Product Management © 2013 Johan Oskarsson

Many people in organizations complain about a lack of clear goals. The Vision Statement is there to be your guiding star but moving from strategic vision to dedicated tactical execution can perhaps be one of the most difficult challenges an organization faces.

Strategy Wall

To get to a place where people not only accept but are passionate about what needs to be done is far from easy. It requires an environment where people are part of the strategic planning and where their thoughts count. Transparency and engagement from upper management is one step in the right direction. The Strategy Wall is a good place to start.

Strategy considerations are not only for C-suites, they are something everyone, sometimes even for your customers, can be involved in. To get to the point where the mission and vision statements of your company actually make sense to people, it cannot simply be posted on the company website or in an internal memo. The vision needs to be integrated in the DNA of an organization and all it employees. Decentralization, autonomy, self-organization and self-direction require that local ambitions are strategically aligned. For this to be achieved we need to work across the layers of hierarchy. Visualization, transparency and collaboration can help facilitate this. A former CEO of mine did some amazing things. For example, he invited almost half of the company to attend strategy days on a regular basis in an effort to get peoples inputs and thoughts, and to share his own ideas and thoughts. He joined daily standup meetings to stay in touch with what was going on in the organization. He came and presented the more general company strategy for our development department. Basically he made sure that everyone counted and were engaged in the company. Truly immersing himself between the company’s hierarchies.

Even in very decentralized organizations there are hierarchies. The important message is that we have to work across all the layers simultaneously, not just one at a time. Remember that the upper layer of an organization exists to serve the purposes of the lower layers. Few organizations are built top-down and that makes understanding what is happening in the front lines most important. The Strategy Wall creates a place to meet and start working together with strategy.

[wikipedia.org]

“It seams to me that there is a pressing need to develop modes of thought in which there is a tension between immersion in ordinary daily experience of local interaction and abstraction from that experience, also understood as emerging from local interaction, in order to understand what we are doing.”

Ralph Stacey, “Complexity and organizational reality”

Business Model Canvas Secret business plans are out, transparent Business Models are in. The Business Model Generation technique is collaborative, it provides the tools and techniques you need to create, play, explore and communicate your business strategy.

The Business Model Canvas can be applied to many parts in your organization. It can be used as an overall business model, a product line business model, a project description or even your own personal business model. It creates multiple possibilities to enhance cross-layer work. It is a great tool for developing the purpose of your portfolio. Few people in an organization understand all its’ parts and the Business Model Canvas can help even small companies understand their overall business model. When this is not clear to everyone involved, people tend to do things that are not aligned with each other or with the business as a whole.

The Business Model Canvas consists of 9 blocks that most companies need to understand. Customer segments, Value Proposition, Customer Relation, Channel, Revenue Stream, Key Resources, Key Activities, Partners, and Cost Structure. Any project you run is initiated from a development of the business model, it is an execution of strategy. If it is a quality fix, cost ratio, new product, it will have an impact on the business model to be. Make sure that everyone understands how their work fits into the larger picture. The Business Model Canvas combined with a Portfolio Anatomy is a powerful tool.

[alexanderosterwalder.com]

“Co-creation is much more work than writing somewhere hidden in a corner and then publishing your content. However, the benefits outweigh the costs.”

Alexanders Osterwalder, “Business Model Generation”

[businessmodelgeneration.com]

Portfolio Anatomy Understanding all parts and the relationships between different projects can be both overwhelming and complex. The Portfolio Anatomy creates a visual aid for understanding these relationships and coming to grips with how to move forward.

The Portfolio Anatomy starts with a Business Model Canvas “as is”, i.e. the present day company business model, and displays tactical moves or projects which need to happen in order to reach the next milestone on the path to the company's strategic vision. This visual aid will help you to provide transparency, illustrate interdependencies and allow clear goal setting for projects. The Portfolio Anatomy also provides a ‘sandbox’ in which to play and experiment with different solutions. Far too often projects become larger and larger over time, making it difficult to align strategic initiatives and postponing achievement of important milestones.

Visualization of the interdependencies between projects can help you figure out how to break dependencies and split projects into smaller and smarter parts. The Portfolio Anatomy is the heart stone of the Strategy Wall, when developed it sets the direction and alignment of your overall strategy. It is accessible for everyone to see, discuss, comment and understand. It gives a clear notion of how everything should connect in the end.

[ Source: captaintrouble.com/2013/04/15/the-portfolio-anatomy/ ]

The Balanced Portfolio Balance is key to healthy investments. Investing short term may increase the quarterly revenue, while large scale investment in innovation may not show returns for significant periods but be critical to long term success. Balance is different for everyone, just make sure you have the right balance for you.

[wikipedia.org]

“You don’t learn to walk by following rules. You learn by doing, and by falling over.”

Richard Branson, Virgin Group, Adventurer

There are plenty of different ways to understand the balance of investments. A common method is the risk/reward bubble diagram. It is pretty straight forward but I have changed some names to make it ever easier (for me) to understand. It has four types of investments: Maintenance, Incremental, Innovative and Exploratory. Each investment initiative is displayed with a bubble. The larger the bubble the larger the amount invested. The bubbles are positioned relative to each investments perceived uncertainty and predicted value.

The more more uncertain an investment is the more it is positioned to the right, the greater the expected income from the investment the higher up it is placed and vice versa. I use different colors to show to what product line or similar the investment belongs. Using this diagram you can easily see if you are over-investing in one area and under investing in another. What is the right balance? That is for you to figure out, but start measuring so that you know what you are spending money on. A complement to the bubble diagram is the pie chart aggregating the investments.

