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How to Create a Strategic Product Plan

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  • Pragmatic Institute is the transformational partner for today’s businesses, providing immediate impact through actionable and practical training for product, design and data teams. Our courses are taught by industry experts with decades of hands-on experience, and include a complete ecosystem of training, resources and community. This focus on dynamic instruction and continued learning has delivered impactful education to over 200,000 alumni worldwide over the last 30 years.

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Most technology companies have a product management department serving as the “voice of the customer” and helping to better understand market needs. This function typically generates an extensive roadmap of new products and enhancements, but is product management really being used strategically?

 

For example, what is the product strategy that is driving roadmap priorities? And how is the product strategy linked to the company’s overall strategy?

 

Since most technology companies’ revenues come primarily from their products or services, you would think that the product strategy would be carefully crafted with the scrutiny of the executive team and that it would be meticulously aligned with an overarching corporate strategy.

But this is often not the case.

Without the engagement of the leadership team most responsible for determining strategy and direction, the risk is suboptimal financial performance at best and complete company failure at worst.

Let’s take a look at some practical approaches to making product management more strategic by engaging executives in key product strategy decisions and encouraging better corporate strategic planning.

 

The Strategic Product Plan

The essential goal of a product plan should be to ensure that a product delivers some business value to a specific set of customers to meet certain financial goals based on a defined corporate strategy.

A product plan describes the market opportunity, profiles the target customers, specifies pricing, identifies the financial goals, indicates the key priorities for development and enhancement and provides a roadmap for delivery for at least the next four quarters.

A comprehensive MRD (Market Requirements Document) might serve as the product plan for a new product. But each product that continues to be offered to customers should have a product plan updated yearly.

 

So, how does product management create a good product plan?

Let’s assume that the product management department is already managing several products that are currently serving customers.

After getting feedback from customers, speaking with the sales teams, obtaining a list of the top technical support issues, surveying competitor positions and features, and receiving new ideas from development, the product management team has generated a list of possibly hundreds of potential product enhancements across the product line as well as some new product ideas.

 

Project prioritization

Since there are limited resources, prioritization is a key step for any product plan.

Unfortunately, many companies apply some arbitrary prioritization scheme based upon the perceived number of times the feature/product has been requested or how much revenue they think the feature can generate.

The product manager (or their development friends) may also make assumptions about value based on how they think the product should be used. The product management team then creates a roadmap and a release schedule based upon these priorities and voila, the product plan is done, right?

No, it certainly is not.

The product plan is incomplete because the company’s strategy has not yet been considered. The executives who are chartered with running the company have not influenced the product plan. The plan merely reacts to random market facts and events. So how exactly does the corporate strategy relate to the roadmap?

 

Focus on What Increases Revenue

The goal of almost any technology company is to increase revenues.

Without a strategy to indicate HOW the company plans to increase revenue, then just about any product plan could arguably help the company achieve its goal, including the plan we just created.

But with a strategy that specifies how new revenue would be generated, a product plan tailored to support that strategy can then be developed.

 

For example, your company could plan to grow revenue by selling its flagship product into new geographic regions. Your company could establish a new reseller channel. Your company enhances its existing products to appeal to a wider base of customers. Your company could develop new products that appeal to the existing customer base. Each of these decisions carries with it significant implications on the product plan.

Selling into new geographic regions would require local language support and may have other specific regional requirements. Selling through a reseller channel may require multi-tier administration and branding. Enhancing products to appeal to a wider customer base requires profiling that new customer and understanding his/her unique needs and requirements. And developing new products requires new analysis, requirements, design, and development work.

Each of these strategies would result in a different prioritization of the projects on the product manager’s candidate list and a different allocation of resources. The product plan we created previously is reactionary and haphazard, while the product plan that responds to corporate strategy is directed and intentional.

 

So why aren’t corporate strategies incorporated into product plans?

There are several possible reasons, but three of the most prevalent ones are:

  1. No strategy exists
  2. The strategy has not been clearly communicated
  3. The strategy appears inconsistent with market and customer data.

Let’s analyze each in the following sections and propose some ways to solve them.

If no strategy exists, then one should be created. At one company, the executive team employed a process where they reviewed and prioritized the top project requests every six weeks. This approach resulted in constantly shifting priorities since the highest priority projects were always related to the biggest sales opportunities at the time. Less critical product features never made the cut, resulting in an increasingly uncompetitive product line. Without a driving strategy behind it, your company risks being pushed by short-term opportunities.

