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 STRATEGIZE
Product Strategy and Product
Roadmap Practices for the Digital
Age

ROMAN PICHLER
Strategize: Product Strategy and Product Roadmap Practices for the Digital Age Roman
Pichler

Copyright © 2016 Roman Pichler. All rights reserved.

Published by Pichler Consulting.

Editors: Rebecca Traeger; Victoria, Bill, and Carma from CreateSpace Design: Ole H.
Størksen, Roman Pichler, and Melissa Pichler Cover photo by Ollyy/Shutterstock Many of the
designations used by manufacturers and sellers to distinguish their products are claimed as
trademarks. Where those designations appear in this book and the publisher was aware of
a trademark claim, the designations have been printed with initial capital letters or in all
capitals.

The author and publisher have taken care in the preparation of this book but make no
expressed or implied warranty of any kind and assume no responsibility for errors or
omissions. No liability is assumed for incidental or consequential damages in connection
with or arising out of the use of the information or programs contained herein.

This publication is protected by copyright, and permission must be obtained from the
publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission
in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
For information regarding permissions, please write to [email protected].

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To my children, Leo, Yasmin, and Kai
TABLE OF CONTENTS

Acknowledgments

Preface
The Big Picture: Vision, Strategy, Roadmap, and Backlog
A Brief Guide to This Book

Part 1: Product Strategy

Strategy Foundations
Understand What a Product Strategy Is
Think Big and Describe Your Vision
Find Out How Vision, Strategy, and Tactics Relate
Let the Business Strategy Guide the Product Strategy
Be Clear on Your Innovation Strategy
Take Advantage of the Product Life Cycle Model
Capture Your Strategy with the Product Vision Board
Complement Your Strategy with a Business Model
Choose the Right Key Performance Indicators (KPIs) for Your
Product
Track the Product Performance with a Product Scorecard
Complement KPIs with Operational Metrics
Engage the Stakeholders
Review and Update the Product Strategy
Strategy Development
Segment the Market
Pick the Right Segment
Use Personas to Describe the Customers and Users
Find an Itch That’s Worth Scratching
Clearly State the Value Your Product Creates
Make Your Product Stand Out
Eliminate Features
Offer a Great Customer Experience
 Build Variants and Unbundle Your Product
(Re-) Position Your Product
Strategy Validation
Iteratively Test and Correct Your Strategy
Determine the Necessary Validation Effort
Involve the Right People
Use Data to Make Decisions
Turn Failure into Opportunity
Get Out of the Building
Identify the Biggest Risk
Choose the Right Validation Techniques
Directly Observe Customers and Users
Carry Out Problem Interviews
Create Minimum Viable Products
Build Spikes to Assess Technical Feasibility
Pivot, Persevere, or Stop
Use Agile Techniques to Manage the Validation Work

Part 2: Product Roadmap

Roadmap Foundations
Why You Need a Product Roadmap
Be Clear on the Different Types and Formats of Product
Roadmaps
Choose the Right Roadmapping Approach
Understand Who Benefits from Your Roadmap
Involve the Stakeholders
Get the Relationship between the Roadmap and the Product
Backlog Right
Avoid These Common Roadmapping Mistakes
Roadmap Development
Make Your Product Roadmap SMART
Take Advantage of Release Goals
Capture Your Roadmap with the GO Template
Determine the Right Release Contents
Get the Features on Your Roadmap Right
 Identify the Success Factors
Determine the Window of Opportunity
Take Dependencies into Account
Make Your Roadmap Measurable
Roadmap Changes
Track the Progress
Review and Change the Roadmap
Portfolio Roadmaps
Why You Should Use a Portfolio Roadmap
Plan Your Portfolio with the GO Portfolio Roadmap
Address These Portfolio Challenges

Epilogue
About the Author
References
ACKNOWLEDGMENTS

This book would not have been possible without the help and
support of many people. I would like to thank the attendees of my
product strategy and roadmap workshops, as well as my blog
readers, for their feedback, comments, and questions. I would also
like to thank the following individuals for reviewing this book: Jock
Busuttil, Mike Cohn, Kerry Golding, Steve Johnson, Ben Maynard,
Rich Mirnov, Stefan Roock, Jim Siddle, and Caroline Woodhams.
Special thanks to Marc Abraham for reviewing and re-reviewing the
manuscript as I changed and rewrote sections. Thank you, Geoff
Watts, for helping me come to grips with self-publication; and thank
you, Ole Størksen, for designing the book cover and turning my
sketchy images into proper graphics. I am particularly grateful to my
wife, Melissa Pichler, for all her help and support—from reviewing
the manuscript and helping me with the graphics to listening to my
ideas.
PREFACE

A journey of a thousand miles begins with a single step.

Lao Tzu

Developing a successful product is not down to luck, a stroke of

genius, or just trying hard enough. While these factors are
undoubtedly helpful, product success starts with making the right
strategic decisions. The challenge for product managers, product
owners, and other product people is that we are often so
preoccupied with the tactics—be it dealing with an urgent sales
request or writing new user stories to keep the development team
busy—that we sometimes no longer see the wood for the trees. In
the worst case, we take our product down the wrong path and end
up in the wrong forest; we’ve perfectly executed the wrong strategy
and are left with a product that underperforms or even bombs. This
book will help you play a proactive game, make the right strategic
decisions, and use them to guide the tactical work. It explains how
to create a winning product strategy and an actionable product
roadmap using a wide range of proven techniques and tools.

The Big Picture: Vision, Strategy, Roadmap, and Backlog

When you look up the meaning of the term strategy, you will
probably find it defined as a plan of action to achieve a long-term
goal. While this definition makes sense, developing a successful
strategy for a product involves two steps: finding the right overall
strategy and deciding how best to implement it. To help you focus
on each step and deal with its specific challenges, I discuss them
separately in this book and distinguish between a product strategy
and a product roadmap. The product strategy describes how the
long-term goal is attained; it includes the product’s value
 proposition, market, key features, and business goals. The product
roadmap shows how the product strategy is put into action by
stating specific releases with dates, goals, and features. Figure 1
illustrates how the product strategy and roadmap relate, along with
their connection to the vision and the product backlog.

