in 1965, this classic book is one of the introductory texts in the field of strategic management. Ansoff also created the Product-Market Growth Matrix – a way to approach growth through existing or new products and existing or new markets.
Urbany, Joel E. and James H. Davis. “Strategic Insight in Three Circles”. Harvard Business Review, November 2007. (Subscription Required)
An insightful piece that uses a Venn diagram of your company’s offerings, your competitor’s offerings, and your customers’ (market) needs to explain how a competitive advantage can be built and sustained as it relates to product market strategy.
D’Aveni, Richard. “Mapping Your Competitive Position”. Harvard Business Review, November 2007. (Subscription Required)
This article introduces the concept of a Competitive Positioning Map, which plots price and primary benefit of competing solutions over time within a defined market. This tool can be used to formulate strategies by benchmarking against rivals, dissecting competitors’ strategies, and forecasting a market’s future.