Having a plan that minimizes the risk of product failure while maximizing the chances of success is the starting point of knowing what winning looks like. However, what must your product strategy include when facing a turbulent market?
Knowing how to adjust your plans during execution is another key element of product strategy. Let’s take a look at how you can prepare for such adjustments.
Feedback Loops
Good product organizations have mechanisms to listen to their customers and gather feedback to ensure product features are performing for their customers. These may take the form of trouble-ticket analysis, user surveys, or even listening in on support calls. Additionally, most companies will have methods of tracking sales and product performance, cost monitoring, and other metrics such as cost of goods sold, capital expenditure, operating margins, and more. All of these provide feedback on how your product is performing and ultimately, how your product strategy is playing out. Great product organizations know how to synthesize all this feedback and incorporate it into the next product iteration, or use it to help define new product and revenue opportunities. The difference between good and great is how much preparation the product organization does to plan for this synthesis of data.
OODA Loop
Air Force Colonel John Boyd coined the phrase OODA loop to encapsulate real-time decision-making in air combat operations. It stands for Observe, Orient, Decide, Act, and forms an iterative cycle during operations for decision-making. This cycle contrasts with the classic continuous improvement and management cycles of Plan — Do — Check — Act or Adjust (PDCA) in that it enables late commitment which fosters agility. Let’s unpack that.
A traditional PDCA requires commitment to action after detailed plans. In many regards, it is also incorporated into the broader military planning process and most strategic planning processes, including product strategies. OODA, however, focuses on continuous feedback collection and observations. This enables late commitment and sets the stage for the next iteration of observation. OODA is inherently focused on making decisions faster than your opponent and getting inside their decision cycle to gain an advantage. It is this faster movement from observation to action that creates winning opportunities.
Application for your business
Planning for how your product team will observe the customers, marketplace, and business environment is key for your overall product strategy. Let’s look at the app-store economy for some examples.
Apple announced the App Store and rules for posting an application to run on the iPhone. Developers had sufficient time to plan their application/product strategy based on what they knew from desktop software and what they could reasonably do within the first iteration App Store rules. Every developer knew inherently that defeat in their application product strategy was to NOT have an app in the store. Conversely, they all wanted to maximize sales of the apps they did make. They used what was known to form their plans and orient themselves to the market opportunity they anticipated.
As a result, at the launch of the Apple iPhone App Store, phone apps were initially priced like desktop software. There was a price paid, you gained access to the app, and that was the end of the transaction. Some developers observed that customers were very sensitive to pricing, especially for applications they did not hear about from trusted sources, or which had questionable utility for them. This caused some developers to orient on the price of their application and decide to try to gain awareness and market share by lowering the price (act). Other developers decided to boost awareness through advertising, but generally the app market entered into a “race for the bottom” using aggressive pricing and trying to make up revenue on volume. This was a viable approach because failure looked like not selling, while lowering price only changed the marginal revenue per sale.
This led to the next cycle, where developers observed lower than expected revenues, which moved them closer to their most likely definition of failure, so they chose to orient on revenue per customer. This led many to decide to drive advertising revenue, so acted to embed advertising into their applications.
Apps and companies that were not agile enough to adjust to the rapidly changing market and customer base soon became irrelevant and most likely exited the business.
Of course, in a sea of cheep apps, some developers observed little differentiation, so oriented on customer needs to access back-end resources as a value-add in their applications. This decision to integrate to some online service allowed them to act and gain marketshare with a more differentiated product.
This change in product offering, once again, changed the earnings equation for an application since they incurred additional expenses to support these back-end integrations. Observing this earnings-per-customer shift, developers were able to orient on the need to offset the cost of these integrations. They coulddecide to offer a subscription pricing model, and then act to lobby Apple to enable such a model.
Obviously, this story is still playing out in the various app stores and even in global legislative bodies. The key takeaway is that the product strategy appeared viable in most cases, but the various execution paths companies took was the difference between success and defeat. The first rounds of pricing decreases hit the App Store within days and weeks with the most common app price point being $0.99 within three months of the store opening. Choosing not to react was a recipe for defeat.
A successful product strategy
The lesson learned is that a good product strategy is not enough, if you are not ready to react once you start executing your strategy. Even if you are in an industry that moves slowly, you cannot assume competition and the consumer won’t move in unexpected directions. Part of a sound product strategy must include the feedback loops to listen, learn, decide, and act as rapidly as possible. It should identify what key elements of the product landscape are most important to the product, so teams are ready to observe, orient, decide and act as the environment changes.
Do you require urgent help?
If you’re still not sure if you have a wining product strategy, and make some quick decisions, drop me an in-mail and let’s connect. My extensive background in business, technology, product, and program delivery uniquely positions me to help you rationalize product lines, right-size sales teams, and increase sales with expanded offerings. Contact me today and ask for a free problem assessment and evaluation.