FIGURE 1: Product Strategy and Roadmap in Context

In Figure 1, the vision describes the ultimate reason for creating

the product, the product strategy states how the vision will be
realized, and the product roadmap states how the strategy will be
implemented. The product backlog contains the details necessary to
develop the product as outlined in the roadmap, such as epics, user
stories, and other requirements. Note that the relationships between
the elements in Figure 1 work in both directions: the product
backlog can cause changes to the roadmap, for instance, which in
turn may affect the strategy. For example, if the feedback from the
customers and users indicates that the product does not adequately
address their needs, or if the development progress is slow, then
this may lead to product roadmap changes. Similarly, larger roadmap
changes can cause product strategy adjustments. And if you cannot
find a valid product strategy—a strategy that helps you realize the
vision—then you may have to change the vision or look for a new
one.

A Brief Guide to This Book

This book contains two parts. Part 1 covers product strategy
practices, including determining a compelling value proposition,
addressing the right segment, and selecting the right key
performance indicators (KPIs). Part 2 discusses product
roadmapping practices such as choosing the right roadmap format,
using the right planning horizon, and reviewing the roadmap. Each
practice is described in a section, and related sections are grouped
into chapters. I have done my best to write the sections so that they
can be read independently rather than requiring you to read the
book from the beginning to the end. I have also tried to keep the
sections as concise as possible, so you can read and digest them
easily.
Most of the examples in this book are taken from the consumer
space. The reason for this is simple: I have tried to use products
that I hope you, the reader, have heard of. But the majority of
practices also apply to business-to-business products. While virtually
all examples are either digital products or products where software
plays a key part, you can apply many of the practices to other
products (although you may have to adjust them and ignore the
software-specific advice).
I have written this book specifically for product executives,
product managers, product owners, entrepreneurs, marketers, and
others who create and manage products. You will notice, however,
that I use the term product manager in the diagrams. My intention is
not to exclude anyone who isn’t called a product manager. Instead, I
employ the term in a generic sense to refer to the person in charge
of the product, no matter what the individual’s actual job title is.
While I am aware that product managers aren’t always in charge of
the product strategy, I believe that anyone who looks after a product
and is accountable for its success should drive the creation of both
the strategy and the roadmap.
PART 1: PRODUCT STRATEGY

Doing the right thing is more important than doing the thing right.
Peter Drucker

The first part of this book discusses concepts, techniques, and tools
that will help you develop a winning product strategy. The practices
are grouped into three chapters: strategy foundations, development,
and validation. The foundation practices are key to achieving product
success, no matter where your product is in its life cycle. The
development practices help you create a new product and ensure
the continued success of an existing one. They include techniques
such as segmenting the market, working with personas, and
bundling and unbundling the product, all of which are described in
the pages ahead. The validation practices help you test strategy
assumptions; they minimize the risk of choosing the wrong product
strategy and help you create a strategy that is likely to be
successful. While these practices are especially important for new
products, they will also benefit an existing product whose strategy
needs to change—for instance, to achieve product-market fit (PMF)
or to revitalize the product to extend its life cycle.
 STRATEGY FOUNDATIONS

As its name suggests, this chapter lays the foundations for the
remainder of the product strategy part. It contains essential strategy
concepts, techniques, and tools that will help readers who are new
to the topic get up to speed; for seasoned strategy practitioners,
they provide the opportunity to brush up their knowledge or close
any gaps. Let’s start by discussing what exactly a product strategy
is.

Understand What a Product Strategy Is What do searching on

Google and booking a car on Uber have in common? Both are
common technology experiences that require well-designed products
that can handle varying loads, process complex interactions, and
manage huge amounts of data. To achieve this, user stories have to
be written, design sketches have to be created, and architecture and
technology decisions have to be made. While attention to the details
is necessary to create a successful product, it is easy to get lost in
them. This is where the product strategy comes in: it helps you
manage your product proactively by looking at the big picture.
A product strategy is a high-level plan that helps you realize
your vision or overarching goal. It explains who the product is for,
and why people would want to buy and use it; what the product is,
and what makes it stands out; and what the business goals are, and
why it is worthwhile for your company to invest in it. Figure 2
illustrates the elements of the product strategy.
 FIGURE 2: The Elements of the Product Strategy

Let’s take a look at the three aspects captured in Figure 2: the

market and the needs, the key features and differentiators, and the
business goals.
The market describes the target customers and users of your
product: the people who are likely to buy and use it. The needs
comprise the main problem your product solves or the primary
benefit it provides. Think of a product like Google Search or Bing,
which solves the problem of finding information on the Internet,
compared with a product like Facebook, which provides the benefit
of staying in touch with family and friends.
The key features and differentiators are those aspects of your
product that are crucial to creating value for the customers and
users and that entice people to choose it over competing offerings.
Take, for example, the first iPhone and its key features of mobile
Internet, an iPod-like digital-music player, and a touch screen; or the
Google Chrome browser with its focus on speed, safety, and
simplicity. As these two examples show, the point is not to list all
product features in your strategy—that’s done in the product backlog
—but to focus on the three to five features that influence a person’s
decision to buy and use the product.1
The business goals capture how your product is going to benefit
your company, and why it is worthwhile for the company to invest in
the product. Is it going to generate revenue, help sell another
product or service, reduce costs, or increase brand equity? Being
clear on the business goals allows you to select the right key
performance indicators (KPIs) to measure your product’s
performance. Take the iPhone and the Google Chrome browser
mentioned earlier. While the iPhone generates the largest portion of
Apple’s revenue at the time of writing, the Chrome browser does not
earn any money for Google. But it does allow the company to control
the way people access the Internet, and it has reduced Google’s
dependency on third-party browsers such as Mozilla’s Firefox and
Microsoft’s Internet Explorer.
Note that a product strategy is not a fixed plan or something
you only create for a new product: it changes as your product grows
and matures. As a consequence, you should review and adjust your
product strategy on a regular basis—at least once a quarter as a rule
of thumb.

