Product Development Strategy

Strategy is a set of choices

The development process tells you how to execute; strategy tells you what to execute and why. Getting the strategy right is what keeps you from pouring effort into a product aimed at a market too small to matter or too crowded to enter.

Blue ocean or market-following?

The first choice is which kind of opportunity you're chasing:

• Blue ocean: something never done before. The highest upside, but you have to create all the demand yourself, which is slow and expensive.
• Market-following (tangential): a better version of something already selling. The demand is proven, but there's more competition and thinner margins per player.

Market-following done well is a legitimate, often smarter play. Pebble proved smartwatches could sell on Kickstarter; Apple watched what worked, built a better version, and now nearly everyone owns one. Watching what already sells, then out-executing, is a real strategy.

Aim at a growing market

Whatever the opportunity, point it at a market that's growing. A decent idea in a growing market beats a great idea in a shrinking one, because the rising tide does half the work. Look at what people are already buying and which categories are gaining appetite, and shape your idea toward that direction. Reading the trend before you commit keeps you from building for a market that's quietly disappearing.

Size the slice you can actually win

Don't plan against the whole category; plan against your obtainable market, the slice you can realistically win, which is often a small percentage of everyone who could ever buy. Estimate that number early, because every later decision about cost, price, and order size is measured against how many units you can actually sell. Planning around the real nucleus keeps your tooling, inventory, and pricing honest.

De-risk before you spend

The core of a sound strategy is sequencing your spend so risk comes down before the money goes up. Validate demand cheaply, prototype before you tool, and run a small first batch before full production. Each stage is a checkpoint to continue, change, or stop. This is what the staged process is for, and it's how you avoid committing to tooling for a product nobody has proven they'll buy.

Build it or license it?

Finally, decide the path to market. Licensing hands the product to a company for royalties: lower capital and risk, but less control and upside, and it demands a strong prototype and pitch. Building it yourself means owning the engineering, manufacturing, and marketing: more risk and work, but more reward and control. Decide early, because it changes how much you invest in each development stage.

The short version

A product development strategy picks the opportunity (blue ocean or market-following), aims at a growing market, sizes the obtainable slice, de-risks the spend in stages, and chooses build or license. With the strategy set, run it through new product development and the development process.