Ultimate Guide to Product Development

Strategy | 8 Examples
https://www.tcgen.com/product-development/product-development-strategy/#product-development-
growth-strategy-types

Product development strategy enables companies to gain competitive

advantage by investing in new products that drive revenue and margin
growth.

What is product development strategy?

Product development strategy enables product organizations to create a stream of innovative
offerings that disrupt the competition and delight customers.

Product development strategy can be a subset of corporate strategy and not to be confused with
the new product development process – it is a lot more. It sets the direction for new products by
establishing goals and through funding decisions. The aim of product development strategy is to
gain competitive advantage by placing product offerings in the best possible position to drive
business goals such as sales growth, revenue, and profits all throughout the product development
life cycle.

Here are five examples of a product development strategy:

1. Price driven strategy: adopting a premium or value strategy

2. Innovation strategy: offering the best and charging for it (or not – fast follower)
3. Time to market strategy: being first to market
4. Market/Customer oriented strategy use customer insights and competitive position
5. Platform driven strategy: optimize flexibility, cost, and scale with a more internal
strategy

Read about our 5 general strategies and understand how Amazon, Apple, Google, Microsoft,
and Netflix developed their tech strategies.

Learn how Coca-Cola, IKEA and Kellogg use product as an integral part of their corporate
strategy.

Product development strategy examples (Technology)

Amazon’s product development strategy

Amazon is an example of a customer-oriented approach to product development strategy. Their

product strategy is focused entirely around customer needs. Amazon likes to work backwards
from the target market. They write the press release for the product first, and hone it until its
language is simple enough for anyone to understand. The press release has no technical jargon
about technologies or UIs. They then work backward from the press release to the product. This
is a product development strategy that focuses on Amazon’s internal process, in engaging with
customers to create a specific product that meets an identified need.

Apple’s product development strategy

Apple is an example of a platform/derivative strategy. They connect their top level strategy to
their product development process. The tech giant tends to be product-driven. Apple creates
products and then finds the market for them later. Steve Jobs famously suggested that customers
do not always know what they want. Apple bets that customers will pay a premium for superb
products and tends to focus on optimizing existing offerings. Apple relies on brand loyalty and is
happy to allow competitors to control the market in lower-priced products that compete with
Apple’s.

Google’s product development strategy

Google’s new product development strategies tends to be technology driven. Google bets on
technology “to solve a big problem in a big way.” This is a market oriented approach since
Google favors growing the market for everyone, which serves Google as the market leader.
Google also optimizes for growth, not for revenue. Google’s product development strategy takes
the long view; it is typical of a company that has been a consistent market leader.

Microsoft’s product development strategy

Microsoft is an Exemplar of product innovation strategy carried out through partnerships. “Our
industry does not respect tradition – it only respects innovation,” said Microsoft CEO Satya
Nadella. The maturing tech giant began its strategic transformation in 2014. It conceded the
smartphone market to its rivals and invested in AI and Cloud. It created an AI division with
thousands of engineers and scientists. It also dropped its aggressive ways and began to emphasize
partnerships. It embraced open-source software, becoming the leading open source code
contributor by 2017. Microsoft is now unique in offering a discrete product unlike Google,
Twitter, and Facebook where user data is the product.

Netflix’s product development strategy

Netflix has a Profit and margin driven strategy to maximize adoption and retention. Netflix is the
largest streaming service in the world. Netflix’s core offer is a subscription including unlimited
access to content. Its product strategy emphasizes margin growth. Monthly retention is a key
metric. It has increasingly focused on providing high quality original content to pin eyeballs to
screens. Netflix relies on a strong, trustable brand promising “movie enjoyment made easy.” Its
strong brand, ease of use, and personalization are difficult for competitors to duplicate.

Product development strategy examples (Consumer)

Coca-cola’s product development strategy

Coca-Cola has a strategy that is all about the voice of the customer. “If we embrace where the
consumer is going, our brands will thrive, and our system will continue to grow. This is Our Way
Forward,” said then Coke President and COO James Quincey in 2017. Coca-Cola has become
focused entirely on consumers and what they want from beverages. As consumer tastes change,
for example toward options with less sugar, Coke is moving with them. In recent years Coke
have rolled out new products in response to consumer demand, from juices to coconut water, to
organic tea. Consumers want beverages with benefits. Some call for smaller, more convenient
packages than the classic Coke can. Coke’s strategy is to continue to listen to the voice of the
customer and to respond.