Think Big and Describe Your Vision Because the product

strategy is a high-level plan that describes how you intend to realize
your vision or overarching goal, it is helpful to begin by capturing
that vision. The vision is the ultimate reason for creating your
product; it describes the positive change the product should bring
about.

Why the Vision Matters

Having a vision is important, as creating and managing a successful
product requires a lot of time and energy. In order to be fully
committed, you have to be convinced that what you are doing is
right: life is too short to work on products you don’t believe in. On
the positive side, if you are enthusiastic about your product, then
this will help you do a great job and inspire others. Say I want to
create an app that helps people become aware of what, when, and
how much they eat. My vision, then, could be to help people live
more healthily; the strategy would be to create an app that monitors
their food intake in conjunction with a smart watch, fitness band, or
smart food scales. Figure 3 illustrates this relationship.

FIGURE 3: Vision and Product Strategy

Qualities of an Effective Vision

An effective vision has four qualities: it is big, shared, inspiring, and
concise. A big vision, such as “help people eat healthily,” increases
the chances that people will buy into it compared to a narrow one,
like “lose weight.” What’s more, it makes it easier to change the
strategy (if necessary) while keeping the vision stable. Say that it
turns out that my idea of developing a health app is ill conceived.
With a big vision in place, I can explore alternatives, such as writing
a book on healthy eating or offering mindfulness classes that teach
people to become aware of their eating habits.
The beauty of a shared vision is that it motivates and unites
people: it acts as the product’s true north, facilitates collaboration,
and provides continuity in an ever-changing world.2 An inspiring
vision resonates with the people working on the product, and it
provides motivation and guidance even if the going gets tough.
A concise vision, finally, is easy to communicate and
understand. To achieve this, I like to capture the vision as a slogan—
a short, memorable phrase such as “help people eat healthily.” A
powerful exercise is to ask the key stakeholders to formulate their
visions for the product and to share them with one another. Then
look for common ground and use it to create a big, shared, inspiring,
and concise vision.
Find Out How Vision, Strategy, and Tactics Relate As powerful
as they are, the vision and the product strategy are not enough to
create a successful product. What’s missing are the tactics—the
details required to develop a great product, including the user stories
and the design sketches. Figure 4 shows how the vision guides the
product strategy and how the strategy directs the tactics.

FIGURE 4: Vision, Strategy, and Tactics

Without a valid product strategy—a strategy that has been

validated and does not contain any significant risks—you will
struggle to discover the right product details; to create the right
epics, user stories, story maps, scenarios, design sketches, and
mock-ups; and to make the right architecture and technology
decisions. If you are not clear on the path, then how can you take
the right steps?
But it’s not only the strategy that shapes the tactics. The latter
also influences the former. As you collect data about how people
respond to your product, you learn more about the customer needs
and how best to address them. This may require smaller strategy
updates, but it could also result in bigger changes, such as pivoting
or sun-setting your product: significantly changing your strategy or
phasing out the product, respectively. Think of YouTube, which
pivoted from a video-dating to a video-sharing site; or take Google
Buzz, a social networking, microblogging, and messaging tool, which
was taken off the market a year after its introduction in 2010 due to
its lack of success. Similarly, if you struggle to find a valid strategy,
then this could indicate that your vision is a hazy, unattainable
dream that you should wake up from. Vision, strategy, and tactics
hence influence one another. Table 1 provides an overview of the
three concepts, together with sample artifacts.

TABLE 1: Vision, Strategy, and Tactics

Level Description Sample Artifacts

Vision Describes the positive change the Vision statement or slogan.

product should bring about, and
answers why the product should
exist. Guides the strategy.

Strategy States the path for attaining the Product strategy, product roadmap,
vision; captures how the vision business model.
should be realized; directs the tactics.

Tactics Describes the steps along the way, Product backlog, epics, user stories,
and the details required to develop a story maps, scenarios, interaction and
successful product. May lead to workflow diagrams, design sketches,
strategy changes. mock-ups, architecture model.
 Let the Business Strategy Guide the Product Strategy A
product is a means to an end. By benefiting its customers and users,
it should create value for your company. It is therefore important
that your product strategy supports the overall business strategy. A
business strategy describes how your company wants to achieve its
overall objectives. It determines, for instance, which new innovation
initiatives your company invests in, which markets you target, which
role organic growth and acquisitions play, and how your company
sets itself apart from the competition. Take Apple and Samsung, two
companies that have employed different business strategies in the
same marketplace. At the time of writing, Apple releases a few high-
end and highly priced products while Samsung focuses on capturing
market share with a wide range of offerings. Some companies refer
to their business strategy as the company mission. When I worked
at Intel in the late 1990s, the company mission was to “be the
preeminent building block supplier to the worldwide Internet
economy.”3
To ensure that your product helps the company move in the
right direction and that your strategy receives the necessary support
from management and stakeholders, the business strategy has to
direct the product strategy, as Figure 5 shows. Similarly, your overall
company vision should influence the vision of your product.
 FIGURE 5: Business and Product Strategy

To put it a different way, the product vision should be in line

with the overall company vision, and the product strategy should
help implement the business strategy. If your business does not
have an overall strategy, or if you are unaware of what it is, then
delay formulating a product strategy until a business strategy
becomes available—unless you work for a start-up, in which case
your business and product strategy are likely to be identical.

