Product strategy generally inherits strategic positioning from the overarching business strategy, rather than generating it. (The exception is when you are truly doing a 0-1 product, such as in a disruptive startup or a Horizon 3 effort in an existing business.) This strategic positioning broadly determines where your product will play in the market.

Based on that positioning, you need to zoom in and segment customers much more specifically in order to make good differentiation choices. Essentially, the broad ‘where’ question really becomes a ‘who’ question. Said differently, the heart of the "where to play" choice in product strategy is customer segmentation.

What is a "customer segment," anyway?

My favorite definition of a customer segment comes from my friend Alan Albert: a group of customers who share the same perception of value in a given context.

To create such a segment, you must deeply understand the needs, values, and motives of your target customer. This is how you know exactly which customer needs the product must meet. This clarity is what unlocks your ability to make powerful ABC differentiation choices as discussed in the previous post.

How do you make a customer segmentation framework?

There are many ways you can segment your customers: demographics, firmographics, psychographics, and behaviors are the traditional approaches. I think doing something like a needs-, worldview-, or a value-based segmentation approach is the strongest choice here.

Having a distinctive view of the market creates enormous value for your company. What unlocks this value is your creativity about the dimensions on which you'll segment customers. If you’re making a 2x2, what are the axes? Go beyond generic segmentation approaches. You want to create your own segmentation model that is built for your specific product and context, rather than using the same generic segmentation approaches everyone else is using.

Customer segmentation is ultimately choosing who the product is for, and just as importantly, NOT for. This is about deciding who your product will serve and who it will shun. Your goal is to list of three types of customers. My model for this is “TBD”:

1. Targets: these are the top customer segments you are explicitly designing the product for. This is who the product is really for.

2. Beneficiaries: these are customers who may benefit, i.e. adjacent segments, but you aren't explicitly designing for these customers. If they want to buy/use the product and get benefit from it, that's welcome. You may deliberately expand the product into these adjacent segments in the future.

3. Distractions: just as important is saying who the product is NOT for, i.e. non-targets. If these customers show up, we'd like to redirect them to alternatives rather than confusing our product. Better to have a focused, opinionated product that turns away some customers than a frankenproduct that doesn't really deliver for anyone. This is especially critical for b2b enterprise products, which face constant pressure to add one-off, customer-specific features.

Aim to make a prioritized list of customer segments, with clarity on non-targets. You should have 1-3 ranked Targets, a short list of Beneficiaries, and a longer list of Distractions.

There are many mental models out there to think about differentiation, and they all seek to answer the same question: how do we make our product compelling so that customers choose it over alternatives? How do we make our product a must-have?

Differentiation essentials

Differentiation only makes sense within the context of a given customer segment, the progress that customer wants in their situation (e.g. the JTBD or problem to be solved), and a set of alternatives for achieving that progress.

You have to differentiate your product:

1. for a certain group of people (who)

2. within a market category and relative to their alternatives (where)

3. in a way that offers customers enough compelling value that they'll choose your product over alternatives (what + why)

ABC differentiation model

You cannot differentiate your product on everything.

It's a product trope to say the product needs to be "10X better."1 But your product can't—and doesn't need to be—10X better on everything. It may not literally be 10X better—sometimes, 2-3X better is enough. And in some situations, 10X isn't currently possible, but combining a bunch of 2-3X improvements yields a whole that feels 10X better and is perceived as a must-have.2

You want to differentiate the product on the the few dimensions of the problem that really matter, and where you can offer unique value to your customers. This means you have to deeply understand your customers and the problem, in order to identify the few things that make all the difference.

Whether 3X or 10X, the principle here is that the product needs to be better enough that it compels customers to switch to it, overcoming counterforces like switching costs, inertia, and anxiety. Be 10X better, selectively.

For the progress that your customers seek in their context, there is a subset of dimensions that matter and where your product has a chance of being truly compelling. Assuming you've done your customer research, you now want to select the few dimensions on which you'll differentiate your product.

To make sense of this, I use the ABC model of differentiation3:

• Where will your product be Amazing?

• Where will your product be Basic?

• Where will your product intentionally be Crappy?

Where will your product be Amazing?

