(2009-04-09) Cagan Business Strategy Vs Product Strategy

Margin Cagan on Business Strategy vs. Product Strategy. ...source of frustration in many companies. Many companies confuse or blur the two, and the result is easy to spot. The senior executives want to focus on the business strategy, but they find they are forced to make decisions at a level far below where they’re comfortable or usually even interested, such as which specific products, projects and even features to invest in, and what the interdependencies are between these features and projects, and often what is on the actual page and how to resolve conflicts.

And on the other side, the product managers feel like they don’t understand the reasons behind decisions that directly impact their products, they feel like the strategy is guard-railing every few months, and they don’t feel empowered to do their jobs.

Business strategy is about identifying your business objectives and deciding where to invest to best achieve those objectives. For example, moving from a direct sales model (your own sales force selling directly to customers) to an online sales model (your customers buy from your site) is a business strategy. Deciding whether to charge for your services with subscriptions or transactions fees or whether you have an advertising-based revenue model is a business strategy. Deciding to move into an adjacent market is a business strategy. (cf business model)

The product strategy speaks to how you hope to deliver on the business strategy.

Moreover, while the business may believe something is a great business opportunity, you don’t yet know if your company can successfully deliver on this opportunity.

This is where product strategy and especially product discovery come into play.

The business maintains a portfolio of investments, and the business can and should adjust that portfolio mix.

Take as an example Amazon. They’ve got a portfolio of investments including their core e-commerce offerings by category, they’ve got third-party selling, they’ve got an infrastructure technology (cloud computing) business

you can see their portfolio planning. Now each of these businesses has one or more product strategies

The business strategy and business portfolio planning provides a budget and a set of business metrics (OKRs). The product organization then lives within that budget to pursue as aggressively as possible the best ways to hit those business metrics.

Some product strategies will prove more successful than others

a big part of business strategy is knowing when to continue to invest and knowing when to cut your losses so that you can invest elsewhere.

What’s most important however is to make sure you’re asking the right questions and making the hard decisions. (see 2009-03-09-CaganTheSevenDeadlySinsOfProductPlanning).