Be Clear on Your Innovation Strategy Products are value-

creating vehicles. In order to generate value, a product has to offer
something new; it has to innovate to a greater or lesser extent.
Innovations range from small incremental steps, such as improving
the user experience for an existing product, to big and bold ones—
think of the original iPhone, the Nintendo Wii, or the Uber taxi
service. It’s important to understand which innovation strategy your
product executes and which innovation type it represents, as this will
shape the product strategy. A helpful way to classify innovations is
the Innovation Ambition Matrix developed by Bansi Nagji and Geoff
Tuff and shown in Figure 6.4
 FIGURE 6: The Innovation Ambition Matrix

The matrix in Figure 6 considers the newness of the product on

the horizontal axis and the newness of the market on the vertical
axis. This allows us to distinguish three different innovation types:
core, adjacent, and disruptive.5

Core Innovations
Core innovations optimize existing products for established markets;
they draw on the skills and assets your company already has in
place, and they make incremental changes to current products.
These initiatives are core to your business, as they generate today’s
revenues. Most of your company’s products are likely to belong to
this category (unless you work for a start-up). Examples of core
innovations include Microsoft’s Windows operating system and the
Office suite. Both are major revenue sources for the company. The
longer-term growth potential of core products is low, and so is the
amount of risk and uncertainty present. Your ability to create a
reliable financial forecast or business case is high due to your in-
depth knowledge of the market and the product. Because core
products leverage existing assets, a conservative attitude is
appropriate. You should aim to protect the product, focus on
operational excellence, avoid mistakes, optimize the existing
business model, and use proven technologies—unless you decide to
make a bigger change to your product, such as taking it to a new
market, which would turn it into an adjacent innovation.

Adjacent Innovations
Adjacent innovations involve leveraging something your company
does well into a new space—for example, taking an existing product
to a market that’s new to the company or creating a new product for
an existing market. Examples of the former include Microsoft
entering the server market with Windows NT in 1993 and Facebook
moving into the online payment space with its Messenger
application.6 Examples of the latter include the Apple TV and
Google’s Chrome browser. Both companies entered an existing
market (TV set-top boxes and web browsers, respectively) with a
new product. Adjacent innovations allow you to open up new
revenue sources, but they require fresh insights into customer
needs, demand trends, market structure, competitive dynamics,
technologies, and other market variables. You may also have to
acquire new skills, use new technologies, and adapt an existing
business model. The amount of risk and uncertainty present is
therefore considerably higher than in core innovations. It
consequently requires more time to develop a valid product strategy,
and it becomes difficult to create a reliable financial forecast. To
succeed with adjacent innovation, you should adopt an inquisitive
attitude, be willing to take informed risks, and have the ability to
make mistakes and fail. You will benefit from having a dedicated,
collocated product team that is loosely coupled to the rest of the
organization and that applies agile and lean product development
practices.

Disruptive Innovations
Core and adjacent innovations provide you with the benefit of
leveraging existing skills and assets, both intellectual and material.
This makes the challenge of innovating successfully manageable.7
Unfortunately, such innovations also share a significant
disadvantage: they address an existing market, and their growth
prospects are limited by your ability to grow the market and capture
more market share—that is, to attract more customers and users. In
order to experience higher long-term growth, your company should
invest in disruptive innovations. Apple, for instance, disrupted the
mobile-phone market with the iPhone by offering a product with
superior usability, as well as better design and better mobile
Internet; Nintendo disrupted the games-console market with its Wii,
which could be used without a traditional control or keyboard and
was offered at a lower price; Amazon disrupted the retail book
market with its online platform, making it easier and more
convenient for consumers to shop, and offering greater choice and
lower prices. While disruptive products often use disruptive
technologies—for example, the touch screen in the case of the
iPhone, and the Internet in the case of Amazon—a disruptive
technology does not necessarily create a disruptive innovation.
Instead, a disruptive innovation typically solves a customer problem
in a better, more convenient, or cheaper way than existing
alternatives. A disruptive product also creates a new market by
addressing nonconsumption: it attracts people who did not take
advantage of similar products. But as the disruptive product
matures, it makes inroads into an established market, reconstructs
market boundaries, and disrupts the market. Take the iPhone as an
example. The incumbents, including Nokia and BlackBerry, did not
perceive the original iPhone to be a threat; its business features,
such as e-mail integration, were too weak. But as the iPhone
improved and offered an increasing range of business and
productivity apps, more and more people began to use the product,
and the market share of Nokia and BlackBerry phones started to
decline. The first iPhone also removed the traditional distinction
between business and consumer segments, thereby changing the
market boundaries.
While disruptive innovations are crucial for enabling future
growth and securing the long-term prosperity of your business, most
established companies struggle to leverage such innovations
effectively. To achieve disruption and to do different things, a
company has to do things differently and therefore disrupt itself—at
least to a certain extent. It has to discontinue some of the practices
that have helped it succeed in its established markets, acquire new
skills, find new business models, and often embrace—and in some
cases develop—new technologies, such as the touch screen for the
iPhone and the motion controller for the Wii. The effort to create a
valid product strategy is significantly higher than for adjacent
innovations; it may take you several months to find a product that is
beneficial, technically feasible, and economically viable.
Succeeding with disruptive innovations requires an
entrepreneurial mind-set and the ability to experiment, to make
mistakes, and to fail. You will benefit from using an incubator: a
new, temporary business unit that provides the necessary autonomy
to think outside the box, break with traditions, and to iterate and fail
quickly. Having a small, collocated team with full-time members is a
must, as is employing agile and lean product development practices.
Be aware that creating a reliable financial forecast is impossible for
disruptive innovations. Requiring a solid business case can prevent
you from creating disruptive products. It’s often better to use the
risk of inaction—the danger of not investing in a disruptive product
and therefore losing out on future revenue and profits.8

Summary
Table 2 summarizes the three innovation types; it shows that you
should adopt different practices and manage products differently
depending on their innovation types.
Note that over time, successful disruptive and adjacent products
turn into core ones. A good example is the iPhone. While the first
version was a disruptive innovation, it has become a major revenue
source for Apple. But you can also move a core product into the
adjacent space by taking it to a new market. Think of the iPhone 5C,
which was aimed at a younger audience and emergent markets. The
bottom line is: to grow organically, companies have to continually
look for new growth opportunities and invest in adjacent and
disruptive products—the products that generate tomorrow’s cash.