Your product should be incredible on a small set of dimensions that really, really matter. As economist Thomas Sowell said, "there are no solutions, only trade-offs." Good strategies make explicit tradeoffs. This is where you make tradeoffs in the product, compared to the alternatives that customers might use instead.

To be amazing at something, you have to be less amazing—or even crappy—at others. For example, Intuit's TurboTax is amazing for individuals with basic tax prep needs. To be amazing at this, it takes a standardized, form-based approach to gathering financial information. This makes it crappy for someone with a very complicated financial situation that needs high customization and a lot of discussion with a CPA.

It's not about "better or worse" in general. It's about being intentionally, selectively better/worse—in specific ways, for specific customers, for their needs in specific situations.

You can't innovate on every edge at the same time. I recommend you choose one to three dimensions, and no more than five, in which your product will be truly amazing. You might also think of them as "differentiation pillars" or “value themes.” These should be things that your competitors can't or won't want to match. Cost can be one of those dimensions if you are choosing the fundamental strategy of being the low-cost option, as SpaceX did.

Where will your product be Basic?

I’ve never bought a car because of the seatbelts. But if the car doesn’t have seatbelts, I’m not buying it.

Your product should be basic—just meeting baseline expectations—on the dimensions it must have to be accepted by customers, but which are not in any way differentiating.

You want to minimize the set of basic features. Otherwise the surface area of the product gets too big. This increases carrying costs, maintenance costs, and product complexity.

Where will your product be Crappy?

In what ways will we choose to make the product inferior to alternatives, in order to make it amazing in the ways that we choose?

This is the inverse of your choices to be Amazing. Your product should intentionally suck at a bunch of stuff that don't matter much for the thing we're trying to do.

It's often easiest to think about the A/C tradeoff as "X, not Y" or "X versus Y" such as:

• efficiency versus customization

• opinionated vs user-defined workflows

• seamless, predefined integrations vs user-defined integrations

Contrast your product to the customers' alternatives. Make different tradeoffs. Differentiate hard on those.

JTBD & Kano complement each other, but they're not interchangeable. Let me explain.

What JTBD & Kano share is that they are both lenses on understanding what people value.

Where they mainly differ is in (1) focus and (2) stability.

Focus

A JTBD is about a person. Kano is about a solution that person might choose ("hire").

A JTBD focuses on a person and the progress they're trying to make in a given context. JTBDs live in the person, not in the solution.

The Kano model describes how someone evaluates the current set of options they can hire for their JTBD. Kano lives in the solution, not the person.

In the language of supply and demand, JTBD is about demand, whereas Kano is about supply. See the graphic below from Bob Moesta's excellent Demand-Side Sales 101.

Stability

JTBDs are much more stable and enduring, whereas the attributes of a product that Kano describes change frequently.

For example, consider the JTBD of "I want to go for a long walk and think." The core of that job is stable and has existed for literal ages long time and has many possible solutions someone might hire. Now let's assume that the person wants to listen to music of their choice while they take this walk—that has been possible for at several decades. Let's take the 1979 release of the Sony Walkman as the start of "personal portable music" as a common practice.

Since 1979, different products have been "hired" by consumers with this JTBD. The iconic products were the Walkman, Discman, iPod, and now iPhone. Just two companies dominated these eras: Sony, and Apple. But each of those products—and their competitive sets—had a very different Kano models. The must-haves, performance, and delighter features that satisfy the JTBD are different today when choosing among smartphones than they were in the days of early MP3 players.

A strategy is the approach to achieving a goal. Whatever the goal is, strategy is your high-level approach to accomplishing it.

A good strategy makes explicit choices which create a framework for decision making. This framework both focuses and aligns energy on the point(s) of leverage where it can overcome the obstacle(s) to our goals. This is the "mechanism of action" of good strategy. 

This means that a good strategy is a force multiplier on execution, yielding more progress per unit of effort. The fewer resources you have at your disposal, the more important strategy becomes: you need to get all the progress you can with what you've got (startups, are you listening?).

A business strategy is the approach for a business to win in its market(s) of choice. This is often phrased as "where to play and how to win.1" The end result of good business strategy is that the business enjoys sustainably better economics than rivals. This is what is "sustainable competitive advantage" means. It shows up in the P&L. Strategy is an evolving theory of how we can use what we DO control to compel what we DON'T control—namely customer behavior2. It bets on a possible future and tries to make that future be the one that happens.

