Drive Your Product Strategy with Data

Product strategy is one of the most important competencies of a company. Why are you creating and investing resources in the product? That is the question answered by your product strategy. The answer to this question is greatly determined by your market and customer requirements. The insights from this data, along with the analysis of the market and competition, competitors’ probable moves and responses to a new product, and your organization’s capabilities, are the ingredients for crafting your product strategy. Therefore, anyone involved in product strategy needs to know how to conduct and use market research. Yet, this is often one of the most difficult undertakings for many companies. Many companies don’t have the skills or resources to conduct market research, and others tend to rely on their own ideas and instincts.

And for truly innovative category-breaking products, customers may not actually be able to give you the insight you need. Users of existing products may not even realize they would be interested in an alternative. How many customers of cell phones in the mid-90s would have said they wanted data or graphic capabilities on their phones? How many PC users in the 90s would have said they wanted to be able to watch video from their computer? Using market research to evaluate a long list of features generally takes companies down the lowest common denominator path- selecting features that will affect everyone but not necessarily help you develop a truly innovative product or a product that will meet a very specific need very profitably.

How to Use Market Research to Create Your Strategy

Rather than focusing your research on actual features, focus on understanding the needs and psychology of your customers and the market. Try to understand how they live and work, what they care about, their challenges, and aspirations. Look for things that actually stand out and enable a product to serve a large enough market. Instead of using market research to create a big, expensive, complex product that will result in everything but the kitchen sink and therefore a product that must be everything to everyone, use your market research to identify opportunities to bring a product to a specific market that will result in a huge win for that segment.

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Three Steps to Shape Your Product Strategy Research

So how do you get started, especially if resources (money, time, people, skills) are limited? Take these three steps to help determine the market opportunity, shape your product strategy, and frame your market research:

1. Get A Lay of the Land: Spend a week digging through existing research, market trends, market dynamics, competitors, technology trends, market forecasts, consumer data, etc. This won’t help you create the product strategy nor validate any product hunches, but it will help you begin to see the big picture and potentially see the relationship between random pieces of information. When you complete this step, see if you can write 2-3 possible scenarios of the future based on your findings.

2. Complete a SWOT Analysis for each Scenario. Your SWOT analysis should address:

Strengths: What are the product strengths that differentiate it from the competition? What organizational strengths do we bring to the table?
Weaknesses: Where are features lacking or underdeveloped? Are there alliances or organizational weaknesses that erode market share?
Opportunities: Where can we differentiate the product? What strategies can we put in place to gain greater market share?
Threats: How could this product fail? What factors in the market or the roadmap can bring it to obsolescence or lose market share?

Use the SWOT analysis to assess the competitive landscape and to generate and assess your organization’s assets and liabilities. SWOT will not help you define the product or set product objectives, but it will help you evaluate the degree of risk and opportunity and to what degree you can achieve each scenario. When you’ve completed the SWOT analysis, determine which scenarios you can most likely successfully and competitively develop, launch, and deliver a product to the market. Shape Your Strategy. Now that you have a scenario, you can use the Five/Six Forces Model (Michael Porter) to dive deeper into the market dynamics of where you are investigating a product. Each of the forces evaluates the competitive intensity of a market. If there is intense competition, there is both strong interest from potential buyers to purchase a product and business model(s) that ensure companies make a profit to meet this demand. To refresh your memory, the forces include:

3. Check out the competition. New entrants that would compete in your space, often with new business models.End users/Buyers and their bargaining power on influencing price, integration, and concentration.Suppliers of raw materials, components, and services for your product and their bargaining power on business strategy. Substitute products and those factors that influence it (cost of product, perceived value, cost to switch, etc).Complementary products/ The government/ The public. Take into account strategic alliances and how the government or public can influence business strategy for a particular product. This step enables you to investigate whether there really is a market for a product.

After completing these three steps, you can then decide whether to invest in conducting quantitative market research. The result of these three steps will help you frame what market research you actually need. Good research takes experience and expertise.

FAQ:

(written by Penn of Sintra.ai)

Q1: Why is product strategy one of the most important competencies of a company?

A: Product strategy answers a fundamental question: Why are you creating and investing resources in the product? The answer is largely determined by market and customer requirements, informed by competitive dynamics, competitors’ probable moves and responses, and your organization’s capabilities.

Q2: What inputs are required to craft a strong product strategy?

A: The ingredients for product strategy include:

Market and customer requirements (data and insights)
Analysis of the market and competition
Competitors’ probable moves and responses
Organizational capabilities (development, production, distribution)

Q3: Why is market research essential to product strategy—and why is it difficult?

A: Anyone involved in product strategy needs to know how to conduct and use market research. Yet it is often difficult because many companies lack the skills, time, or resources to do it well, and others rely too heavily on internal ideas and instincts.

Q4: Why can customer input fall short for category-breaking innovation?

A: For truly innovative products, customers may not be able to provide the insight you need because they don’t have a reference point. Users of existing products may not realize they would want an alternative. (Example: few cell phone users in the mid-90s would have asked for data/graphics; few PC users in the 90s would have asked to watch video on their computer.)

Q5: What is the risk of using market research to evaluate long feature lists?

A: Feature-based research often pushes teams toward the “lowest common denominator”—selecting features that affect everyone but don’t create meaningful differentiation. This can lead to an expensive, complex “everything but the kitchen sink” product that tries to be everything to everyone.

Q6: How should you use market research to create product strategy?

A: Instead of focusing research on features, focus on understanding the needs and psychology of customers and the market:

How customers live and work
What they care about
Their challenges and aspirations

Look for what stands out—insights that support a large enough market or a highly profitable segment. Use research to identify opportunities to bring a product to a specific market that can produce a “huge win” for that segment.