TABLE 2: The Three Innovation Types and Their Impact

Areas Core Innovation Adjacent Disruptive

Innovation Innovation

Product Optimize an existing Create a new product Create both a new

product for an for an existing market, product and a new
established market. or take an existing market.
product to a market
 that’s new to the
company.

Growth Low Medium High

Potential and
Risk

Attitude Conservative—protect Inquisitive—take Entrepreneurial—create

existing assets, focus on informed risks; look for new assets, develop
operational excellence; new growth new skills, and find a
avoid mistakes; opportunities while valid business model.
optimize existing leveraging existing Mistakes and failure are
business models. skills, assets, and unavoidable.
business models.

Organization Business as usual; Dedicated, collocated Incubator with a small,

matrix organization. product team that is full-time product team
loosely coupled to the that is autonomous and
rest of the collocated.
organization.

Technologies Proven technologies; New technologies may New, disruptive

changes usually result be necessary to gain a technologies are likely
in incremental competitive to be required.
improvements. advantage.

Research and Low (hours to days) Medium (weeks) High (months)

Validation
Effort

Reliable Possible Difficult to create Impossible to create

Financial
Forecast
 Take Advantage of the Product Life Cycle Model The purpose
of the product strategy is to maximize the chances of achieving
product success: to ensure that your product grows and prospers. A
helpful model to understand how products develop over time is the
product life cycle. The idea behind the life cycle model is simple. Like
a living being, a product is born or launched; it then develops,
grows, and matures. At some point it declines, and eventually the
product dies and is taken off the market, as Figure 7 shows.9
The product life cycle model in Figure 7 presents five stages:
development, introduction, growth, maturity, and decline. I have
also added three important events in the life of a product: launch,
when the product first becomes available; achieving product-market
fit (PMF), when your product is ready to serve the mainstream
market; and end of life, when you decide to discontinue your
product. Of the five stages, growth and maturity are the most
attractive ones, as they provide you with the biggest business
benefits. For revenue-generating products, your product should
become profitable around PMF, and it should offer the highest profit
margin in maturity. You should therefore aim to get your product
into the growth stage quickly, and to keep it there for as long as you
can.

FIGURE 7: The Product Life Cycle Model

 While the curve in Figure 7 is roughly bell-shaped, your
product’s actual trajectory may differ significantly: it may be steeper
or flatter. This demonstrates that the life cycle model is not a
predictive tool that forecasts the business benefits your product will
generate. Instead, it is a sense-making model that helps you reflect
on how your product is doing so you can make the right strategic
decisions. In order to leverage the product life cycle model, you have
to define the business benefits your product delivers and then track
them over time. For revenue-generating products, for example,
revenue is commonly used, but if your product exists to sell another
product or service, then the number of active users might be the
appropriate metric to track.
As an example let’s take a look at a sample product life cycle
curve. Figure 8 illustrates the life cycle of the iPod family by showing
iPod sales per year.

FIGURE 8: The Life Cycle of the iPod Family10

As Figure 8 shows, the iPod was launched in 2001 as Apple’s first

consumer music gadget. The company was a new entrant in the
digital-music-player market, which at the time was dominated by
products like the Nomad Jukebox from Creative Labs. In 2002, the
iPod became Windows-compatible, and sales subsequently reached
600,000 units. In the following year, Apple launched iTunes, which
helped sell more than 900,000 units in 2003 and nearly 4.5 million in
2004. The iPod had entered the growth stage and become the
dominant digital-music player in the United States. To sustain
growth, Apple enhanced the product and added new features, for
instance, the ability to show photos and videos. The company also
introduced new product variants, such as the iPod Nano and iPod
shuffle in 2005 and the iPod Touch in 2007. Additionally, Apple
issued a number of limited iPod editions, including a black-and-red
U2 special edition. Sales of the iPod reached their peak in 2008,
which also marked the product’s maturity stage. In 2009, iPod sales
started to decline. As a consequence, Apple discontinued the original
iPod, now called the iPod Classic, in 2014.

Development
Let’s now look at the individual life cycle stages and how they
influence the product strategy. Before the launch your primary goal
is to find a valid product strategy—a strategy that results in a
product that is beneficial, feasible, and economically viable.11 In this
period you are likely to carry out some research and validation work,
and you may have to pivot—that is, to significantly change your
strategy and choose a different path for attaining your vision. Take,
for example, the idea mentioned earlier of creating a healthy-eating
app. If it turns out that building an app is not a valid approach, I
could pivot and choose to write a book on healthy eating instead.
Don’t make the mistake of trying to launch the perfect product.
No product is impeccable from day one. Even iconic products like the
iPhone had a comparatively humble start. Think of all the things the
very first iPhone could not do: no videos, no copy and paste, and no
third-party apps—just to name just a few. The trick is therefore to
launch a good-enough product, a product that does a good job of
meeting the primary customer need, and to subsequently adapt and
enhance it. How good your initial product has to be is closely linked
with its innovation type. The initial version of a disruptive product
can be comparatively basic, like the original iPhone. An adjacent
product, however, faces higher customer expectations, as it
addresses an established market where the customers have viable
alternatives to choose from. Take the Google Chrome browser as an
example. When the product was launched in 2008, the company
entered an existing market with a number of established products,
including Internet Explorer, Firefox, Opera, and Safari. In order to
succeed, Google had to offer a product that was faster, more secure,
and simpler to use than the competing browsers. The company also
heavily advertised its product, for instance by using poster ads at
train stations in London.