So: what is a product strategy?

Product strategy is the approach to realize the product vision and meet the needs of the business. 

A product strategy explains how the product will contribute to the business achieving its goals. It does this by choosing which customer and business problems the product will solve, in what order, and why. 

If you're anything like me, these situations are where you are most at risk of spinning out and burning a lot of time and energy.

For me, they have two things in common: (1) there is no right answer, and (2) I'm not clear about what really matters.

Whether you're a VP or an APM, prioritization is an ongoing pain for everyone in product. And oh, do we love our prioritization frameworks: (R)ICE, MoSCoW, Kano, cost of delay, importance vs satisfaction...the list goes on.

We reach for these frameworks like a binkie, because they help us get unstuck when we don't know what to do. They do have their place. But from a leadership perspective, they're a red herring.

Prioritization is the symptom, not the illness.

The illness is our lack of focus.

Our PMs are drowning in feature requests and fighting a war of attrition. As leaders, we've spread our resources too thin and are trying to make the org do too much. This is because we haven't done the work to focus on what is truly important. Focus means cutting priorities, not ranking them.

This is a failure of leadership. Specifically, it is the predictable result of leadership abdicating the work of strategy.

Time for a gut check: as product leaders, have we truly done the work to create and operationalize a strategy that is clear, coherent, and compelling?

If not, then it's not fair for us to complain about other departments providing lots of inbound feature requests that "aren't strategically aligned." Of course the inbound ideas aren't strategically aligned — they don't know the product strategy! If there even is one.

So, what's a product leader to do?

First: keep your prioritization framework. RICE—or any reasonable method—is fine, if used consistently. (Only applying it once, by scoring ideas and then just building whatever is on top, is a different failure mode. But I digress.)

Second: start actually developing a strategy. The bare minimum I suggest you do is to take a few hours and write down what your team(s) are already doing, why, and what the expected outcome is. One page of prose, max. Then, talk about it with your team members and cross-functional colleagues to get some basic alignment on it. This is a far cry from doing an actual product strategy, but it will help.

Third: try to focus (cut) more and prioritize (rank) less.

This nudge was first published on Mind the Product.

What does "better" mean? What’s it look like? It can be hard to know.

Here's an exercise that's helped. It takes an hour or two, and improves if you talk it through with a thought partner.

The underlying principle here is to interview potential companies just like you interview users. To do that, you need to do three things:

(1) Establish your stack rank of values

(2) Understand what you are moving toward, and away from

(3) Turn that into interview questions

1) Stack rank your workplace values

This is about what you value in a work experience and team behaviors, rather than general life-level values. Think about the behaviors that you appreciate and are frustrated by. They are clues to what you value. These might be things like role clarity, strategic coherence, feeling like you have a voice, mentorship, or proactive team collaboration.

Stack rank these.

2) What you are moving toward & away from (and stack rank them)

In choosing a next thing, people tend to overcorrect for what they disliked about the last one. The longer you’ve tolerated a bad situation, the more prone to this you are. It’s important to clarify what you are moving toward and away from.

Make two lists:

• Away: what do you not want, or want to avoid? This is probably informed by what you haven't liked in your current/previous roles. Try to parse out what is specific to your current role/org from what is more general.

• Toward: what DO you want?

  • General screening criteria: money, title, and other easily identified factors do not create motivation or satisfaction. They can break your experience, but they can’t make it. These are “hygiene factors” that need to be good enough.

  • Motivators: “motivator factors” are things like enjoying the work itself, meaningful challenges, growth pathways, or increased responsibilities you’d like to develop.

For both of these, stack rank them. On the away-from list, clarify what is an absolute no (must not) vs what you don’t like, but are willing to tolerate. In terms of what you do want, you must stack rank these. Otherwise you will not be able to effectively make tradeoffs, since there are no perfect options.

3) Convert into interview questions

Your answers from the last section establish your research questions, what you really want to learn and see evidence of. You may want to see evidence of managers coaching/mentoring, or that the engineers engage in product decisions, or that feedback from ICs is taken into account by leadership in setting direction.

The last step is to turn these into interview questions that elicit stories of actual past behavior or situations. Just like interviewing users, this is how you can uncover higher-reliability data for your decisions.

