The Evolution of Product Strategy
April 26, 2022

The Evolution of Product Strategy

Gaussian Team

A strong product strategy is the cornerstone of thriving in modern business. Product management is responsible for developing and bringing products to market, and product strategy is the communicable plan to maximize the outcomes of product management endeavors.

The history of product strategy teaches many lessons. In fact, the definition and application of "product development" has changed significantly over the decades. Today, leaders realize that "if you build it, they will come" is a weak philosophy, but there was a time recently when this was a core belief.

The Historical Evolution of Product Strategy: From "Divine Inspiration" to "Agile Planning"

The product management function, compared to other departments within organizations, is fairly young. The product department, subsequently, has evolved majorly, through new ways of working, or the implementation of new tools and resources, and the ever-changing needs of organizations and the customers they serve. It continues to evolve today.

As markets became more complex and competitive, the role of the product manager began to evolve as well. 5- and 10- year plans, while still useful as a guiding milestone, can no longer be relied on as the be-all and end-all of product strategy. In today’s business environment, the ability to rapidly respond to market changes is critical to success. 

The role of the product manager has shifted from being primarily focused on managing the product development process to being responsible for all aspects of the product life cycle, both the short-term execution and long-term planning. This includes everything from market research, analysis, resource planning, and roadmap development to channel management and go-to-market strategy. (With these new responsibilities come new product management challenges.)

To understand how to strategize around product and growth most effectively, it's important to understand the history of product strategy and product management.

1. Divine Inspiration (pre-1960s)

Strategy, as a corporate discipline, was not concretely defined until mid 20th century. Igor Ansoff, in the 1960s, coined the term "strategy" in the business sense, in his book Corporate Strategy. With the discipline around "strategy" came an increasing focus on planning, and an increasing focus on external factors (specifically competition).

But what came before strategic planning was a concrete discipline? Before market dynamics, competition, customer voice, and other external analyses were consistently used to make plans and decisions?

Simple. In the beginning, there was the autocrat. A risk-taker would identify an opportunity and doggedly pursue it, building an organization around themselves, with the strength of the resulting business dependent on the attractiveness of the original opportunity and the ease of execution (eg availability of capital). Decision-making would be informed purely hierarchically, driven by the "divine" perspective of the leadership.

Modern Day "Divine Inspiration"

While modern businesses have outgrown the simplistic "leadership knows everything" approach to management, there are instances where "divine inspiration" is still prevalent: the venture world.

In the early days of a startup, product management is all about big ideas. Individual leaders guide a company forward. A single idea is often the genesis of a company. Leaders in these organizations often have a "vision" of the customer's needs and pursue that relentlessly. Data is limited. Time is limited. Speed is everything.

This is the kind of thinking that led to the development of products like the iPod and iPhone. Steve Jobs had a clear vision for what he wanted Apple to be and what kind of experience he wanted customers to have. This focus helped him create groundbreaking products that completely changed the way people interact with technology.

Similarly, Mark Zuckerberg's vision for Facebook was to connect people worldwide. He's achieved this by constantly evolving the product and adding new features that meet users' needs. As a result, Facebook has become one of the most popular online services globally.

During a company’s early stages, product strategy is often founded on the vision and experience of the founders. This can be a great strength, but it can also lead to problems if the team isn't open to new ideas or is unwilling to change course when necessary.

A byproduct of the legacy of Steve Jobs, unfortunately, has been to enshrine the autocratic product strategy approach of "divine inspiration," where one person knows better than the rest of the team and even better than the customers themselves.

Many companies today, particularly young, bold, inexperienced ventures, follow the "divine inspiration" model of product strategy, though they may not be aware of it, and even though they may be speaking to customers frequently. An easy way to check if your own organization does this is to ask, "Does the decision maker of our product roadmap exercise her veto powerful frequently?"

2. Pure Planning, aka "Waterfall" (1960s to 2000s)

As strategy and planning became more formal disciplines in the mid 20th century, so too did they expand their reach into the realm of innovation and product creation. In 1970, Dr Winston Royce introduced the concept of "Waterfall." He stated that for large software projects to succeed, they required the following high level steps in a linear sequence, with one step flowing logically and chronologically into the next without overlap or iteration:

  1. System Requirements
  2. Software Requirements
  3. Analysis
  4. Program Design
  5. Coding
  6. Testing
  7. Operations

This was advanced in 1976 by T. A. Bell and T. E. Tayer who emphasized the criticality of setting requirements, and using these requirements as a framing for an entire software project, flowing from requirements to design to release in a "waterfall" fashion.

