Product development strategy: How to define the direction of your new product

To stay competitive, companies need to find new ways to innovate and deliver continuous value to their customers. Yet creating winning products requires more than an innovative idea. Careful planning and strategy are a must for success. You'll need a clear direction to follow to optimize resources, identify priorities, and ensure a smooth product development process.

In this article, we’ll look at what a product development strategy is and how you can develop a great one for your product. For expert insights and best practices, we spoke to Vicky Volvovski, Senior Director & Head of Product Management at Postlight and former Head of Product at Zapier; Enzo Avigo, Co-founder & CEO at June and former Product Manager at Intercom, Zalando, and N26; and Ian Booth, Senior Product Manager at EduMe.

A product development strategy is a fundamental part of the new product development process (NPD). It’s a high-level plan that describes the actions needed to develop new products or upgrade existing ones and introduce them to current or new markets.

New product development strategies link together the product vision and the strategic steps to realize that vision. In other words, a product development strategy guides a company's product development efforts—from concept to testing to launch—and aligns the new product's features and functionalities with the business strategy and target market needs.

Defining a product development strategy before you begin development is crucial. It will set the direction of your product and help you set clear goals. Let’s dive into the top three benefits of developing a strategy for your new product.

When you’re building a new product, deciding what to do, and most importantly, what not to do, is challenging. A product development strategy gives you a clear direction to follow. It helps you set priorities and make decisions that align with the company's overall strategy. "Sometimes the things you say 'no' to might be good ideas, but they don't align," explains Vicky. "That’s where product strategy gives you clarity."

When goals and priorities are well understood, product teams can make better decisions throughout the development process. They will know what ideas are worth pursuing, what features they should prioritize, or how to adjust the plan if challenges arise. This brings us to the third benefit.

When product teams have a well-defined strategy to follow, they can better manage resources, estimate timeframes and costs, and make quick, confident decisions. Enzo points out that a product development strategy not only is a way to optimize resources but it also keeps your teams motivated and your organization healthy.

Now that you know how a product development strategy can benefit your organization, let's look at three different types of strategies you can adopt and some real-life examples of product development strategies.

Being data-driven means making decisions based on data and key metrics. Data-driven companies break down the product development strategy into quantitative objectives to measure progress and success. What to measure and why usually depends on the company's high-level strategy. Product teams translate the high-level strategy into key metrics and generate initiatives to achieve the desired goals.

N26 is a company that adopts a data-driven approach to product development strategy. The company was founded with this vision: A global digital bank to transform the way we manage money.

“One of the ways to achieve our vision was to reach as many people as possible and increase our user base,” says Enzo Avigo, Co-founder of June and former Product Manager at N26. He and his team identified the metrics they wanted to move, such as the conversion rate and the number of active users, and worked on the main product initiatives to unlock those metrics.

A vision-driven strategy starts with a view of the future—a clear picture of what the company wants to build. Innovation is driven by intuitive vision and personal goals rather than market research data. Founders of such companies rely on this type of strategy when they want to create truly innovative products and explore a market where users don’t know much about the new product and what features they’d like.

Yet “vision-driven” doesn’t mean that product teams won't use data. Insights and data are still needed to understand user behavior, test assumptions, or understand how to upgrade the product in the future.

Apple is one of the best examples of a company executing a vision-driven product strategy. Historically, Apple was known to build the products first and then find the market for them. In an interview, Steve Jobs explained: "We do no market research. We just want to make great products. When we created the iTunes Music Store, we did that because we thought it would be great to be able to buy music electronically, not because we had plans to redefine the music industry."

This third type of product strategy is based on market and user research. Product teams start the new product development process with product discovery and use research to inform their decision-making at all stages of the process. They reach out to users to understand their needs and expectations and based on data and user feedback, they determine how to build a product that satisfies those needs and delivers value to customers.

One example of a research-driven product strategy is Intercom. During his time as Product Manager at Intercom, Enzo Avigo worked in the platform group. The team was developing the Intercom App Store, where users can browse and install third-party apps and integrations. User research was crucial to figure out what to build. “We knew that the more integrations our users had, the better retention they had,” says Enzo. “We created the platform group to make sure that all the users could find the right app, for the right use case, at the right moment.”

While this is a "formal" distinction between different types of strategies, the most successful products employ a mix of these strategies: they are driven by data, do research, and have a clear vision of where they want to get to.

As we saw, there are different approaches to product development. But whatever strategy you choose, here are some simple steps to develop and execute a successful new product development strategy.

Your product development strategy is the bridge between your product vision and the actions needed to realize that vision. So, as a first step, you’ll need to clearly define where you want your product to go and what you want to achieve. In simple words, your vision communicates the intent behind your product and the high-level goal driving your product development.

Sometimes, companies use mission and vision statements interchangeably, but they have different purposes. A mission statement focuses on the here and now and what the company is doing to achieve its goals. A vision statement focuses on the future and where the company wants to be in the long run.

One example of a successful vision statement would be Google's: To provide access to the world’s information in one click.

The second step is to conduct in-depth research of your target audience, existing market, and competitors. In this way, you and your team can mitigate risks, use accurate data to inform your decision-making and increase your chances of building a successful product.

First, define and understand your ideal audience. Who are your target customers, and what problems are they facing? How will your product solve their problems? Interviews, surveys, or product analytics are just a few methods to get to know your users and identify their wants and needs.

Ian Booth, Senior Product Manager at EduMe, explains: "We have fantastic customer support and user research teams who constantly communicate with the customers and understand what they’re looking for from a strategy perspective. They’re so focused on being the champion for the user within the conversations that we’re having."

Second, conduct market research and competitor analysis to learn what other products are available in the market, understand how users perceive your product compared to your competitors' offers, and identify what makes you unique. This is a fundamental step to decide how you will position and differentiate yourself in the market.

When you have a deep understanding of your target market, you should use the data gathered to establish a series of goals you want your product to achieve to deliver value to customers and gain a competitive advantage. Set SMART goals that are specific, measurable, achievable, realistic, and timely. They will help you decide what to build next and give you a tool to measure the success of your product.

As part of our product development process at Maze, we always include a summary of our goals in the product development strategy document and regularly track our progress on every goal. This allows our product team to make decisions and align on the next steps.

It’s now time to define the initiatives, features, and releases that will help transform your goals into action. A product roadmap is a high-level visual that allows you and your team to execute the strategy. Product managers use roadmaps to plan tasks, communicate priorities, allocate resources, and see the evolution of a product over time.

A product development strategy ensures that all the initiatives in the roadmap are linked to the product’s vision and goals so that you can start development with a detailed and solid plan.

Looking for a comprehensive list of product management tools? Check out our list of the best 13 product management tools to streamline your workflow.

We’d like to conclude with a piece of advice from Enzo Avigo, Co-founder and CEO at June:

Rapid prototyping can help you explore and validate ideas early in the product development process. With tools like Maze, you can test prototypes with users and get actionable results that help you make informed product decisions.

We hope this article has provided an insight into what a product development strategy should include. Now it's your turn. Start testing things out and get ready to launch a successful product.