For example, these are my five starter interview questions for understanding what actual day-to-day product work looks like in an org:

• What were the last few things your team has built and shipped, and how did you decide to do those?

• When's the last time you talked with your customers? How often have you done that in the last month?

• What was the last feature or product your team killed?

• Can you describe your product vision?

• Tell me about the last coaching session you had with your manager. How often did that happen last month?

These won’t address your specific research questions, but they give you the idea of the format of story-based questions you’ll want to ask.

Good luck!

(1) **Who's it for?** This sets your customer segment.

(2) **What's it for?** This scopes the job, challenge, or problem the product is solving.

(3) **How will we know it's working?** We need a solution-agnostic way to measure progress.

If any of these change, your strategy will need significant rework because your customer, value prop, and/or measures will be different. I consider alignment on these to be prerequisites for creating & operationalizing strategy.

P.S.: a fourth question consideration here would be “how’s it different? why will they buy it? [compared to their existing alternatives]”

Want to be a beta reader and get early access to the product strategy book material? Register your interest here.

1️⃣ They drive the agenda: your coachee should set most (70%) of the agenda items. You are primarily there to be a resource supporting them. They need to show up prepared to make the most of your time together.

2️⃣ Generally, you'll end up covering three main topic categories:

• Operations: working through the issues of the day—not getting status updates

• Skill practice: in business, every day feels like game day. Where do we have space to practice? 1:1s are one of the few regular, developmental environments to practice skills in lower stakes environments.

• Career development: regular conversations to understand and support your people's career aspirations goes a long way. You'll find non-obvious ways to support their growth trajectory by doing this.

Ideally, you want each of your Target segments to be a “5-star segment.” But how do you know a good target when you see one?

To assess this, ask yourself five questions about each of your candidate Target segments:1

1. Do they share needs? This is by far the most important criterion. If customers don't share needs—and other key constraints, e.g. regulatory requirements—then you cannot build one single product for all of them. You'll constantly be pulled into building custom solutions or adaptations. The grey area between built-once-sold-many product and custom solutions is a difficult place to live. This is how "frankenproducts" happen.

2. Can you find them? Could you come up with a list of identifiable attributes or criteria by which a sales rep or marketer could target them?

3. Can you reach them? You may be able to see who they are, but if you can't get to them, it's not much use. You'll revisit GTM channels in the next section.

4. Can you win with them? Do you have any shot at building a product that is truly compelling to them and winning there, or are they completely satisfied with the status quo?

5. Are they worth winning? If you did win with those customers, would it make sense for the business and be worth it? There's no point in winning a segment that doesn't help your business.

For each "yes" above, award the potential target segment one star. Then rank the segments based on how many stars they have.

If a segment has all five, you’re really onto something! This is likely a terrific segment to target. With 5-star segments, you have a real shot at building a product that will crush it with a group of people and they'll be stoked to pay you. And you won't end up with a frankenproduct or in the endless hell of supporting custom, one-off solutions.

Based on the analysis above, choose and prioritize your segments into the three categories of Targets, Beneficiaries, and Distractions.

This is often easiest to do in a spreadsheet, so you can look at and compare all the candidate segments in one place. Mine looks like this:

Aim to have 1-3 ranked Targets, a short list of Beneficiaries, and a longer list of Distractions.

1. Show up to sessions prepared and having a sense of what you want to focus on that would be highest ROI for you.

2. Take massive action in between sessions. Otherwise you're wasting everyone's time.

3. Get their eyes on real work artifacts! It's easy to stay abstract, but often the moment you look at a real work artifact, the actual issues become clear.

4. Use the bat phone when you need it (but only if you truly do). Often the greatest growth comes amidst challenge, so if there is a serious situation that cannot wait, reach out. 

But as we take on more leadership, the pressure on us increases and the number of people we can turn to for candid support decreases. It gets lonely and stressful, fast. By the time you reach a senior product leadership role, you likely have no peers at all and everyone is looking to you for answers. Especially if you are new to the role (or level), this is one of the most common times to seek external support. This support may be in the form of a coach, a mentor, or external peers at your level. I'm going to use the terms "coach" and "mentor" synonymously here, although a mentor tends to be a less intensive and formal relationship, while a coach is usually someone you have an official working relationship with.

