7 Steps to Create an Effective Annual Product Plan | Product Planning Process

Planning a product is like planting a seed that grows into something extraordinary. It shows how a product will help meet your company’s goals and outlines the steps to create it. A product plan focuses on the big picture: what you’ll build, how it supports your business, who will buy it, and when it’ll be done.

You need approval from key stakeholders, teamwork across departments, and a solid understanding of your customers, the market, and competitors to succeed. Plus, you need to launch your product on time and within budget. Many think annual planning is just for senior executives, but it’s a crucial part of product management. In fact, over 30% of teams plan their roadmaps a year in advance, proving that even agile teams benefit from long-term planning.

Don’t worry—product management planning isn’t easy, but this guide will walk you through seven essential product planning steps to plan, build, and launch your product successfully. In this blog, let’s discuss the seven practical steps to annual planning, what a product plan, how to make a product plan,  the importance of strategy and budgeting, and eight tips to improve your planning process. 

What is an Annual Product Plan?

It is a single document that provides a roadmap for the company and the product for the next 12 months and quantifies the projected impact the product will create in the next year. It includes a detailed strategy on how the product will develop, the features that will be added, and any improvements or updates. The document also sets clear targets for growth, revenue, and customer engagement.

Why is an Annual Product Plan important?

A well-crafted product plan lays the groundwork for success by providing clear direction and purpose for the entire team. Here is why an annual product plan is essential: 

1. It helps everyone focus on the correct problems.
2. It creates alignment across the board, horizontally and vertically.
3. It ensures everyone makes progress in the same and the right direction.
4. It builds a healthy culture that is both outcome and ownership-driven.
5. It connects the roadmap to the company’s larger mission and vision.

A Quick Overview Product Management Stages 

Before jumping into annual product planning, it's important to understand the basic stages of product management. Here’s a quick overview:

1. ‍Idea Generation: Coming up with a product concept based on market needs, customer feedback, or gaps in the market.
2. Market Research & Validation: Conducting research (both qualitative and quantitative) to confirm that the idea solves real problems and has demand.
3. Product Development (MVP): Building a Minimum Viable Product (MVP) to test core features with early users and gather feedback.
4. Launch & Marketing Strategy:Planning and executing a launch strategy, including demand generation, marketing campaigns, and press briefings.
5. Post-launch Monitoring & Iteration:Continuously gathering feedback, improving the product, and fixing issues based on real user experiences.
6. Growth & Scaling: Expanding the product based on its success, adding new features, and targeting new market segments.
7. Product Sunset: The final stage is when the product is no longer viable or needed and is retired from the market.

What Is The Best Way to Build An Effective Annual Product Plan?

‍

How do I create a product plan? We got you. These 7 steps (don’t miss the 8th one; it’s complementary) are used to do effective product planning with some exciting and practical product planning examples to make your product shine bright and meet the company goals. Follow it :

Step 1: Create Focus Areas For The Year

The executive team meets and decides on the areas they want the company to focus on for the year. At this stage, the focus areas are broad and intentionally so. 

For example, the focus area for a food delivery app is “Become the best food delivery partner in the country.”

At this stage, the focus should be on the problem areas, not the solutions.

Step 2: Finalise And Align On The Focus Areas

The previous step results in a long list of ideas. And now:

1. The executives negotiate, discuss, and argue, eventually reaching a final list of 1-3 focus areas.
2. The executive team shares the list with non-executive leaders—such as product heads, engineering heads, business heads, etc. - and allows them to share feedback, ask questions, and suggest changes.
3. The exec team and the respective heads agree on the final list of the annual focus areas.

If you want to explore this in detail, explore JAPM’s Fundamentals of Product Management

Step 3: Break-down Focus Areas into Initiatives

At this stage, the primary ownership of the process shifts from the execs to their direct reports (VPs/Directors/GPMs), who then start working with their direct reports (GPMs/SPMs/PMs)

The product leader and last-level product managers work with their engineering counterparts, breaking down the focus areas into initiatives. Initiatives are not specific features (or actionable roadmap items), but they have just enough details for PMs and EMs to start estimating the impact and cost of doing them.

Example: Focus area - Become the best food delivery app in the country

• Initiative 1 - Introduce a loyalty program to increase the average. monthly order frequency by 20% 
• Initiative 2 - provide real-time order status to decrease the total number of user complaints by 10%
• and so on.

Step 4: Estimate the Impact of Each Initiative

PMs estimate each initiative's impact with their business and analytics counterparts. It is critical to ensure that all initiatives have the same effect in the same currency.

Example: Focus area - Become the best food delivery app in the country.