In fact, the Waterfall approach is merely an example of top-down planning, and, without modification, it suffers in the same way that other "planning only" approaches suffer: they are not resistant to change and uncertainty.

Waterfall is well suited to larger projects with well-defined requirements. It's easy to understand and manage, and it can be used to track progress and provide quality control. Engineering firms, like Boeing, successfully used the Waterfall approach to massively reduce rework and release stellar products.

However, the waterfall model also has some limitations. One of the biggest problems is that it's difficult to make changes once a project is underway. This means that feedback is only possible on the final product, and because each phase builds on the previous one, any change made in one phase can cause ripple effects that impact other phases.

Additionally, the waterfall model assumes that all requirements be known upfront, which is often not the case. As a result, this approach is often not well suited to projects that are complex or subject to change.

The waterfall model has been the traditional approach to product development for many years. However, as the world of business and technology has become more complex and dynamic, other approaches have emerged that are better suited to today’s environment.

3. Pure Agile (2000s to today)

In 2001, in a ski lodge in Utah, a group of self-described "organizational anarchists" birthed an evolution of the product management approach: the Agile Manifesto.

  1. Individuals and interactions over processes and tools
  2. Working software over comprehensive documentation
  3. Customer collaboration over contract negotiation
  4. Responding to change over following a plan

The Agile model emphasizes flexibility and collaboration. While waterfall worked well for larger organizations that had clearly defined goals that were realized over many years, many businesses needed to move faster, and could move faster due to the rapid nature of software development.

Agile focuses on small sprints where work can be continuously refined. Unlike the waterfall model, the agile approach is iterative and incremental. This means that requirements can be changed or added at any time during the development process.

The Agile model is well suited for projects that are complex or subject to change, as it allows for feedback and iteration. Also, the Agile approach encourages collaboration between developers and stakeholders, which can improve communication and understanding.

The Agile model is also well-positioned to help organizations plot a path through the ever-increasing uncertainty in today's business world. But it has critical flaws that make it untenable as a universal framework for product management, because it loses the benefits of strategic planning. And not even high-complexity implementations of Agile like SAFe are able to overcome the disconnect with top-down planning.

4. Agile + Planning (2010s onwards)

Agile made a name for itself by disparaging "planning"—indeed, one of the four tenets of the Agile Manifesto is, "Responding to change over following a plan."

This is unfortunate. While Agile excels at near-term decision-making, it struggles to provide the right answer over a multi-year horizon. A multi-year strategy requires a top-down approach, one that is rooted in outcomes and whose executional driver is an unrelenting focus on customer needs. The crux of building good products is understanding and solving the most important customer needs. How can you be sure you are doing this on the scale of 5-10 years if you are only looking at the level of 2 weeks? Mathematically, this is the challenge of local vs global optimization. Agile methodologies are a form of local optimization.

The challenges of Agile are exacerbated by the fact that there is often a gap between what customers ask for and what they need. This gap can be due to many factors, such as customers not being aware of all the possibilities or companies not being able to translate customer requests into practical solutions. When designing new functionality for a product, it's important to keep in mind that customers aren't always experts in building products. As such, their requests should be translated into needs instead of being taken at face value. Additionally, feedback can be subject to bias, such as recency bias, which occurs when recent feedback is given more weight than older learnings.

The solution is simple, at least in theory: merge Agile with Planning, to get the best of both worlds. Use an incremental, self-organizing approach (Agile) bounded by a top-level, rigorous, customer-rooted strategy plan.

With this model, the focus from a planning perspective is on a global, prioritized list of fundamental customer needs and requirements., using this to guide a high-level roadmap by mapping customer needs against features.

The best companies follow a customer-needs-driven approach to create products that meet the demands of their customer base, while incrementally building the features that meet these needs. By taking this approach, companies can make sure that their products are constantly evolving to meet the ever-changing needs of their customers.

The Future: Uniting Agile and Planning into "Continuous Strategy"

Product strategy is an essential part of any successful business. By understanding the needs of their customers and designing new functionality with those needs in mind, companies can create products that are always evolving to meet the demands of the market.

Modern innovating organizations, like Viewpointe, PILOT and MoMA, are increasingly uniting Agile processes with top-down Planning to benefit from the iterative, fast-paced growth that is critical in an increasingly uncertain market, while maintaining the long-term goal achievement that comes through multi-year and annual Planning.

For more on how top-down planning can connect to nearer-term Agile execution, check out our article on about reviewing product differentiation strategy quarterly.

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Photo by K. Mitch Hodge.


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