How can I gather the information to build a tech product strategy?
A good tech product is derived from the guidance of a good business strategy. Building a business strategy needs good analysis tools. There’s loads to choose from so we’ve picked some oldies but goodies and some newer tools here too, all of them helping you get the info you need to make the informed decisions needed to get off on the right foot.
Let’s start right at the beginning.
The fundamentals of business strategy
What is our role as a strategist?
The fundamental principle of business strategy is that in a perfectly competitive market, no firm can realise an economic profit. This means that in a commercial environment a market inefficiency must exist for us to make money.
Our job as a strategist is to find that gap and exploit it.
What is the ‘strategy schema’?
There is a ‘schema’ for a business strategy. It is Mission + Plan + Action.
Mission: This is the firm’s purpose, the reason it exists.
Plan: This is how we intend to achieve the mission, how we position ourselves and how we make the most of our capabilities and resources to do so.
Action: What we are going to do about it. This can be a new product, a new approach to problem solving, build or buy, improving the value chain, etc.
Imagine these in a three circle Venn diagram. Defining these elements of the schema helps us alleviate the ultimate challenge of finding the most valuable competitive position for us – the sweet spot at the centre of it.
Understand the environment around us
A strategy is pretty much always about finding competitive advantage. Makes sense as we work in a competitive environment, albeit one we can’t have control over. Though we can’t possibly know what all our competitors are up to, we can analyse it. And there are simple tools for that, which aren’t new, but have stood the test of time. Let’s look at four of them. SWOT, PESTLE, Competitor Analysis and Five Forces.
SWOT stands for Strengths, Weaknesses, Opportunities, Threats. It’s a classic framework, nearly 50 years old, that helps us establish our position really quickly. See it as an overarching framework, or simply a good place to start your analysis.
|StrengthsWhat do we do?
What are we good at?
What don’t we do?
What advantage do we have?
What could work against us?
PESTLE stands for Political, Economic, Social, Technological, Legal, Environmental. Again, it’s a simple tool to help us work out what’s going on in all of those areas. A great way to use it is to imagine yourself in a year’s time, looking back and noting all the things in those categories that were either an advantage or disadvantage. Simply completing this helps us to navigate what may happen next and shape our thoughts and progress.
A competitive environment is, well, competitive. It’s will be hostile and you need to prepare. Even basic research on your competitors is useful in helping shape your thoughts or actions.
Company Performance Vision Strategy Capability Offerings
The information you have gathered so far can now be enhanced in another incredibly useful tool, Five Forces. This tool helps us consider the competitive environment and the profit potential in a chosen market segment. This is about understanding the structure of the industry and the potential gains we may make in it. Jumping straight in to Five Forces isn’t advised as the conversations you will have using SWOT, PESTLE and Competitor Analysis all lead to enriching the five forces conversation.
It’s worth remembering that the five forces are indicating the future prospects for profitability in a certain industry.
The Five Forces are:
Threat of Entry
Will a new entrant be able to be able to join your market and destabilise you?
Threat of Substitutes
Can your product for service be easily substituted for another?
Bargaining power of buyers
Consumers have more power when there more alternatives and low switching costs. In a monopsony, a situation where there is only one buyer, that buyer has a lot of influence.
Bargaining power of suppliers
Fewer alternatives mean the suppliers have power of the consumer. Companies with no competitors monopolise the market.
Intensity of rivalry
Counter-intuitively, rivalry goes down when the number of competitors are small. The more competitors, the more rivalry there is.
Using a canvas
So far, we have been gathering basic competitor information to help us understand the competitor landscape and where we might fit in.
As tech product professionals we need to be identifying and solving problems, so even though competitor and landscape analysis is crucial and shouldn’t be missed out, bring it together is vital for this, the best tool is a canvas.
There are a few types of route you can take here.
The Lean Start-Up Canvas, popularised by Eric Reiss is great at helping you understand how to appeal to investors for an idea, get alignment and get and get started. There are lots of versions, but the one over at LeanStack is a good starting point.
Strategyzer promotes both a business model and a value proposition canvas which are great used together to help use the data you have to manage strategy or understand the core challenges for your business.
A good business strategy is as important as ever. You will need one to build a great tech product. The quality of the information you collect is directly proportional to the quality of the informed decisions you can make.
There are some great older tools, like SWOT and Five Forces that shouldn’t be skipped.
There are some brilliant tools, like canvasses, that bring a new dimension to strategy.
You still need a strategy to help drive a tech product vision.
Inspect and adapt is still the name of the game.
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