Why Startups Fail: The Importance of a Solid Product Development Strategy
Every year, thousands of startups emerge with the goal of creating better alternatives to existing products. However, a staggering 90% of these startups won’t survive beyond five years. So, what goes wrong? While there are many contributing factors, a poor product development strategy is often the culprit.
What is a Product Development Strategy?
Before we dive into the importance of a product development strategy, let’s define what it’s not:
- A high-level, five-year plan that outlines every step
- A detailed financial plan that focuses solely on revenue growth
- A visually appealing slide deck designed to impress investors
These distractions can lead you astray from creating a real product development strategy. So, what is it?
A product development strategy is a comprehensive plan that guides a company in creating, testing, and marketing new products or improving existing ones. It encompasses the entire process, from ideation to launch and beyond, and helps the product team understand the target audience, competition, and market conditions.
Understanding the Importance of Strategy
To illustrate the importance of strategy, let’s use a soccer analogy. In 2009, Barcelona had one of the best teams in history, thanks to their Tiki-Taka strategy. However, when Bayern Munich faced Barcelona in the Champions League quarter-finals, they employed a high-pressure strategy that ultimately led to their defeat.
Similarly, in software product management, a misfitting strategy can lead to suboptimal results. For example, if a company develops an innovative email client but focuses solely on advanced features, they may alienate their original target audience and fail to differentiate themselves from the competition.
Common Product Development Strategies
There are several common product development strategies employed by successful companies:
- Price-driven: Creating significant value to charge a premium for your product or service (e.g., Apple)
- Innovation: Being on the leading edge of innovation to develop and charge for the most attractive alternative on the market (e.g., Tesla)
- Time to market: Solving a problem differently to create a new market (e.g., Airbnb, Netflix, Uber)
- Customer-oriented: Using data to generate customer insights and develop products customers want (e.g., Amazon)
- Platform: Developing a flexible, cost-effective, and scalable solution (e.g., Shopify)
Creating a Solid Product Development Strategy
So, how do you create a solid product development strategy? Here are the key steps:
- Research: Explore the market to identify opportunities for creating products.
- Ideate: Analyze the competition and imagine potential solutions.
- Define the product scope: Identify a specific audience, problem, and value proposition.
- Create a roadmap: Align on the next steps and prioritize tasks.
- Experiment: Test assumptions and explore solutions before development.
- Develop the product: Build and test the product with a portion of your audience.
- Penetrate the market: Define your go-to-market approach and execute it.
Final Thoughts
A solid product development strategy is crucial for success. It establishes constraints to concentrate on what you believe will lead to success. As you learn, you’ll realize that some things aren’t as you initially thought. Step back, inspect, and adapt your strategy accordingly. Remember, a product development strategy evolves slowly, so make minor tweaks regularly and conduct significant reviews yearly. Keep it simple, and you’ll excel in the product world.