IKEA’s product development strategy

IKEA has a strategy to focus on low cost at a consistent level of quality. The high volume of
interchangeable parts requires an extensive, worldwide supply chain. Initially the company leased
out equipment to suppliers and provided training to ensure quality. Later, as it became an
international brand, it re-organized its supply chain to manage the large volume and geographic
dispersion of its suppliers. With its core competency in supply chain management, Ikea can
pursue a product differentiation strategy offering furnishings for any home. Ikea also has a
commitment to sustainable design principles. Its product strategy relies on smart design driven by
its unmatched supply chain.

Kellogg’s product development strategy

Kellogg has a strategy of divest and acquire. Kellogg may have to divest its most cherished
cereal brands in order to move into a future that serves consumer’s better. Kellogg’s iconic
brands like Corn Flakes, Frosted Flakes, and Froot Loops were the Boomer’s favorite breakfast
growing up. But times have changed and the market for cereal is declining as more consumers
avoid sugar and carbs. Following a strategy of acquisition and divestment, Kellogg sold off its
Keebler and Famous Amos cookies brands, while acquiring brands like RXBAR which are more
health-aware.

What is product development strategy?

Product development strategy enables product organizations to create a stream of innovative
offerings that disrupt the competition and delight customers. New product development is often
integrated into product strategy to emphasize innovation (including development steps specific
for new products.) For entrepreneurial companies, product development can be daunting, so
their strategy should be very simple and oriented towards getting new concepts to market without
a lot of investment.

Product development strategy is a subset of corporate strategy. It sets the direction for new
products by establishing goals and through funding decisions. The aim of product development
strategy is to gain competitive advantage by placing product offerings in the best possible
position to drive business goals such as sales growth, revenue, and profits.

New product development strategy is the means to…

 Mitigate risk in developing a product concept

 Improve the fit between products and markets
 Overhaul a product line
 Increase the sales of existing products by enhancing them

Although market research and marketing strategy are necessary in most cases, there are other
inputs to business strategy. A fully formed product strategy includes your brand, your platforms,
your technology, etc. Often product management consulting engagements can inform product
strategy.

Here are five examples of a product development strategy:

1. Innovate new product/service areas outside your core product

2. Clarify your direction: innovator, follower, or low cost participant
3. Establish your product portfolio consistent with risk tolerance and market position
4. Tie your corporate vision, to product strategy, and then to yearly budgets
5. Implement right governance, funding, and process for setting new product strategy

Product development growth strategy types

There are many approaches to product development strategies that focus on different dimensions
of the new product process (including what to do with existing products) and the product
development organization. Most often product development strategy is driven by three market
position categories:

1. Premium, innovative and differentiated products with High Price/High Value (Apple
iPhone Pro)
2. Competitively priced products that differentiate on minor factors including pricing (Crest
Toothpaste)
3. Low cost products where often the quality is good enough (Kirkland, Costco’s house
brand)

The first category above will have the highest product development or R&D expenses – typically
in the range of 10-20%, the competitively priced strategy is in the 5-10% range, and the low cost
category requires less engineering and R&D spends are below 5% of sales. Tech product
development strategies are expensive, where software companies typically run in the 10-25% of
sales spent on development and testing. This is also true of companies that focus on new product
introductions. Note that the company’s risk tolerance may come into play here, and often it is
advantageous to take a product portfolio management approach.

Product development strategies either augment those positions or enable them by focusing on
time to market; on a calculation of technology and market risk; on a strong platform that spins-off
families of products; or on customer insights and internal procedures to produce the best existing
solution.

Time-based approach

One approach to product development strategy emphasizes when your new product offering
enters the market. In this approach, entrants compete on time to market. Either a company is an
innovator, that creates a brand new product category; it is a rapid follower in that rapid
commercialization is the goal; or it lags behind as a “me too” product.