Common currency - 💵 dollars (made or saved)

Initiative 1 

Introduce a loyalty program to increase the average—monthly order frequency by 20%. 

1. Leads to an increase in monthly orders by 20%. 
2. Every order, on average, has a value of ~$10. 
3. average order value multiplied by the incremental orders gives us the incremental revenue for this initiative

Initiative 2 

Provide real-time order status to decrease the total number of user complaints by 10%

• Reduces the total number of complaints by 10%.
• Every complaint needs ~10 minutes of a call support agent’s time
• Total complaints reduced multiplied by 10 minutes gives us total time saved
• Use the total time to calculate the (reduced) number of agents required, and use that to calculate the cost (dollars) saved

Step 5: Estimate the Cost for Each Initiative

Currently, the EMs (engineering managers) create high-level effort estimations for the initiatives. 

Since the initiatives are not well-defined, EMs typically add buffers for vagueness, unknowns, and unplanned events (PTOs, sick leaves, team churn, etc.). They work with engineers to create best-guess estimates for each initiative. All estimates are in a common currency: engineering months.

Are you liking this post? Get the next one in your inbox!

No Spam. Unsubscribe at any time.

Step 6: Prioritise by ROI

This step is usually straightforward. The PMs add a column for ROI (a function of impact and cost) and then sort the list by ROI.

Step 7: Finalise and align on initiatives for the year

In this step, the product and engineering leaders finalize the initiatives they will commit to delivering by the end of the year. To get to that list, they need additional information: total available engineering capacity. 

The engineering heads have visibility into this number. Using this data, the group is able to objectively decide which initiatives are doable, assuming the same capacity.

The output looks something like the below chart:

‍

Will Do, Can Do, Won't Do Chart

We classify each initiative into the following categories:

1. Items that we will do based on current capacity
2. We can do items if we have more capacity or if any items in the “will do” category get deprioritized. 
3. We won’t do these items because they are low impact, high cost, or both.

Answering #2 above is more complex. There are situations where it does not make sense to move items from “will do” to “can do.” In such cases, the next option is to create more bandwidth. Engineering heads incorporate this in the hiring plans and ensure that teams have the required bandwidth throughout the year.

It is important to note that at the end of this step, we have finalized and aligned two crucial things:

1. List of initiatives that teams commit to deliver
2. Number of engineers the teams need to hire to deliver on the commitment

Step 8: Create Quarterly Projects/Requirements/Tasks

This step is NOT part of the annual planning, but I still included it because it is the immediate next step after we freeze the yearly product plan.

In this step, the PMs and EMs break down the initiatives into projects or tasks to create an actionable roadmap for the first quarter.

Wrapping Up! 

Creating an effective annual plan is crucial for success; following these steps can help you achieve this. Creating a clear annual product plan ensures that everyone is on the same page and working towards common goals. Remember, this plan is just the beginning—it sets the stage for exciting projects and growth.

If you’re eager to learn more about product management planning and sharpen your communication skills, check out the JPAM Fundamental of Product Management Course. It’s a fantastic chance to dive deeper into effective product planning process and development strategies. Let’s take this journey together and become better product managers!

That is it for today. If you liked the article, please share it with friends.

FAQs: Annual Product Plan 

#1 What is annual planning process?

This process helps the product team create a plan that they will focus on for the next year. This plan is created in collaboration with multiple teams across organisation, including leaders.

#2 What is the process to create an effective annual plan?

The overall process includes defining product goals, breaking them into initiatives, estimating costs and potential benefits, prioritizing based on business impact, and finalizing the initiatives to move forward with for the year.

#3 How do you create an annual plan?

To create an annual product plan, start by identifying broad focus areas, break them down into initiatives, estimate their potential impact and the resources required, and prioritize them based on business priorities and ROI. Finally, align the plan with team capacity and finalize the initiatives for the year.

Remember the goal is always to build something that is ambitious, but also grounded in reality. And that is why it is critical to collaborate and align with different stakeholders.

Depending on the size and complexity of the organisation, this can take anywhere between 4 and 12 weeks. Larger organisations have more people to align with and hence take longer.

#4 How to make an annual plan effective and impactful?

It is important that the plan is focusing on the most important strategic areas for the company. It is also important that the teams involved are thinking broadly while ideating. And finally, it is important that all stakeholders have a strong input into the plan so that they are aligned. Alignment ensures that the plan gets executed successfully.

A plan is only effective if it actually delivers what it promises. That is why it is important to be very thorough in the process, to ensure you've thought of as many ideas as possible, you've kept it realistic, and all important people are bought into it.