The three strategic building blocks
On business, customer, and market needs
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Several weeks ago, I shared a 10-question framework product managers can use themselves, or escalate, to help build out a vision and strategy. In this post, I’d like to discuss the first three questions or “needs,” which set up the answers to the following seven. I think about these answers as my strategic building blocks.
We construct product strategy from three primary building blocks:
What the business needs;
What the customer needs; and
What the market needs.
I know that sounds obvious (likely because business, customer, and market are very “product-y” words). Still, you’d be amazed how many product managers and organizations laser in on just one or two building blocks and struggle to formulate a coherent strategic approach.
It’s critical to understand how these three building blocks function together to enable us to think about strategy holistically. In particular, I find it most helpful to think about business needs and market needs as top- and bottom-of-funnel filters that customer needs pass through:
Business needs determine which customer needs we investigate and pursue; while
Market needs determine how we solve for those customer needs.
For instance, imagine you’re responsible for improving the conversion rate for an e-commerce checkout flow. That business need directly filters which customer needs you’ll investigate. Therefore, it’s critical to establish the business need upfront; otherwise, you’ll have no way to prioritize the customer needs you uncover.
Similarly, market needs filter which solution paths are viable and, to some extent, control for what we optimize. If most e-commerce checkout flows follow patterns or best practices, breaking with those conventions presents a usability risk. It’s essential to understand the market to determine which solutions and needs are must-haves, opportunities, or bad investments.
By far, the most common instance I see of not approaching strategy holistically is when product managers focus way, way too much on customer needs and not nearly enough on business or market needs. This issue tends to manifest as the same question: “How do I organize the work my team is doing into a roadmap?” Trying to prioritize customer needs by using customer data – for instance, deciding what to build based on how many customers are using an existing feature – is not only limited but also myopic. It ignores the broader constraints of where the market is going and where the company wants to go.
This trap is not only an issue at the individual product manager level. Many organizations structure their teams in a way that exacerbates this trap. Namely, they organize teams by domain – which in and of itself is fine – but then fail to communicate a higher-level business need. What ends up happening is that product managers start thinking about what’s best for, say, the analytics portion of the app and which reports customers want rather than about which customer needs will work for the company and present good strategic opportunities.
There’s a reason why, in the 10-question strategic framework I wrote about, “What are our business needs?” is first. It is the most crucial building block to establish because it gives us a concrete goal towards which to aim. If you don’t know the answer to this question, you need to do whatever it takes to find it. That could mean escalating upwards or analyzing the top-line metrics of the business to identify opportunities and vulnerabilities.
Another typical instance of not approaching strategy holistically is undervaluing market needs. Because of the industry’s heavy focus on metrics and OKRs, many product managers are adept at connecting business needs to customer needs – yet they don’t always think beyond their domain and company. Undervaluing market needs is far tougher to identify and correct because the market moves slowly, and the ramifications of missteps become clearer in aggregate. Releasing a single feature that works for the business and your customers but not the market probably won’t cause much damage. Continuously doing so, however, will tank the product.
Two prevalent warning signs here are if you’re living off of a breakthrough advantage that’s now years old or optimizing without substantially adding to your product.
Fortunately, however, identifying and analyzing market needs are the easiest to hone in isolation, even for fun (if you consider “boring” things “fun,” anyway). Look at industries outside of the one you work in; when you read about exciting technology news, consider the market forces. For instance, Spotify started in music (obviously) before expanding to podcasts, and they’re now expanding to video. What do you make of that? What market forces do you think are shaping that decision? Do you think it’s a good strategic direction and why?
Thinking about your strategic building blocks holistically and ensuring you’re considering more than customer needs or business and customer needs are essential because they create the foundation on which you build a vision and strategy. That means that if your foundation is not holistic, your vision and strategy won’t be, either. If you’ve ever seen a “vision” that is essentially a distillation of customer needs into a few strategic “pillars,” it’s because the foundation is not sufficiently solid and holistic.
As you continuously flesh out your strategic approach and socialize it, having a solid foundation helps you to more easily identify obstacles, prioritize needs, and chart a path to success.