driving strategic choices for agile product portfolios
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Driving Strategic Choices for Agile Product Portfolios
Rich MironovTri-Valley Agile Leadership
Network26 May 2015
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• Veteran product manager/exec/strategist• Business models, agile, organizing product organizations• “What do customers want?”
• 6 startups, including as CEO/founder• “The Art of Product Management” • First Product Camp, Agile Alliance
product track chair
ABOUT RICH MIRONOV
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For revenue software and software-enabled companies:• Validation and strategy should
precede full development• Organizational behaviors shape
decision-making• Explicit portfolio allocations
enable feature-level prioritization
AGENDA
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• Make money by shipping market-winning software
• Software profits are all about scale• $5M for First Customer Ship, $0 for the next 10,000 units
• No company ever has enough development capacity
• Segmentation is strategic art of choosing similar customers who want same solution (product)• Can’t let any single customer’s opinion dominate
REVENUE SOFTWARE COMPANIES ANDSOFTWARE-ASSISTED COMPANIES
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There’s nothing more wasteful than brilliantly
engineering a product that doesn’t sell.
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• No natural prioritization of development work without an underlying strategy
• Need to correctly frame (and force-rank) customer needs
• No development team big enough to fulfill all dreams of your execs
PRIORITIZATION REQUIRES STRATEGY
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• Too little agility at strategic/portfolio level?• Annual budget, 6 month candidate review• Full waterfall requirements/specs/designs• Process-bound, uncompetitive, products always late• Our mean time to decide > competitor’s mean time to ship
• Too much (overused) agility?• ADHD/shiny object: initiatives change monthly• Weak validation, business case, pricing, competitive info• Many projects abandoned late in cycle
• First a product/business problem, then an engineering problem
STRATEGIC AGILITY: CRITICAL PRODUCT MANAGEMENT ISSUE
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market information, priorities,requirements, roadmaps, epics,
user stories, backlogs, personas, MRDs…
product bits
strategy, forecasts, commitments, roadmaps, competitive intelligence
budgets, staff,targets
Field input,Market feedback
Segmentation, messages, benefits/features, pricing,
qualification, demos…
Markets & CustomersDevelopment
Marketing& Sales
Executives
ProductManagement
WHAT DOES A PRODUCT MANAGER DO?
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• Large software companies spend 12%-18% on Engineering • So revenue is about 6x development costs
• Headcount math: $1M/year buys 5-6 people in US• Dev, test, docs, product mgmt, project mgmt, release ops…
• $1M/year more in Engineering $6M/year revenue
• +1 headcount +$1M/year revenue
PRODUCT COMPANIES: A FEW FINANCIALS
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PRODUCT SUCCESS FOOD CHAIN
Is this a good problem to solve?
(product mgmt)
Do we have a good solution design?
(dev, UX, QA, support)
Can we implement efficiently, agilely?(program mgmt)
Can we go to market and bring in revenue?
(marketing, sales)
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COMMERCIAL SOFTWARE FAILURE MODES
Undifferentiated, poorly positioned
15%
Marketing/Sales/Channel failures
25%
Late Delivery*15%
Poor Quality*10%
Wrong problem, wrong so-lution or product
35%
*Engineering/program management scope
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Most of the success/failure of a
product is determined before we pick our first developer or fill out our
first story card
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• Hard to attribute success/failure • Sales teams paid to subvert
corporate goals• Revenue estimates have huge error bars• Executives don’t believe in mutually
exclusive development choices• Shiny objects, confirmation bias,
groupthink• Politics and Big Swinging Budgets
ORGANIZATIONAL CHALLENGES TO STRATEGIC PRODUCT THINKING
• Limited development resources = household budget
• Too many expenses: rent, food, repairs, entertainment, college fund, property taxes, Girl
Scout cookies…• Kids Execs don’t
remember whatwe spent committedto yesterday
PORTFOLIO PLANNING
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• Hard to rank-order unlike items• Where does this bug go versus minor features?• A one-off customization versus more Dev Ops work?
• Instead, group similar requests• Which two features will we put into v6.5?• P0, P1, P2, P3…• We can fund only one audacious, long-term program:
teleportation or synthetic petroleum
• Cross-bucket trade-offs reflect our biases
PRIORITIZING WITHIN BUCKETS
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TYPICAL COMMERCIAL SOFTWARE COMPANY R&D BUDGET*
Features for current re-lease 50%
Quality (refactor, test automation) 15%
Engineering overhead; 10%
Big future bet, 5%
Sales one-offs, non-roadmap 20%
*In my personal experience
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VARIES WITH GROWTH STAGE
Current release
50%
Quality20%
Eng Overhead5%
Sales one-offs
25% Current releases/features
35%
Quality35%
Future bet5%
Eng Overhead15%
Sales one-offs10%
v1.0 software startup
Mature software (post-innovation)
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• This quarter, how should we spend our precious feature-focused story points?• 70% on deployability, 20% on cost reduction?
-OR-• 60% on scaling, 30% on hardware reliability?
• What was our actual spending last quarter?
• What portion was “unplanned” or sales interrupts?
PORTFOLIO STRATEGY = FORCING HARD TRADE-OFFS
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• “QA and Support teams can sort P1/P2 bugs any way they like, using WSJF or any other method. Max 310 story points in Q3.”
• “Performance improvement goal is 65% faster transaction processing. Architect leads story writing.”
• But customer-visible features are heavily lobbied and highly political. Product Management needs to be Development’s heat shield.
ALLOWS DECENTRALIZED DECISION-MAKING
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• Users understand problems, but mis-design solutions
• Have we asked enough people/the right people?• Watch for confirmation bias• …Before full-scale development starts
• $2M+/year burn rate creates its own momentum
• Then frequent prototypes and early versions
INTELLECTUALLY HONEST VALIDATION (LEAN TOOLS)
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• Must have product strategy/product management• Hire for experience, not convenience
• Validation before full development• A month of good market input might save $2M in pivots• Then frequent exposure/re-validation/piloting throughout
• Set product-level and portfolio-level spending allocations• One-off choices trend in same direction
• Build a deeply agile development capability
TAKE-AWAYS
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