Introduction
After the launch your objective is to achieve PMF and to experience
growth as quickly as possible. How long this is likely to take you and
how much effort it will require, depends on your product’s innovation
type. Building an initial customer base and finding out if and how
people use the product is particularly important for disruptive
innovations. Take Twitter as an example. The company had to
discover how people used the product to decide how to move it
forward, as Twitter’s cofounder Ev Williams explains: “With Twitter, it
wasn’t clear what it was…Twitter actually changed from what we
thought it was in the beginning, which we described as status
updates and a social utility. The insight we eventually came to was
[that] Twitter was really more of an information network than it is a
social network. That led to all kinds of design decisions, such as the
inclusion of search and hash tags and the way retweets work”
(Lapowsky 2013). Adjacent products, however, tend to require a
shorter introduction stage, as they address an existing market and
compete with established products. You can therefore usually learn
about the customer and user needs and how best to address them
during the research and validation work you do in the development
stage.
 With both disruptive and adjacent products, make sure you
track the product performance and monitor how your product’s
business benefits develop. If they are flat or rise only slowly, then
you should investigate why the uptake is poor. Consider changing
your product, or even killing it. The former may entail enhancing or
adding features, or it can require a more drastic change, such as
pivoting or unbundling the product. Flickr, for example, changed
from an online role-playing game to a photo-sharing website;
YouTube evolved from a video-dating site to a video-sharing product
(Love 2011). While killing your product may sound rather drastic, it
frees up resources and avoids investing time, money, and energy on
a product that is not going to be successful. Take, for instance,
Google Wave, a product that combined e-mail, instant messaging,
and wikis. Due to its lack of success, Wave was discontinued at the
introduction stage about a year after its launch in 2009.12 Remember
that failure is part and parcel of the innovation process; there is no
guarantee that your product will make it to the growth stage and
become a success.
If you see a positive market response to your newly launched
product, then don’t make the mistake of overoptimizing your product
for the early market. The initial customers and users of a new tech
product are usually happy to put up with a few teething issues as
long as they will gain an advantage from using it. To get into the
mainstream market, you have to satisfy much higher expectations;
you have to provide a product that works flawlessly and is easy to
obtain, install, and update. As a consequence, the transition to the
growth stage may not be a small, incremental step. Instead, your
product may face a gap or chasm between the early and the
mainstream market that you have to overcome (Moore 2006). Figure
9 shows the product life cycle with such a chasm between the
introduction and the growth stage.
 FIGURE 9: The Product Life Cycle with Chasm

To bridge the chasm, you have to adapt and improve your product.
This may include enhancing the user experience, adding or
improving features, or refactoring the architecture to increase
performance and stability.13 In addition, you may have to adjust the
business model and revisit, for example, the cost of acquiring
customers and the marketing and sales channels you use. The size
of the chasm is influenced by your product’s innovation type. While
the initial version of a disruptive product can be simpler and more
basic than an adjacent one, it tends to require more time and effort
to achieve PMF and experience growth. An adjacent product usually
faces a smaller gap between the introduction and the growth stage,
as the initial expectations for the product are typically higher.

Growth
Once you start to experience significant growth, you have achieved
PMF. You should now have a product that fits the market and does a
good job of creating value for the mainstream customers and users
and for your business.14 For a revenue-generating product, you
should have reached the break-even point by now and should be
benefiting from a positive cash flow. Your strategy now needs to
focus on penetrating the market, sustaining the growth, and fending
off competitors. Therefore, you have to find ways to attract more
customers and users and clearly differentiate your product, since
competitors may start to copy some of its features. At the same
time, you have to manage the growth and deal with a product that
serves an ever-growing audience, is becoming increasingly feature-
rich, and requires more and more people to develop it. You may
want to start unbundling your product and promote features to
products in their own right, or you could employ product variants. (I
explain both techniques later in this part.) Maturity, Life Cycle
Extension, and Decline As your product matures, growth will
eventually start to stagnate. When this happens, you face an
important strategic inflection point. One option is to accept your
product’s trajectory, let it continue to mature, and keep it at this
stage for as long as possible by, for instance, defending its market
share and reducing cost. Alternatively, you can move the product
back into the growth stage thereby extending its life cycle, as Figure
10 shows.15

FIGURE 10: Extending the Product Life Cycle

A number of techniques can help you make an aging product

attractive again including enhancing its capabilities and adding new
features. Take the iPod Classic mentioned earlier. Apple made
considerable changes to the product throughout its life cycle: it
decreased its weight, extended the battery life, and added the ability
to view photos and watch videos, to name just a few. Sometimes,
though, the opposite strategy is more appropriate, and instead of
adding you may want to remove features and declutter your
product. Microsoft Word is another example. Microsoft has made
significant efforts to simplify the application in recent years, thereby
improving the user experience and making it easier for people to use
the product. Another way to stimulate growth is to take your product
to a new market or market segment, thereby turning it into an
adjacent innovation. Apple, for example, introduced the iPhone 5C in
2013 to target a younger audience and emerging markets. Finally,
you might consider bundling your product with other offerings to
increase its attractiveness. For instance, mobile operators in the
United Kingdom have started to offer free streaming subscriptions
when customers purchase higher-priced contracts.
Despite your best efforts, your product will one day reach the
decline stage. During this stage, you want to milk it for long as you
can while minimizing the investment that goes into the product. As
the profits it generates start dropping, you should consider
discontinuing it—just as Apple did with the iPod Classic in 2014.

Summary
Table 3 summarizes how the life cycle stages shape the product
strategy.
 TABLE 3: The Product Life Cycle and the Product Strategy

Life Cycle Stage Strategy

Development Develop a valid strategy: a strategy that results in a product

that is beneficial, feasible, and economically viable.

Adapt and improve your product to achieve product-market fit

Introduction (PMF). This may require incremental changes such as
improving the customer experience, adding new features, and
refactoring the architecture. But it may also make a more
drastic change or pivot necessary. Aim to achieve the break-
even point for a revenue-generating product by the end of this
stage. Ensure that your business model is scalable.