Regardless of the form, this piece will cover how to approach finding and assessing support, what you should (and shouldn't) expect, and how to get the most out of it.

How do you know if it's a fit?

Finding the right coach is a bit like finding the right therapist. They need to be really good, and personal fit matters.

Expertise and focus-wise, are they qualified to help you with what you need? Can they actually help you with your challenges? Have they actually done it, or have they just read blogs about it or done a weekend certification? Look for proof of work: past results, sharing how they think, and an ability to rapidly find the heart of challenges.

You have to feel that you can trust this person and open your mind to them, and that they can meet you in that space. You don't need to be friends with your coach, but you need to respect their mind, how they think, and how they influence you to think differently.

What to expect (and not)

There are many excellent ideas, books, podcasts, frameworks etc. out there. You've probably engaged many of them already. Expect your coach to be able to understand your context and help you customize and apply them to your unique situations. You don't want someone who can merely quote thought leaders or books at you, but lacks personal experience of translating the concepts into the messiness of the real world.

Expect your coach to be a strong thought partner and help you improve the quality and clarity of your thinking. Each coach or mentor has their own approach. Some are more like ICF-style executive coaches, who tend to focus coaching more on the person: their communication, inner game challenges (e.g. mindset, confidence, imposter syndrome), or interpersonal challenges. Other coaches are more like position coaches in sports, and are very focused on the craft, the work itself. My own style deliberately blends both coaching the person and the craft, as each is what's needed at different times to help someone raise their game.

Most good coaches I know start with an assessment, which yields a personalized coaching plan. Then, as we walk forward together, there tends to be a balance between proactively working the plan and reactively adjusting to the highest value needs of the moment. It's a good sign if you are outgrowing the initial plan and going into new areas. This means the relationship is working!

You should not expect your coach or mentor to come up with answers for you. Their role is to support you in creating your own answers. It's reasonable to provide their opinion, illuminating stories and examples, and to be a top-notch thought partner. But what to do is your decision to make. Similarly, while they can help hold you accountable and on track to your goals, you cannot abdicate responsibility for your goals and expect results.

This nudge also appeared on Mind the Product.

Strategy is focusing force on a point of leverage to overcome a challenge.

Let's break that down:

1️⃣ Focusing: this means cutting priorities, not ranking them.

2️⃣ Force: what power—capabilities, energy, and resources—can you bring to bear?

3️⃣ Point of leverage: where can you achieve outsized results if you focus force there? What is the crux, the unlock, the problem that if solved would make others irrelevant or easier?

4️⃣ Challenge: what stands in the way of achieving your objective, goal, or vision? Overcoming this challenge is the point of the other three.

The above is what it looks like to deliver on the purpose of strategy: to be a force multiplier on execution. Identifying the point of leverage is the heart of diagnosis1—finding the crux, if there is one—and depends on strategic insights.

Strategy is how, sometimes, David beats Goliath.

Being good product leaders, we hunt for these insights and try to pump them around our org so everyone has the latest and greatest context.

Things improve, but not as much as we hoped. Why?

In our eagerness to improve, we've lost sight of what makes an insight an insight. While everyone advocates for insight-driven strategy, insights are rarely defined. So what is an insight?

An insight is an understanding of the true nature of something.

Important “somethings” you want insight into are your customers, their challenges, their hidden motivations and worldview, the nature of the market you compete in, new enabling technologies, industry shifts, and many more. We earn these insights through deep investigation.

An insight is not just a data point. An insight shines new light: we become enlightened to the truth of something. This yields a deeper, intuitive understanding of how that thing really works. This understanding fundamentally changes how we think about a situation, and makes our ensuing actions far more likely to be effective.

Let’s begin with a quick refresher on the basics. Money is a medium for exchanging value. So, any pricing discussion is inherently a value discussion. Our products are the mediums through which our businesses deliver value, and we expect to capture some of the value delivered via money.

The trap to avoid is focusing on the selling price before discovering a value-aligned pricing model. Without such a model, we can continually add “value” but remain unable to increase revenue accordingly.

The issue is that value perception is ultimately subjective. It’s difficult to measure the actual value delivered accurately. We usually have to discover proxy indicators for the actual value. In particular, we need to know the top three

How to do this? I like a model I originally learned from my friend Alan Albert, which is to interview customers to find out the top three factors—and their stack rank—in how they perceive value in a product like ours. Do they value reliability, safety, performance, convenience, speed, how it helps them look to their boss? Something else?

