Product Strategy for Physical Products
Product strategy for physical goods requires balancing user desirability, technical feasibility, and business viability—factoring in BOM costs, retail margins, and inventory risk.
Product Strategy for Physical Products
(Viability Before Design)
Definition (Canonical)
Product Strategy for physical goods is the rigorous alignment of what you build (features & form) with how you sell it (business model & channel) and how you make it (supply chain & cost).
Unlike digital products, where you can launch and pivot, physical products require high upfront capital (Capex). A bad strategy with good execution just means you burn cash faster.
The "Iron Triangle" of Hardware Strategy
A successful physical product must satisfy three constraints simultaneously:
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Desirability (User) Do people want it enough to pay for it? Does it solve a real pain point better than the alternative?
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Feasibility (Technical) Can it fundamentally be built? Does the technology exist at the right size and reliability?
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Viability (Business) Can it be made for a cost (COGS) that allows for a healthy profit margin at a price the market accepts?
If you miss one, you don't have a business.
- Desirable + Feasible - Viable = Hobby Project
- Desirable + Viable - Feasible = Vaporware
- Feasible + Viable - Desirable = Warehouse Inventory
Key Strategy Questions
1. Unit Economics (Bill of Materials)
You must know your target price (MSRP) and work backward. Example: If you want to sell for $100, your retailer takes $40. You have $60 left. Your landed cost needs to be $20-$25 to cover operations and marketing. Can you build it for $25? If not, don't start designing.
2. Time-to-Market vs. Quality
In hardware, "Fast, Cheap, Good: Pick Two" is a law of physics. Strategy determines which one you sacrifice. (Hint: Sacrificing quality usually kills the company).
3. SKU Complexity
Every color, size, or variation (SKU) multiplies inventory cost and logistics complexity. Strategy: Simplify ruthlessly. Launch with one great SKU, not five mediocre ones.
4. The "Moat"
What prevents a factory in Shenzhen from copying you in 3 months? Answers: Brand, proprietary complex software, difficult tooling, trade secrets, or deep retail relationships. "Being first" is not a moat.
Discovery vs. Delivery
Product Strategy changes phases:
- Discovery Strategies: fast prototyping, Wizard-of-Oz testing, fake ad campaigns to test demand. Goal: Validate the problem.
- Delivery Strategies: rigorous specs, supply chain locking, QA/QC. Goal: Execute the solution.
Most failures happen because teams stay in "Discovery Mode" while trying to manufacture (constant changes) OR go to "Delivery Mode" too early (building millions of the wrong thing).
Conclusion
Strategy is deciding what not to build. In physical products, discipline saves millions.
Related Concepts
Plan the business, then design the product.
Explore Related Topics
Design for Manufacturing (DFM)
Design for Manufacturing (DFM) is the engineering discipline of optimizing a product design so it can be mass-produced efficiently, reliably, and cost-effectively.
Hardware–Software Integration
Hardware-software integration is the coordination of physical constraints (sensors, battery, chips) with digital logic (firmware, cloud, app) to create a seamless user experience.
Industrial Design
Industrial design (ID) defines how a physical product looks, feels, and functions for the human who uses it, bridging the gap between human needs and technical feasibility.
Physical Product Development
Physical product development is the process of designing, engineering, validating, and manufacturing tangible products that must exist reliably in the real world.
Product Prototyping
Prototyping is the rigorous process of building physical models to answer specific questions about form, function, and feasibility.