Let’s start by picture this: you're a skilled chef with a dream of creating the most exquisite chocolate cake ever tasted. You have a clear vision, a dedicated team of talented sous-chefs, and a pantry stocked with the finest ingredients. It seems like you're well on your way to achieving your goal, doesn't it? Now, let's take a twist in the tale. Imagine that your sous-chefs are not aware of your objective, and your pantry is stocked with nothing but lemons. Do you still believe your dream cake will come to life?
Like in real life, we encounter the same challenge when working on digital products. There is a common misunderstanding that product strategy and business strategy are synonymous. Yet, they are not. To create great products and share a clear vision, product professionals must understand important distinctions and how they work together.
👀 Business Strategy vs. Product Strategy: The Key Differences
To differentiate between these two essential components, let's think of business strategy as the grand blueprint for the entire organization. Product strategy is then the meticulous plan focused on the individual product and how it fits into the company's larger vision.
Business Strategy: The Grand Blueprint
Business strategy is the main force behind big investment decisions. This decides if a new product is worth pursuing and how to allocate resources to current products. It is important because it helps product decision-makers (like you) make informed choices about the product.
With a business strategy defined, you should be able to understand details such as: How will the company be financed? And what are the plans for selling? Will it occur through an in-house sales team, or will it be created as a self-serve purchasing process? Will the business build a corporate brand or brand each product individually?
In essence, the business strategy is the path a company plans to follow. This will unlock growth, delivering value to customers, employees, and shareholders.
Product Strategy: The Path to Product Success
On the other hand, product strategy focuses on the details of how the product will be successful and achieve the goals set in the Business Strategy. It's the roadmap that identifies the steps to take, the features to develop, and the target audience to engage.
Product strategy answers questions like: What unique value does our product offer? How does it address market needs? What low-cost high-margin levers can we pull?
Let’s take a look at their biggest differentiators:
To put it simply, while business strategy defines the "what" and "why" of a company's goals, product strategy delves into the "how" by outlining the specific actions and tactics required for a product's success.
With this, you can easily understand why it's important for any business to grasp the distinction between these two. By working on them and aligning both, companies can develop a solid competitive edge that fuels growth.
🤝 Why Business and Product Strategy Must Align
Let’s assume the Business Strategy and Product Strategy are already in place. However, simply existing is not sufficient. To experience the enchantment of a collaborative approach, they must work together. Both Business and Product must actively participate in defining each strategy.
Executives may create the business strategy without knowing the insights collected by the product fellows. The same can happen with the definition of the Product Strategy. However, if the Product People decide to define the Product Strategy without involving the business, it will create the perfect recipe for failure. Most likely, the final result will be like a cake that can't be sliced because the dough isn’t aggregated.
On the other hand, if done in partnership, it will bring lots of advantages:
- Clear Direction: to ensure everyone is working towards the same goals, alignment is crucial in an organization. It gives a clear sense of purpose and direction, which helps reduce confusion and conflicting priorities.
- Resource Allocation: when business and product strategies align, it's easier to allocate resources (budget, talent, time) in a way that greatly increases the company's chances of success.
- Consistent Messaging: alignment is an important factor that helps to maintain consistency in external communication, marketing, and branding efforts. By being consistent, the company can improve its image and reputation in the market. This makes it easier to gain the trust of customers and stakeholders.
- Efficiency and Effectiveness: when business and product strategies are aligned, teams can work together more effectively. Product development teams can concentrate on features and enhancements that align with the company's goals. This avoids doing unnecessary work on unrelated projects.
- Customer Focus: alignment enables the company to stay focused on the needs of the customers. Both the business and product strategies are built with a thorough understanding of what customers want and prefer so that relevant and valuable products and services keep being delivered.
- Competitive Advantage: a well-aligned strategy helps the company respond effectively to competitive threats and market changes. It allows for flexibility in adapting to new trends and technologies, which helps the company stay ahead of the competition.
- Measurable Progress: alignment plays a crucial role in helping establish key performance indicators (KPIs) and metrics that track progress toward the strategic goals. This makes it simpler to conduct regular performance evaluations and make any necessary adjustments to the existing strategies.
- Innovation and Growth: a cohesive strategy fosters innovation and growth. It enables the exploration of new markets, product lines, and business models that align with the overall strategic framework.
- Risk Mitigation: alignment is really important because it helps identify and deal with risks more effectively. By thinking about how the product decisions can impact the business strategy, proactive steps can be taken to address any potential issues that may arise.
- Long-Term Sustainability: in the long run, alignment is really important because it helps the company sustain itself. It makes sure that decisions about products in the short term don't harm the company's long-term success or reputation. And that brings confidence to all stakeholders involved in the company.
🗣️ The Product’s Role in Alignment
Doing a good orchestration of Business and Product strategies is pivotal. And here is where the Product role emerges as the conductor for alignment.
Your role as a Product person is to transform the business strategy into actionable product strategies. You need to be a good translator and understand business terms and complex product development.
Your first responsibility is to bridge the gap between these two realms. How? To start, make sure you understand the business strategy, including its vision, goals, and market. By guaranteeing this, you can ensure that the product strategies align with the overall business strategy. At the same time, you will enable your team to grasp the bigger picture and champion this alignment.
With awareness as your guiding light, you can now participate in the craft of Product Strategy. This involves tasks such as:
- Setting objectives. One of the primary tasks is to establish clear objectives that align with the business's goals. Having these objectives well-defined will help you concentrate on the outcomes and impact of the product rather than solely focusing on features and isolated initiatives. Additionally, clear objectives will facilitate tracking progress and performance, enabling adjustments as necessary.
- Making strategic decisions. You’ll be making pivotal decisions that determine the product's path to success. Your responsibilities include defining the unique value proposition, identifying market needs, and suggesting features, changes, and approaches that might be more efficient to get you to achieve the final goal. You must ensure that every product-related decision contributes to the realization of the business strategy.
- Fostering communication and collaboration among teams. In addition to being a decision-maker and a facilitator, you also must excel in communication and collaboration. It will allow you to open communication channels between the product and other departments (especially the executives we’ve mentioned earlier, remember?).
- Staying agile by adapting and iterating the product strategy to match changing business priorities and market conditions.
Conclusion
As product people, we have a special connection with the products we handle. It's great to have that emotional attachment, but we should always remember that products serve a purpose: they exist to bring value to both users and the business. That's why it's crucial for your product to contribute to the progress of your company and align with the overall business strategy.
Like skilled chefs, we navigate a constantly changing culinary landscape, striving to please our customers while staying true to our company's recipe for success—the business strategy. While we may not have direct control over the entire menu, it's essential to recognize that the existing recipes and guidelines set by the business strategy take priority.
After all, just like in a busy kitchen, it's the right mix of ingredients and strategies that makes a masterpiece, leaving everyone wanting more. 🍽️