Growth Sustain the growth by penetrating the market and fending off
competitors. Keep your product attractive, and refine it.
Manage the growth by unbundling your product or by creating
variants, for instance. Ensure that your product is profitable (if
it is meant to generate revenue).
Maturity As growth stagnates, extend the life cycle and revive growth by
taking the product to a new market, for example, or bundling it
with another product or service. Alternatively, milk your
product by serving the late majority. Defend its market share
and focus on profitability for revenue-generating products.

Decline Reduce cost to keep the product profitable for as long as

possible, then start phasing it out.

As Table 3 shows, the strategy for a new product should first help
you get to launch, then to achieve PMF, and then to sustain the
growth. Once the growth starts to stagnate, you have reached an
important strategic inflection point: You either revitalize your
product, for instance, by taking it to a new market, or you let it
mature and eventually decline and die. As you have probably
noticed, the strategic work does not end until you discontinue your
product. You should therefore regularly assess your product’s
performance and adjust your strategy accordingly. Strategy and
execution go hand in hand for digital products. They are two sides of
the same coin.

Capture Your Strategy with the Product Vision Board Even

the best strategy is useless if you can’t communicate it effectively.
The Product Vision Board is a simple yet powerful tool that helps you
with this. I have designed it to describe, communicate, test, correct,
and refine the product strategy.
The Product Vision Board consists of the five sections shown in
Figure 11. The top section captures the vision; the bottom four
sections describe the product strategy.
 FIGURE 11: The Product Vision Board

The top section in Figure 11 is called Vision. It captures your

overarching goal, which is expressed as a brief vision statement or
slogan. The leftmost bottom section is called Target Group. It
describes your market or market segment, the customers, and the
users. The next section is called Needs, which states the value the
product creates for your target group, the problem that the product
solves, or the benefit it provides. The Product section captures the
actual product; it explains what makes your product special and why
it stands out. It also asks whether it is feasible for your organization
to develop the product. The last section, titled Business Goals,
captures the desired business benefits—the value the product should
create for your company. Examples include opening up a new
revenue source, achieving a profitability target, reducing cost, or
being able to provide a service or sell another product. There is also
an extended version of the Product Vision Board with additional
sections to capture the business model, which I discuss below.
 When you create your Product Vision Board, start with your
vision, and then describe your strategy by filling in the bottom
sections. You can use the Product Vision Board to describe the vision
and strategy for a brand-new product or for an existing one. In the
latter case, you may want to invite the stakeholders and ask them to
create their personal Product Vision Boards. Then compare the
results and see whether there is a shared vision and a shared
product strategy; if not, determine where the main differences are
and decide how to address them.
You can download the Product Vision Board template from my
website, www.romanpichler.com, where you can also find more
information about the tool. Alternatively, you may choose to re-
create it using your favorite tool—be it an electronic spreadsheet or
a whiteboard. A number of other tools are also available to capture
the product strategy, of course, including the Lean Canvas (Maurya
2012) and the Business Model Canvas (Osterwalder and Pigneur
2010). Choose the one that works best for you.

Complement Your Strategy with a Business Model It’s great to

determine the market segment, the value proposition, and the
business goals of your product. But you should also understand how
to reach the desired business benefits stated in your strategy, and
how you can monetize your product—be it by selling it or by using it
to sell another product or service. In other words, you should
complement your product strategy with a business model.

Common Business Models

Common business models for digital products include subscription,
freemium, advertising, and bait and hook. A subscription business
model requires customers to pay a subscription price to access the
product, as is the case for Microsoft Office and Adobe Photoshop.
Freemium means giving away a basic version for free but charging
for premium features, as Spotify and Skype do. Advertising
generates revenue from in-app or online ads—a business model
employed, for example, by YouTube, Facebook, and many news
websites. Bait and hook provides a free or discounted product and
generates revenue from selling another product or service that locks
in the customer. Take, for instance, iTunes: while the product itself is
free, it is only truly useful when combined with a comparatively
expensive iPod, iPhone, or iPad. Once you have started using Apple
products, you are locked into the Apple ecosystem.

Capturing the Business Model

For some products, the business model already exists, as in the case
of iTunes. The product was created to execute an existing business
model and to help sell iPods. But for other products, such as
Facebook and Twitter, the product and the business model are
created together. Among the various tools available to describe your
business model, the Business Model Canvas (Osterwalder and
Pigneur 2010) is probably the most well known. But if the Product
Vision Board described earlier resonates with you, then you can
simply extend the board and describe your business model alongside
the vision and the product strategy, as Figure 12 shows. I find this
option especially attractive when the product and business model
are developed together.
 FIGURE 12: The Extended Product Vision Board

The first and second rows of the board in Figure 12 are identical to
the standard Product Vision Board. The business model is captured
in the bottom row, which is inspired by the Business Model Canvas
and provides the following four sections:
 Competitors describes the strengths and weaknesses of the
competition and their products. It uses your insights from
performing a competitor analysis and helps ensure that your
product stands out.
Revenue Sources captures the way your product generates
money: for instance, by selling licenses, subscriptions, or online
or in-app ads, or by charging for premium features.
Cost Factors states the cost incurred by developing, marketing,
selling, and supporting your product. This includes the cost of
acquiring users and customers, purchasing third-party
components, and paying for the services and products provided
by partners and suppliers.
Channels are the ways you will contact your users and
customers to inform them about your product and to sell and
deliver the product. The latter can range from implementing the
requirements of an online app store to working with retailers to
get some shelf space for a shrink-wrapped product. Consider if
the appropriate sales and marketing channels already exist, or if
you have to create or acquire them.

You can download the Extended Vision Board for free from my
website, where more information on the tool is available.