These three product strategies are often described as:

 First to market
 Fast Follower
 Laggard

The research favors the view that companies that are first to market reap the rewards. There is a
strong correlation between innovation and long term success in creating new products. (One
technique that is commonly used to shorten time to market is an escalation process.)

Ideation Process Approach

If your organization has a formal process in the front end of development, you may have a well
conceived and effective strategy. If your product team starts with a formal way to gather
customer feedback, tap into focus groups, get input from new customers, perform brainstorming,
and get internal stakeholder input, you have the makings of an implicit product strategy.

Of course you should start with your market share, demographic segments, corporate strategy,
market share by segment, and other factors drawn from your business strategy. But sometimes it
makes more sense to start from the current version of the product, knowing what needs
improving from user experience, product functionality feedback and you can generate a great
product starting from the known (but always informed by your business strategy).

Even at this stage it is possible for early validation of your ideas – those it is likely that these are
screenshots or paper prototypes.

Ideation processes can be steered in a number of variations by filtering concepts. For example,
focusing on time to market; on a calculation of technology and market risk; on a strong platform
that spins-off families of products; or on customer insights and internal procedures to produce the
best existing solution can cause you to select one concept over another.
Market-oriented approach

Another common approach to product development strategy is around the dimensions of the
target market, target audience (marketing strategy focused), or even driven by a market
development strategy. Often this takes the form of a relative emphasis on technological or market
innovation.

Either a new product development represents a technological innovation within an existing

market; it finds new market applications for existing products; or it opens up an entirely new
market.

Research on a market-oriented approaches yielded five different types of product development

strategies:

 Innovators that use their existing resources to create new technologies that they sell
within existing markets.
 Investors in technology, mainly through acquisition or partnerships with other entities
(for example with a university research center).
 Searchers for new markets take existing products and try to find applications for them
in new markets. For example, a company that designs games might sell a game-like app
that helps HR test new applicants.
 Business As Usual companies continue to push out already existing products to current
markets and attempt to compete on price, margins, or distribution.
 Middle of the Road companies are happy to take an incremental approach with low or
moderate innovation in products and markets, and stick more with modifying existing
products.

Platform-based Approach

According to David Robertson and Karl Ulrich, a platform is “the collection of assets that are
shared by a set of products.” A platform then spawns families of derivatives. These families have
a relationship to one another with respect to cost, performance, quality, or feature density.

For example, in the computer business 15 inch laptops might constitute a family within a
platform of laptops of various sizes. The variants within a family might appear at various price
points, with different feature sets, such as amount of memory, hard disk size, CPU speed, and
graphics capability.

A platform approach to product development strategy represents a way of optimizing innovation.

Usually, the platform is the result of many years of research and development, and codifies all the
efforts resulting from one or more innovative concepts. A platform’s greatest benefit is that it
maximizes the revenue and business impact of an invention by spreading across different new
product offerings. Oftentimes this is best illustrated by showing the relationships between
platforms and derivatives in a product roadmap.
When you leverage the significant design work embodied in a platform, your subsequent product
variants will require much less engineering time – and less calendar time – to bring to market.
Innovation processes become much more efficient by leveraging the know how from existing
products. This also allows you to enter a new target market efficiently by creating a derivative of
a product family.

Platform approach
to product development strategy yields product families

Customer-oriented approach: Design Thinking

Another approach is to focus on the company’s internal process for producing valuable
innovations that delight customers as a core part of your product development strategies and
break away from existing products. The customers’ needs come first in this approach.

Design Thinking emerged from Stanford University and carried forward by IDEO. Both
Stanford and IDEO have templates to get you started, if you are new to design thinking.

In the Design Thinking approach to new product creation, companies invest in a deep
understanding of the customer. They then convert information derived from customers into
successful products in the market, through a set of consistent steps.

This approach sees the creation of winning new products as the result of an information
processing procedure that includes:

 Product concept generation based on customer insights

 Product planning
 Product engineering
 Manufacturing (or launch) engineering
This approach does not concentrate on what competitors are doing as much as on what customers
require. This approach is more customer facing and often it is part of an Agile Product
Development process. It puts the onus on an internal process to deliver for customers. This
methodology can apply to existing products too.