Product management is in a good position to persuade executives to develop a high-level strategy as part of the product planning process.

 

Here are some key questions that product managers can ask executives to help with product planning that might very well stimulate some strategic discussions.

  • What are the top 3 most critical challenges our company will address this year?
  • In which geographic regions will we focus on selling our products?
  • Will there be any changes to the sales or channel strategy?
  • What are the revenue and profitability expectations for each product line?
  • Will there be any changes to the focus of marketing and advertising?
  • Are new markets or product lines being considered for the future?
  • What strategic partnerships are on the horizon?
  • What resource changes are expected for the coming year?

Now an astute executive may ask the product management team to answer or help answer many of these questions. And that makes sense since product management sees market opportunities, has heard customer feedback firsthand and aggregates it from others, has tracked competitors’ moves, and has an in-depth view of their products’ financial trends.

But at the same time, you still want to leverage the knowledge and experience of the executive team and make sure they agree with the assumptions and logic being used.

Therefore, a practical approach to strategic planning could involve a meeting (or series of meetings) where product management presents their market and customer information to executives, who then have a chance to discuss what they have heard and how they think it should apply to the future of the company.

You could expand the discussion to include input from other functions like sales, marketing, and finance so that everyone is hearing key information that will lay the groundwork for the strategy.

In a subsequent meeting, product management can replay the conclusions and decisions from the previous discussion(s) and then present a proposed product strategy that responds to them. Hopefully, by then, a consensus on the strategy will be reached, and the product management team (with the assistance of development) can then present an updated roadmap and proposed release schedule for the coming quarters for final review and approval.

 

The second reason why corporate strategies are not incorporated into product plans is that product managers don’t know about them or don’t understand them.

It is certainly possible that an executive team will define a company strategy and then succinctly describe it in a form that can be handed down to all employees for successful execution. More typically, however, the executive team communicates the strategy to their teams less formally. At one company, the executives felt that the strategy was too sensitive to share broadly and tried to share it on a “need-to-know” basis only. Most of their employees were in the dark about executing the strategy successfully.

The product management team is a key executor of the strategy.

They will translate corporate strategy into product strategy and will create roadmaps that drive the work of many of the company’s employees. So the entire executive team should present the strategy directly to the product management team. This will facilitate the necessary dialogue and allow for a joint understanding of the implications. Product management should then be required to develop a product strategy and proposed roadmap and present it back to the executive team to close the loop and ensure alignment with the corporate strategy.

 

The third reason a corporate strategy may not be adequately incorporated into product plans is that the strategy itself appears to be inconsistent or contradict market and customer data from product managers.

This is likely if the executive team developed their strategy without being adequately in touch with the market and customers.

If the product management team is being utilized appropriately, then they will be serving as the “headlights” of the company driving the front-end of the product development process, and they will be spending most of their time discovering market opportunities, customer needs, technology trends and competitor positions.

Now executives should always make it a part of their jobs to speak with customers and review market trends. But to ensure they hear the wealth of available market and customer information, it should be considered a prerequisite to developing the corporate strategy to have the product management team present a review of what they have learned.

You may have noticed that in all three of the cases where corporate strategies are not adequately integrated into product plans, the solution was direct communications between product management and the executive team.

 

Why Product Managers Should Join Senior-Level Discussions

Product management can help educate senior executives with their market and customer knowledge, can help mold the strategy, and hear it first-hand so they can properly execute it. However, there are reasons why this direct communication does not occur.

It is common for the product management team to report to a VP of Marketing or Product Development who represents them at senior-level meetings. These are broad functions with many responsibilities. Marketing executives are often measured and rewarded for driving revenue (with sales) for the company.

Product development executives are expected to deliver quality products on schedule.  So when sitting at the strategy planning table, what types of things are they most concerned with? How well do they understand customer needs and market opportunities? Is profitability one of their primary concerns? Are they concerned with short-term or long-term issues? In other words, will they be good representatives of the market and will they push to defend the bottom-line?

 

This brings us to a broader issue at many technology companies. Who is actually concerned with profitability and balancing short and long-term goals? Who ensures every key decision is made with key business goals in mind? In short, who is minding the store?

For most functionally-aligned technology companies comprised of sales, marketing, operations/support, development, and finance, the lowest level of management where accountability exists for profitability and long-term strategic issues are the COO, if one exists, or the CEO if  not.