I think of this as a sphere with four layers of value, similar to a cross-sectional view of the Earth, with two layers each in the outer and inner core. First are surface-layer value proxies which enhance the value perceived, like how solid the titanium iPhone feels in your hand. Second are other indicators of value, which help the customer confirm that what they value is there, like a solid warranty that helps them feel the product is reliable.

Moving to the inner core, we have the true value itself, the core benefits delivered and how those create progress for the customer. Sometimes, this is measurable, and sometimes not. At the deepest layer is the inner core, which is the customer’s identity and worldview. This core is all about the person, not the product.

The key takeaway? To construct a robust, value-aligned pricing model, it’s crucial to delve into all four layers. You’ll know you’re on the right path when you can anticipate the top three factors a customer values in order of importance, and explain why—before they even share their story.

(This nudge originally appeared on Mind the Product.)

Personal update: I'm finally back to writing after being largely offline the last few months completing a major research project on digital transformation leadership. More on that soon.

It's easy to lose sight of the customer, and what they need, when caught up in the hustle of the day-to-day.

You almost certainly have an immediate, default answer to this question. It’s probably closely related to your primary product.

Think again. Your product is just a way of delivering value to people by helping them make progress. What larger need is your product filling? Keep asking until you find the meta frame, inside which are nested the product categories and specific products in your portfolio. An example of this might be an insurance company, which might decide that it’s really in the peace of mind business, and start adjusting how it works accordingly.

Action step: ask a colleague today, "what are people looking for when they come us? What business are we really in?"

Broadly, our field needs to do 3 things in 2024:

1. Adjust our attitude

2. Make sure we’re driving real business value

3. Communicate much more effectively

For a deeper consideration of this, read this in-depth post I just published on the forced maturation of the field.

Happy holidays, everyone. Rest up & see you next year.

There are three broad buckets:

(1) You’re covered by off the shelf (OTS) models (e.g. OpenAI): many operational use cases will be handled well by models. You get no upside or competitive advantage, but avoid falling behind. Rent theirs.

(2) A unique blend is feasible: you can create unique value by adding proprietary data to OTS models. You might be able to get to a real product value in a quarter.

(3) Roll your own: what is available off the shelf doesn’t help you, and you’ll need to build from scratch. This is expensive and slow, but possible upside is massive. Pay for experienced help. Ensure there is major business value before you invest (i.e. do your product discovery due diligence).

Start with bucket one, and advance until you get ROI or it’s not worth continuing. Most interesting examples will fall in bucket two. A handful of people should be able to do a feasibility assessment within one quarter.

(If you liked this, go listen to the short (20m), bonus podcast episode released yesterday specifically about thinking about AI in planning season, that I pulled this from. To go much deeper on how to think about incorporating AI into your product, check out the full conversation.)

**Explicitly aim for 80% accuracy, and 100% alignment.**

Building shared coherence and getting everyone rowing in the same direction is far more important than accuracy.

Next quarter we should have a darn good line of sight on. Anything past that, plan on a range of outcomes and expect to course correct at least quarterly. As the DevOps saying goes, "if it hurts, do it more often."

Perhaps one day our approaches to planning will accept and account for a constantly changing reality. Until then, let’s stop expecting a crystal ball.

(NB: I am *not* saying that planning is a waste of time. Planning is very useful. But the more useful part of planning is the alignment created by going through it together—not the resulting plan. Planning is useful. Plans are brittle.)

If you aren't in one of the best product cultures in the world, I suggest you set a baseline assumption of 10%.

Establishing world-class discovery practices can 3X your expected value (EV) by bringing your percentages up to world class levels (10 → 30%).

This is excerpted from today’s in-depth post, which links product strategy and discovery to show how together, strong practices can 9X your ROI.

It’s easy to read PG’s as saying “they keep pushing hard, no matter what.” That’s often true, but consider another lens on resourcefulness: equanimity.

This does not mean being passive. Here’s the definition:

Mental calm and composure, especially amidst difficulty? I can’t think of anything more likely to enable the creativity and resourcefulness needed to solve hard, creative, valuable problems.