The Difference Between Business, Innovation, and Product Strategy and Why You Should Care
Knowing what different strategies are in a company and the problems they help you solve is necessary for corporate success.
Years ago, I was working with a grocery retail client that had gone through a series of acquisitions to extend their eCommerce capabilities. The executive team saw the opportunity to add a range of new services around their core business as pathways to growth and business differentiation in a competitive market. Seems straight forward enough. As part of the growth plan, the company hired a new Chief Product Officer. The seasoned product leader joined just as the executive team was planning a new go-to market strategy that would link the newly acquired business capabilities together and provide new cross-sell opportunities. The speedy commercialization strategy was focused on realizing some much-needed revenue on these investments in-market. Understandably the new product leader was caught off guard on the idea of value propositions and customer segments that were disconnected from the context of what the current ecommerce product was and the roadmap for existing customers.
This isn't an isolated incident. Unfortunately, this is a natural outcome of large companies going through growth moves that are not linked or communicated. Frequently, this occurs when a company uses a business strategy in place of a product strategy. In building and running businesses, there are three critical strategic components that work together but serve different functions: business strategy, product strategy, and innovation strategy. While there is some natural overlap in more than the use of the word ‘strategy’, they each serve distinct audiences, objectives, and outcomes together to drive organizational success.
Business Strategy: Guiding Light for Growth
Business strategy serves as the foundation for all other strategies. It sets the guardrails for how a company aims to achieve its growth and longevity goals. Effective business strategy provides clear answers to questions such as the purpose of the company, the desired impact on the world, and the areas of growth the company will and won't invest in. It should succinctly answer what ‘kind of business do we want to be in 5 – 10 years and what will be the outcomes of our success?’ A useful business strategy aligns teams and empowers decision-making based on shared goals.
Innovation Strategy: Growth Exploration
Innovation strategy takes the growth goals of the business strategy and makes it real. This sets the foundation for how the company will identify and build new capabilities. The focus of an innovation strategy should direct activities such as internal business model innovation, startup investment and incubation, corporate mergers and acquisition, strategic partnerships, and prioritizing changes to the existing value streams. In turn, this informs growth decisions around repurposing existing resources, identifying new capabilities, and evaluating how much you would invest to drive new customer channels. Innovation strategy looks beyond the status quo and explores uncharted territories to fuel growth and create value.
Product Strategy: Fueling the Engine
Product strategy decomposes the broader business strategy and applies it to the way in which value is delivered across the portfolio of specific products or product lines. The product strategy outlines the goals for how a company will deliver value to existing customer segments, differentiation, competitive positioning, pricing, distribution, technical architecture, and lifecycle management. This is a clear articulation to align the organization's overall goals and the tangible realities for how products function and deliver customer value. The Product strategy sets out definitions of success, customer targets and operational constraints to guide how products in the current market will grow to a future vision. It rallies product teams to focus their work within the defined business strategy and drive immediate market goals.
While all three are strategic in nature, they differ in their areas of focus and levels of granularity. When done well, they form the guardrails for the organization's growth and longevity goals, providing a clear purpose, outcomes, and goals aligned with customer value and market positioning. While their focus may be at different altitudes, these strategies are interdependent and work in tandem to drive organizational success. Often, as our client's Chief Product Officer found out, trying to substitute one strategy for another doesn't provide the right level of detail or context which can lead to more misunderstanding than clear decision-making ability. Alignment between these strategies is critical to drive sustainable growth, customer satisfaction, and business longevity.