Think about it. The sales organization is primarily concerned with revenue and tends to be short-term focused. Marketing typically supports sales objectives. Operations and support keep the services running well, maintain customer satisfaction and are primarily cost centers. Development focuses on delivering quality products on schedule and is also managed as an expense. Finance tracks revenues and costs but is in a limited position to influence them.

So, who is thinking about profitability and achieving long-term goals? If it is nobody other than the CEO or COO, then there is a real danger that the myriad of decisions made daily by managers across the company will not be made with the right focus.

One solution is to elevate the role of the product management function, given its critical strategic responsibilities, and have it report directly to the COO or CEO (or for larger companies, the relevant business-accountable executive). This makes product management a direct member of the leadership team making strategic decisions about the business.

This product management function will be chartered with providing market intelligence to inform the executive team, managing product profitability, and determining and driving product strategy consistent with corporate strategy.

This function becomes a resource for the CEO/COO/business leader to explore and manage long-term opportunities. The function has P&L responsibility and will drive business decisions deeper into the organization. It is a function that gives business leaders greater control over the plans that drive so many of the company’s resources, roadmaps and product plans.

Since product management is in such an influential position to execute the strategy and needs to work with so many of the other functional organizations during product development and delivery, it may be desirable to include other cross-functional delivery teams in this function as well.

 

The Strategic Planning Process

So let’s step back and take a look at what an end-to-end product planning cycle might look like when integrated with the company’s strategic planning cycle. Assuming that a company resets its corporate strategy, financial plans, and product plans once per year, the planning process would ideally occur during the 3rd and 4th quarters of the fiscal year in preparation for the upcoming year.

The five basic steps in the planning process (as depicted in figure 1) are:

  1. Market review
  2. Financial review
  3. Corporate strategy
  4. Product strategy
  5. Product Roadmap and Release schedules

Strategic Product Plan

Step 1

product management presents a market review to executive management sharing facts on market trends and opportunities, key customer needs, and competitor moves and positions. Though product management will keep tabs throughout the year on many of these items, this is the opportunity to update the information to ensure it is complete and current. Other functions may be invited to provide their perspectives on the market and customers as well.

 

Step 2:

The finance team presents results on the company’s financial performance overall, for its sales channels, and for its products. Providing revenue and profitability by product is critical to making good product decisions and developing effective strategies.

 

Step 3:

This is when the company’s executive team outlines its corporate strategy regarding its vision, financial goals, and plan for achieving those goals. The corporate strategy should be explicitly presented to the product management team to facilitate product strategy development. For some smaller businesses, steps 3 and 4 may be combined into a single step.

 

Step 4:

Product management develops its product strategy considering market dynamics, customer needs, financial goals, and corporate strategy. It specifies what product changes are needed and indicates the financial plan for each product area. The product strategy should be reviewed by the executive team to ensure alignment with the corporate strategy before proceeding to the next step.

Step 5

This last step involves the development of a product roadmap and more detailed release plans for the coming quarters consistent with the product strategy. This roadmap becomes the official “product plan of record” and should be managed with formal change control procedures. This step is executed after the annual planning cycle and is repeated every 3 or 4 months to allow responses to changing market conditions and deployment schedules and should be re-approved by executive management.

 

Success is Determined By Product Success

Effective product plans to address market and customer needs AND supports the company’s growth strategy. Creating effective product plans can only be accomplished with strong communications between the product management team and the executive team because:

  1. Product management has critical market information that executives need to develop effective strategies;
  2. Product management can help develop strategies by asking key questions and discussing product implications; and
  3. Product management must clearly understand the company’s objectives and direction to create product strategies and roadmaps.

By leveraging the product management team as a strategic resource, you will ensure that your products have been influenced by the best minds and information your company has available and you will gain greater control in driving your company’s success.

 

Enroll in Foundations

Foundations is an excellent learning opportunity for product teams who want to improve their communication.

Course Overview:

  • Understand the market and the problems it faces
  • Use market knowledge to build and sell products people want to buy
  • Master the Pragmatic Framework and the activities needed to bring a successful product to market
  • Learn to listen to the market, prioritize projects and drive result

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Author

  • Pragmatic Institute is the transformational partner for today’s businesses, providing immediate impact through actionable and practical training for product, design and data teams. Our courses are taught by industry experts with decades of hands-on experience, and include a complete ecosystem of training, resources and community. This focus on dynamic instruction and continued learning has delivered impactful education to over 200,000 alumni worldwide over the last 30 years.

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