Business Model vs. Business Case

The business model explains how the product is monetized, but it
does not quantify the revenue generated or the cost incurred. That’s
done by a business case, which forecasts the product’s financial
performance, typically over the next two to three years. This allows
you to judge if developing and providing the product is an attractive
investment, and it helps you anticipate the cash flow. Depending on
your product’s innovation type, a realistic business case can be
challenging to create, as discussed earlier. For core products,
creating such a business case is usually feasible; for adjacent
products, it can be very hard; for disruptive products, it is
impossible, as the market for your product does not exist yet. For
adjacent and particularly disruptive products, you should consider
using the business model to justify the investment, together with the
inaction risk—that is, for example, the loss that would materialize if
the product were not developed and the related business benefits
were not realized.

Choose the Right Key Performance Indicators (KPIs) for

Your Product Key performance indicators (KPIs) are metrics that
measure your product’s performance. They help you understand if
the product is meetings its business goals, and if the product
strategy is working. Without KPIs, you end up guessing how well
your product is performing. It’s like driving with your vision blurred:
You can’t see if you are heading in the right direction or getting
closer to your destination. You may have a hunch or intuition, but
how can you tell that it’s right? Using KPIs and collecting the right
data helps you balance opinions, beliefs, and gut feelings with
empirical evidence, which increases the chances of making the right
decisions and providing a successful product. This section helps you
choose the right indicators for your product.

Making the Business Goals Measurable

In order to choose the right KPIs, use the business goals stated in
the product strategy. For example, if your product directly generates
revenue, then revenue is likely to be a key indicator. But knowing the
business goals is not enough. To effectively apply the indicators,
analyze the data you collect, and take the right actions, the goals
must be measurable. Say my company decided to invest in creating
a healthy-eating app mentioned earlier, with the goal of diversifying
the business and opening up a new revenue source. While this might
be a good idea, the goal is not specific enough. I can’t tell if the
product is making enough revenue and meeting its business goal;
there is no target and no time frame stated that I can use to
measure progress against. The challenge is to establish a
measurable goal that’s also realistic, particularly for brand-new and
young products, whose business benefits are difficult to correctly
quantify.
One helpful technique for addressing this challenge is to work
with ratios and ranges (Croll and Yoskovitz 2013). Instead of stating
that the new product should create x amount of revenue per year, I
could say, for instance, that the product should increase the
company’s revenue by 5 to 10 percent within one year after its
launch, for instance. While this goal might still be unrealistic, I have
at least drawn a line in the sand that progress can be measured
against. If it turns out that the goal is too ambitious, you should
recognize this, move the line, and adjust your target. The good news
is that the longer you work with your product and the more stable it
becomes, the easier it gets to come up with measurable goals that
can actually be met. With measurable business goals in place, follow
the tips below to find the right performance indicators for your
product.

Choosing Relevant Indicators

Avoid vanity metrics, which are measures that make your product
look good but don’t add value (Ries 2009). Take the number of
downloads for my healthy-eating app as an example. While a fair
number of people might download the app, this tells me little about
how successful it is. Instead, it indicates the effectiveness of my
marketing efforts. Rather than measuring downloads, I should
choose a relevant and helpful metric, such as daily active usage or
referral rate. Whenever you select an indicator, check if the indicator
actually measures performance or just makes your product look
good.
Don’t measure everything that can be measured, and don’t
blindly trust an analytics tool to collect the right data. Instead, use
the business goals to choose a small number of metrics that truly
help you understand how your product performs. Otherwise, you
take the risk of wasting time and effort analyzing data that provides
little or no value. In the worst case, you act on irrelevant data and
make the wrong decisions. Think of driving a car. A small number of
indicators are helpful for getting to your destination, including speed,
fuel consumption, and revolutions per minute. If the car dashboard
always showed other data, such as oil pressure or battery status, it
would be harder to take in the relevant information.
In addition, be aware that some metrics are sensitive to the
product life cycle. You usually cannot measure profit, for example,
before your products enters the growth stage.16 And tracking
adoption rate and referrals is very useful in the introduction and
growth stages, but it is less so in the maturity and decline stages.

Quantitative and Qualitative KPIs

As their name suggests, quantitative indicators, such as daily active
users or revenue, measure the quantity of something rather than its
quality. This has the benefit of collecting “hard” and statistically
representative data. Qualitative indicators, such as user feedback,
help you understand why something has happened—for instance,
why users aren’t as satisfied with the product as expected.
Combining the two types gives you a balanced outlook on how your
product is doing. Doing so reduces the risk of losing sight of the
most important success factor: the people behind the numbers—that
is, the individuals who buy and use the product.

Lagging and Leading Indicators

Lagging indicators, such as revenue, profit, and cost, are backward-
focused and tell you about the outcome of past actions. Leading
indicators, in contrast, help you understand how likely it is that your
product will meet a goal in the future. Take product quality as an
example. If the code is becoming increasingly complex, then adding
new features will become more expensive, and meeting a profit
target will become harder. Using both backward-and forward-focused
indicators tells you if you have met the business goals and helps you
anticipate if the product is likely to meet future goals.

Looking beyond Financial and Customer Indicators

Financial indicators, such as revenue and profit, and
customer metrics, like engagement and referral
rates, are the two most common indicator types in
my experience. While these metrics are undoubtedly
important, they are not sufficient. Say your product
is meeting its revenue and profit goals, and customer
engagement and referral rates are high. This
suggests that your product is doing well; there is no
reason to worry. But if at the same time the team
motivation is low or the code quality is deteriorating,
you should still be concerned. These indicators
suggest that achieving product success will be much
harder in the future. You should therefore look
beyond financial and customer indicators and also
use the relevant product, process, and people
indicators. This creates a holistic outlook on the
product performance, and it reduces the risk that you
miss important warning signs.17

Leveraging Trends
Compare the data you analyze to other time periods, for example,
user groups, competitors, and cancellation rates from quarter to
quarter, or revenue growth over the last six weeks. This helps you
spot trends—for instance, if revenue is increasing, staying flat, or
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