The First Principles of Successful Product Strategy

“In matters of style, swim with the current, in matters of principle, stand like a rock.” — Thomas Jefferson

I was staring down a significant undertaking and had no idea where to start, my inner voice coaching me to do an easy task. The company needed to reboot its products to survive, which required a new strategy. So what to do, what to do?

First Principles are the Foundation

Sometimes in business, you cannot be flexible. While pivoting, agility and adaptability are praised, often missed are the anchors that drive their success — first principles. First principles are the foundation that holds no matter the change. Successful products use first principles as the basic building blocks to create their strategy. Without a place to anchor, creating a strategy, in this case product strategy, can take too many directions — good or bad.

Leaders from Elon Musk to Ray Dalio champion first principle thinking, with good reason. I would argue first principles are so important that you will not find a successful business leader without a set of principles on which they anchor, whether consciously or not.

“We get through life by reasoning by analogy, which essentially means copying what other people do with slight variations. And you have to do that. Otherwise, mentally, you wouldn’t be able to get through the day. But when you want to do something new, you have to apply the [first principles]approach.” — Elon Musk

Back to me. I took a walk. I needed to clear my head. To think.

To remind myself of what worked in the past. As I strolled through the non-descript suburban office park, I had a bit of an epiphany. While I didn’t know the concept of first principles at the time, I knew there were common themes across my successful product strategy projects.

After returning from my walk, I jotted down my thoughts. My first principles for product strategy were born. While it took some trial and error to get the reboot right, the company survived, succeeded, and became the dominant player in its niche market.

First Principles and Product Strategy

Product strategy is a creative act, to “do something new,” approaching an opportunity from a different angle. Therefore, according to Elon, we need to apply first principle thinking.

So what are first principles? At their core, first principles are fundamental building blocks. First principle thinking requires you to break down a complex problem into its basic elements. In other words, thinking like a scientist — glad my biochemistry degree helped me somewhere.

How do first principle thinking and product strategy connect? Product strategy is a discipline similar to investing that must operate based on principles that hold no matter the situation. In the words of Michael Porter of Harvard and Five Forces fame — “The underlying principles of strategy are enduring, regardless of technology or the pass of change.”

“Look for a business with an enduring moat.” — Warren Buffett

Sage words. Also a first principle in Warren Buffet’s investment strategy. The moat is a principle that led Warren Buffett to become one of the most successful investors ever. To be clear, investing and product strategy are different. The “moat” would not be a principle that a product strategist can universally apply. Instead, it would be an input to the product strategy, applied using the first principles of the product strategist’s craft.

Seven Core Principles

Let’s play it forward. If I were lucky enough to create a product strategy for Warren Buffett, I would know it must lead to a product with a moat. Yet, I would follow different principles to build the product strategy to deliver the moat. As a product strategist, these are the core principles of the craft that I would follow:

1. Set a Waypoint

In all cases, products need a North Star. Successful product strategies, therefore, start with a north star, an aspiration. Once documented and agreed upon, all decisions are guided by the north star from design through delivery. The north star removes significant ambiguity for the team, supports internal and external communications, and provides investors with a clear understanding of the path ahead. Without a north star, your team will wander the rough seas of the product lifecycle without a destination based on disconnected functional decisions.

2. DMF: Desirability, Marketability, and Feasibility

A product strategy must consider and include a discussion on desirability(D), marketability(M), and feasibility(F). If we confirm DMF exists, then the strategy will lead to a product that 1) users love; 2) for which they happily give you their hard-earned money; and 3) is possible to build within a set of conditions (time, money, resources). If we do not have DMF, then the product strategy needs to go back to the drawing board. In the case of our product for Warren Buffet, feasibility would include time, money, resources, AND a moat.

3. Size and Space

Is the market big enough to be interesting? Is there space we can carve out? In product strategy, it’s an absolute that these are true. If the market is too small, your organization should not invest. If the barrier to entry is too high, the market is too crowded, and there isn’t a clear place for your product, then you should not proceed. Without size and space, a product strategy may take you into an overcrowded cutthroat market full of seasoned gladiators. Certainly not an investment Mr. Buffett would entertain.

4. Sustainable Value

If we build a product based on the strategy, will it lead to sustainable value creation for the user, buyer, and the organization? The key here is sustainability. You can often find sales, marketing, and channel strategies to create short-term value. If the objective is short-term value, then a product strategy is not required. And if the product strategy doesn’t show how to create sustainable value over time, throw it away. Sustainable value = compelling case for investment. I doubt you would get Warren Buffett’s attention without sustainable value. While you might have a moat, your competitors would quickly cross it.

5. Measurable

Is it possible to measure value delivered, and are there success criteria? All product strategies should articulate how to measure success if executed.This starts with a clear set of outcomes that indicate you are trending toward sustainable value. For example, rather than new users, total engaged users who spend time and money. When you sync back with your product team a year into execution, what would you like to see to deem the strategy a success? If your strategy does not include metrics with targets that are measurable and show sustainable value creation, think twice. I doubt there is a single investment in the Berkshire Hathaway portfolio that does not have measurable outcomes.

6. Clear and Attainable

Will the organization understand what you are asking them to do? Are the strategy and its targets possible to achieve within the constraints of the organization, market, and investment? Referencing back to DMF, attainability, and feasibility are different. A product may be feasible to build but not attainable in your organization. For example, imagine the execution of the product strategy requires your organization to make large structural changes, faces hurricane headwinds in the market, or requires an investment outside of what is possible within your company. While the product may be technically feasible to build based on the strategy, the conditions you face will make it impossible to attain within your organization. If the headwinds are too strong, your team and your company may give up. I wouldn’t want to face the Berkshire board and Warren Buffet asking for investment without a clear and attainable path forward for the product.

7. Stories

Stories are at the heart of how you communicate your strategy. So ask yourself, can you articulate the product strategy in story form. Stories trump facts. Stories supported by facts are game-changers. They create understanding. Your team will always embrace and internalize stories over straight facts and theories. While you can argue Warren Buffett evaluates numbers first and would only require a business case, the story would bring it to life. When you pitch or communicate, a story is a differentiator. Otherwise, you risk becoming one of many investments looked at objectively for consideration without clear advantage or differentiation. Stories sell.

First Principles Exist for Every Craft

Whether it’s blacksmithing, construction, sales, and product strategy. We all need anchors to lean on when we practice our trade. Without them, it’s easy to get lost, make mistakes, and wander in times of change. There is a reason successful business leaders operate using first principles.