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Great Products Start with Strategy

by JD

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“A strategy delineates a territory in which a company seeks to be unique.” —  Michael Porter

Strategy guides your tactics.  One of the most effective tools I’ve used for designing a strategy is a Strategy Diamond, which outlines the five key components of your strategy: arenas, vehicles, differentiation, staging, and economic value.

Why care about strategy?

To put it simply, your strategy can help you compete more effectively or find a sustainable way to stay in business.  If nothing else, it’s about being mindful and deliberate about where you are spending your time, energy, and resources.

In today’s world, strategy is more important than ever, where strategies are battle-tested in a world-wide market and it’s survival of the fittest and the most flexible.

You can think about strategy whether you are a one-man band, a team, an organization, or a company, and beyond.  You can use strategy to your advantage to better guide your actions and investments.  Even the most effective bloggers have a knack for strategy.

In the book, Managing the Design Factory, Donald G. Reinerstsen writes about how your product has to start with strategy, and that it can’t be an after-thought.

Key Takeaways

Here are my key takeaways:

  • Good strategies make money.  You can measure your strategy, by measuring whether it makes money.  It’s a cut and dry way to get market feedback and to tell whether your strategy is sustainable.
  • Product choices must fit with the strategy.    If your strategy is the market segment you’ll compete in, who you’ll compete with, and how you’ll compete, then you need to check whether your product is going to work for your strategy.  For example, is your strategy about price or quality or a unique difference?  Will that work in the market segment you chose, and does your product deliver?
  • Your customer or channel has to value the difference.  The market might not value what you bring to the table.  If you have unique value, but your customer or channel doesn’t value the difference, then you have a mismatch.   A very cutting question is does your customer value what you do?

In my experience, if you don’t have a way to measure the economics, because you’re playing the game to win mind-share, then you can measure success against your mission.  One additional point I’ll add is that if your strategy is easy to copy, then you aren’t taking advantage of your unique strength.

Which Segments, Who to Compete with, and How to Compete

The key point here is that the market will give you feedback on whether your strategy is working.  Either it’s making money or it’s not.  If you’re not making money, you might need to change your strategy.

Reinertsen writes:
”Our company strategy is a key context in which we do product development.  Strategy determines which market segments we will compete in, who we will compete with, and how we will compete. 

The single yard-stick by which we measure our strategy is an economic one.  Good strategies make money, bad strategies do not. 

We need to understand our internal economics, those of our distribution channels, and those of our competitors to do a good job setting strategy.”

Our Products Need to Fit Our Strategy

The key point here is that you have to match your product to your strategy, and your differentiator has to match what your channel and customers can value or appreciate.

Reinertsen writes:

“The products we choose to develop are a critical piece of our strategy, but our product choices must fit with the rest of the strategy.  For example, one computer peripheral company tried to differentiate their product on the basis of its performance advantages. 

Unfortunately, the channel of distribution they used were order takers who had little technical knowledge and no ability to explain these benefits to the customer. 

This channel sold products on the basis of price alone, which means the company achieved no premium for is superior technical performance.  It is quite common to see such misfits between the product and the distribution channel. 

The important thing to remember is that good products cannot fix bad strategies.  We need to start with a well-crafted strategy to make money-developing products.”

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