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How to drive meaningful outcomes from your product strategy
Does creating your annual business strategy sometimes feel like you need a crystal ball? 12 months is a long time, and customer needs are always evolving.
Part 1: Experiment with your strategy to deliver better outcomes
Does creating your annual business strategy sometimes feel like you need a crystal ball? We hear many of our clients complaining about being locked in a room for days, creating lofty statements about vision, mission statement, purpose and goals. The outcome? An update to their 3, 5, or even 300-year plan, and a pile of paper.
Every business needs a strategy, a plan to implement it and a strong foundation to build upon; but the reality is that many of the initiatives don’t result in outcomes, and it’s wasted effort.
It means you’re often left struggling to reconcile the gap between the organisational vision and your day-to-day experiences, until the next annual planning meeting comes around.
As Forrester put it, “Static strategic planning documents become dated as soon as they leave your desk.” The Digital Playbook, 2019
Would you agree? In our experience, most organisations have a strategy document gathering dust in a corner somewhere.
Perhaps it’s been created by an external company who specialises in strategy, or maybe you’ve written it yourself. If you think about the amount of time & effort involved in creating it, let alone reaching an agreement with the rest of the business, how much value do you generally drive from it? Or is it just a very expensive pile of paper?
The trouble is, it’s typically not an actionable plan. It doesn’t tell you how to actually drive outcomes or where to start.
The problem with paper
A paper strategy document is a good first step. You’re thinking about how to deliver better outcomes for your business and your customers. However, once it’s been printed, that’s it. It’s rigid and inflexible, there’s no space to test it, and iterate if it’s not going to have the return you expect. These paper-based, annual strategies force organisations to forecast based on historical data.
This means that your costs of operations and product profit margins are set at the start of the year. Resources are divvied up, performance metrics are set. Budgets are apportioned based on the planned return on investment for each initiative, which is little more than guesswork (and pretty stressful for all of those involved).
The biggest challenge? Nothing is yet in the hands of your users, which could still be 12 months away. That’s 12 months to wait until you know for sure whether or not your initiatives are going to drive any value to your customers, or have the business impact you expect.
12 months is a long time these days, even if your strategy is accurate. Customer needs are constantly evolving. Your competitors are constantly evolving. The world is constantly evolving. You need a process that’s adept and nimble enough to respond to the rapid pace of change.
An exploratory strategy
Many organisations have adopted agile in their organisation as their de facto way of building software. It’s been so successful that other departments such as marketing are also adopting agile, recognising the need to adapt to fast-changing market conditions.
An agile process allows you to constantly explore new avenues for growth, using data from customers to influence and update your strategy based on real-world learnings.
“Exploration is the engine that drives innovation. Innovation drives economic growth. So let's all go exploring.” Edith Widder
Leveraging a more exploratory strategy process means you continuously test your strategic ideas with users and refine your strategy until you know for certain it’ll deliver the outcome you want and meet your business KPIs. You’ll have the ability to adapt to changes in the real world; the power to respond to unanticipated adverse conditions or take advantage of unexpected opportunities.
The challenge? Exploratory, agile processes push organisations towards flexible plans and budgets that often conflict with traditional annual planning. Time and money are always limited. So how do you know where to invest? You need a new framework, and you need to be customer-led.
In this constantly changing business climate, your strategy is the thing that needs to adapt the fastest. By taking an exploratory approach, you can swiftly create a customer-led strategy, and use data to prove return on investment in new propositions before you invest.
More importantly, you’ll be able to accurately describe where there will be the most impact for your customers, and your business, and therefore drive successful outcomes.
Stop using rigid, inflexible processes that don’t result in an actionable plan you can execute. Make your business plan your customer-led, strategic weapon.
Interested in exploring your way to an outcome-driven strategy? We’ve helped many organisations experiment their way to market-leading solutions, and weed out bad ideas in the process. Get in touch here.
Part 2: Put your customers in your strategic driving seat
Let’s face it, it’s hard to create a strategy that can be sustained through periods of uncertainty, sudden market shifts, globalisation and disruptive innovation. Ginni Rommerty put it nicely:
“The only way you survive is you continuously transform into something else.”
But how do you create a business strategy that enables you continuously transform? How do you ensure you’ll get a positive outcome? The only way to remain competitive is to use customer data and agile processes to create, evolve and execute your business strategy.
As Forrester put it:
Leaders must craft strategies that are as dynamic as their customers and competitors and achieve the next level of digital business maturity.” The Digital Business Playbook, Forrester 2019
Unfortunately, annual strategies aren’t designed to be dynamic. But there’s a way to make your strategy evolve, we call it “customer-led planning”. You can break it down into three principles: continuous learning, ongoing measurement, and flexible budgets.
At Red Badger, we call this “industrialised experimentation”. It’s the process of rapidly creating and testing ideas before you start investing in solutions. It’s flipping the traditional business strategy model on its head and using experimentation to prove demand in the market before you apportion the budget.
And the best part? It works at all levels of your organisation; from using exploratory experiments to determine your next “big bet” in a new territory, to figuring out how to adapt an existing proposition to meet customer needs.
We use a concept called North Star Metric here at Red Badger. It enables us to focus on the one, customer-centric metric we’re trying to move. Revenue, in this case, is the worst possible metric you can use, but unfortunately, it’s the one most organisations use. The fact is, revenue is a lagging indicator; it’s a measure of changes you made in the past.
You need to pick a metric that represents growth, but from a customer-centric perspective. A metric that describes the core value that you deliver. By aligning the whole company around one single customer-centric metric we can continually measure how the strategic plan is moving this needle.
Clearly, company boards are risk averse, so ambiguity is a big no-no. They want to know exactly where the budget will be spent, and what the outcome will be. But let’s face it, annual budgeting cycles are downright weird, and not how digital native, product companies operate.
We’ve come across many clients who are racing to spend the rest of their annual budget before the end of the financial year, for fear of being allocated a smaller one next year. Where’s the customer value in that?
The key is flexible budgets or metered funding, the idea that you have to prove investability before you get a budget. It’s a rigid framework to ensure only proven ideas get funding, and the same way start-ups and venture capitalists work. Budget is allocated on proven value, using stringent gates to drip-feed budget where it’s needed, and prevent unnecessary waste.
It’s as simple as that. Your customer is at the heart of every decision. Unless there’s data to indicate where to invest, then don’t. It’s iterative, incremental and (r)evolutionary. You’ll avoid wasting £millions on the wrong thing, quickly get to market with products your customers actually care about, and achieve your outcomes.
Interested in a customer-led strategy? We’ve helped many organisations, from global banks to start-ups, transform themselves and achieve phenomenal outcomes. Get in touch here.