Product Strategy
This section covers strategic thinking frameworks for PM interviews, including vision development, competitive analysis, and market entry decisions.
Strategy Definition
Strategy is the set of choices that determine what a company will and will not do.
| Component | Description |
|---|---|
| Trade-offs | What are we choosing not to do? |
| Advantage | Where do we have a real competitive edge? |
| Sequencing | What has to happen first? |
A strategy without painful trade-offs is not a strategy.
Vision vs Mission vs Strategy
| Concept | Definition | Stability | Example |
|---|---|---|---|
| Mission | Why we exist | Rarely changes | "Organize the world's information" (Google) |
| Vision | What success looks like | Changes as achieved | "A computer on every desk" (Microsoft, 1980s) |
| Strategy | How to get there | Adapts to conditions | Specific plans and choices |
In interviews, clarify the destination (vision) before discussing the path (strategy).
Industry Analysis: Porter's Five Forces
| Force | Assessment Question | Example |
|---|---|---|
| Rivalry | How intense is current competition? | Ride-sharing: high; enterprise database: lower |
| New entrant threat | How easily can startups enter? | Airlines: difficult (capital); note-taking apps: easy |
| Substitute threat | What else solves this problem? | Uber's competitor is car ownership, not just Lyft |
| Buyer power | Can customers squeeze margins? | Selling to Walmart: high; consumer app with network effects: lower |
| Supplier power | Are you dependent on key suppliers? | Apple as AWS supplier: uncomfortable position |
Competitive Positioning
| Position | Description | Requirements | Example |
|---|---|---|---|
| Cost leadership | Be cheaper | Massive scale | Walmart, Ryanair |
| Differentiation | Be better | Defensible quality advantage | Apple |
| Niche focus | Own a specific segment | Deep segment understanding | Shopify (specific merchant type) |
Most startups should pursue differentiation or niche, not cost leadership.
Market Entry Framework
Should We Enter This Market?
| Question | Assessment Focus |
|---|---|
| 1. Do we have an unfair advantage? | Why would we win, not just compete? |
| 2. Is the market worth it? | Size alone is insufficient; evaluate economics and competition |
| 3. What is the strategic logic? | Connection to core business beyond "big market" |
| 4. What could go wrong? | Failure impact on core business |
| 5. Why now? | What changed that makes this the right moment? |
Worked Example: Should Netflix Do Gaming?
Context:
- 230M subscribers, growth slowing in mature markets
- Competing for screen time with TikTok, YouTube, video games
- Gaming market: $200B+
Netflix assets:
- Distribution (already on every device)
- Subscription model familiarity
- Valuable IP (Stranger Things, Squid Game, Wednesday)
Segment analysis:
| Segment | Netflix Fit | Recommendation |
|---|---|---|
| Mobile games tied to content | Strong | Enter |
| Console/PC "real" gaming | Weak (no expertise, no community) | Do not enter |
Recommendation: Enter gaming narrowly. Mobile games as an engagement play, not a revenue play. Defense strategy (keep users in ecosystem), not offense.
Competitive Response Framework
Finding Competitor Weaknesses
Identify weaknesses competitors cannot easily fix due to structural constraints.
| Competitor | Structural Weakness | Why Hard to Fix |
|---|---|---|
| Uber | Driver relationship | Improving it hurts margins |
| Microsoft Teams | Product quality vs. Slack | "Free with Office 365" positioning prioritizes distribution over product |
Battle Selection
Full-frontal competition against established players rarely succeeds. Find wedges:
- Specific use case (airport rides vs. all rides)
- Specific segment (startups vs. enterprise)
- Specific geography (single city dominance)
Second-Order Effects
Consider competitor responses:
- Price competition: If you compete on price, they may match
- Niche focus: May be ignored because too small to matter (advantageous)
Worked Example: Competing with Airbnb
Airbnb strengths: Network effects (more hosts = more guests = more hosts)
Airbnb weaknesses: Inconsistent quality, last-minute cancellations, unpredictable experience
Strategic approach: Reliability over variety
- Smaller, curated inventory
- In-person verification of all listings
- Host training
- Service guarantee
Target customer: Business travelers and families who cannot afford bad experiences. Will pay premium for certainty.
Competitive insulation: Conflicts with Airbnb's "anyone can be a host" model. Difficult for Airbnb to copy without cannibalizing supply.
Vision Questions
Response Structure
| Component | Content |
|---|---|
| Current state | One sentence on product today |
| Market changes | Specific trends affecting this product (not generic trends) |
| Future state | Concrete, ambitious vision |
| Path | Key milestones showing sequencing |
Worked Example: Vision for Google Maps
Current state: Maps is navigation, getting from A to B. Best navigation app but fundamentally about directions.
Market changes:
- AR improving
- Autonomous vehicles emerging
- Digital/physical commerce blurring
Vision: Maps becomes the interface layer between people and the physical world. Not just "how do I get there" but "what's there and how do I interact with it."
Path:
| Timeframe | Focus |
|---|---|
| Near term | Deeper commerce integration (booking, ordering, paying in Maps) |
| Medium term | AR for exploration (information overlay on real world) |
| Long term | Autonomous vehicle interface (summon vehicles through Maps) |
Defensibility: Builds on Google's advantages (data, AI, distribution). Requires capabilities no one else has.
Strategy Errors
| Error | Description |
|---|---|
| Goals as strategy | "Grow 50% next year" is a goal, not a strategy |
| Serving everyone | "Best for everyone" means mediocre for everyone |
| Copying competitors | They may be wrong, or it may fit their strategy but not yours |
| Ignoring responses | Competitors will react to your moves |
| Vision without sequencing | Needs connection between vision and Monday morning actions |
Company Strategy Examples
Netflix Content Strategy
Data informs content decisions, not just recommendations. "House of Cards" greenlit based on subscriber data (Kevin Spacey + David Fincher + political drama overlap).
Lesson: Strategy should use advantages that are hard to copy.
Slack vs Microsoft Teams
Slack had better product. Microsoft had Office 365 in every enterprise.
"Free with existing subscription" beats "better but costs extra."
Lesson: Distribution can overcome product advantage. Find niches where distribution dominance does not apply.
Apple Pricing Strategy
Apple owns the premium segment to capture profit share, not market share.
iPhones: 15% of phones sold, 80%+ of smartphone profits.
Lesson: Market share is not the only measure of success.
Amazon "Day 1" Culture
Perpetual startup mentality enables business cannibalization and new market entry.
AWS would not have happened at a company protecting retail margins.
Lesson: Culture can be strategy.
Spotify's Two-Sided Problem
Music supply controlled by three major labels. Strategy evolved toward owning supply through podcasts and exclusive content.
Lesson: When suppliers have more power than you, change the game.
Interview Assessment Criteria
| Criterion | What Interviewers Test |
|---|---|
| Zoom out capability | Can you think at market level, not just feature level? |
| Business model understanding | Does strategy account for how company makes money? |
| Complexity handling | Can you hold trade-offs, second-order effects, timing simultaneously? |
| Intellectual honesty | Can you acknowledge weaknesses, risks, and uncertainty while taking positions? |
Practice Approach
For any product you use:
- What is their actual strategy? (Not marketing; what are they doing?)
- What are they choosing not to do?
- What advantages are they building on?
- What would you do differently?
Then pick a competitor and develop a different strategy, not just better features.