20%

20%

40%

20%

Investment

Maintenance

Incremental

Innovation

Exploration

Maintenance

Innovation

Exploration

Incremental

Uncertainty Low High

Valu

e Lo

w

Hig

h

Financial Impact Implementing a strategy means investing money on initiatives like internal IT projects, new products, new distribution channels, and so on. Spending money is a good thing if it is on the right stuff. Knowing the condition of your finances is essential to knowing how to spend. [suzeorman.com]

“People first, then money, then things.”

Suze Orman

P&L Income Statement Sales COGS Gross Profit Expenses Net Income 0

50000

100000

150000

200000

250000

300000

350000

400000

450000

Last

Ite

ratio

n 1

Itera

tion

2 Ite

ratio

n 3

Itera

tion

4 Ite

ratio

n 5

Itera

tion

6 Ite

ratio

n 7

Itera

tion

8 Ite

ratio

n 9

Itera

tion

10

Itera

tion

11

Itera

tion

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Itera

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Itera

tion

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Itera

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15

Target

Month actual

Forecast development

12 month avg

Cash Flow Statement Cash Flow from operations Cash Flow from Finance Cash Flow from Investments Net Cash Flow

Business Case – One Pager Return On Investments Project A Project B Project C Project D Project E

The key financial components on the Strategy Wall are the P&L Income Statement, the Cash Flow Statement, possible future Business Cases and ongoing and past investments. It is important to understand how the over all business is performing financially. How are the sales looking? What are we spending? Are we making any money? These questions should be answered by the Profit & Loss statement. The Cash Flow Statement indicates how much operations money we need to spend and wether we will need to borrow this money or can reinvest earned money.

While new and existing business cases may not be the sole thing to focus on when deciding what to invest in, they do help you understand how to manage future profit and cash flows. A rolling budget including forecasts and targets serves as a estimate of how much money you intend to spend, earn and invest in the future. These 4 financial components cover a lot of ground and definitely belong on the Strategy Wall. Read more about this in my article “The Agile Budget”.

Decision-Making Making a decision about the next step is hard because it means saying no to some things. That is key. To say no. I guess it’s hard because ‘no’ is a negative word, and who wants to be the negative one. Instead of leaving the tough job to someone “who gets paid for making decisions”, we can use collaboration to help out.

[en.wikipedia.org]

“You have enemies? Good, that means you stood up for something in your life.”

Winston Churchill, (don’t need to say anything else)

What is common to pretty much anyone who is responsible for making a decision about a product, investment or similar, is that it involves a lot of pressure. The more uncertain the outcome is, the greater the pressure. By using a collaborative scoring model such as Decision-Making Poker [Decision-Making Poker, Oskarsson 2013] you can strengthen your confidence as well as recognizing when perhaps you were on the wrong track. Collaborative scoring provides you with a prioritized list along with their relative strengths via scoring results.

You can also use a Heat Map to show projects that have received high, mid or low scores. For example if 10 is the highest score, the project has a very strong indicator for some factor that you might be interested in. For example a very strong Time To Market factor. This might be something you should act on. On the other hand if some project score is very low, that might be of interest as well. Collaborative scoring is a powerful method for getting input as well as ‘buy-in’ from the people involved.

Prioritized Decisions Project Score 1. Project A 30 2. Project B 27 3. Project C 25 4. Project D 20 5. Project E 18

Portfolio Roadmap At the horizon is the company’s vision, as you move forward, the horizon is moving too. Waypoints becomes tactical milestones in the pursuit of your vision. As vision changes, so does your bearing, but the horizon is still there. Your job is to figure out where to put the waypoints.

[en.wikipedia.org]

“It is always wise to look ahead, but difficult to look further than you can see.”

Projects Milestones

Old Products

IT Systems

Logistics

Suppliers

New Product Line

Face lift

New Product

Iteration A Iteration B Iteration C Iteration D

The Portfolio Roadmap is a visual aid helping your brain to understand the roadmap for each project, product or initiative, and to identify common synchronization points where multiple initiatives can be bundled together in an appropriate way for market launches. The Portfolio Roadmap can be a large whiteboard or similar where you can easily write, change, add sticky notes, magnets etc. Usually each row has a corresponding cross-functional product team that keeps the board up to date and coordinates with other product teams.

Sometimes there is a interdependence between rows (remember the Portfolio Anatomy). The Portfolio Manager, or similar, has the responsibility to facilitate workshops and planning sessions with all cross-functional product teams, preferably everyone that can fit infront of the Wall. It is important that all the different parts of the organization are represented on the Portfolio Roadmap to ensure that everything is planned together. The goal is to optimize the whole, not individual parts.

Winston Churchill, (don’t need to say anything else)

Portfolio Investment Items Projects in an Agile way of working are called Epics. They differ from projects in traditional Portfolio Management in that an Epic would be much smaller than a normal project. In my experience perhaps only 10-20 % of a normal project.

[twitter.com]

“Planning is a quest for value.”

Epics were introduced (the first time I read about them anyway) by Mike Cohn as very large User Stories. And what are these? They are simply large requirements that belong to an investment theme. Same, same but different than a traditional project. Another big difference is that there is no annual planning of what Epics to execute, or an annual budget. Instead you have continuous rolling planning and budgeting. I have seen adaptations that are a good way to start learning but don’t really produce the big benefits of Agile and Lean thinking. When I present small batch thinking I often hear many people thinking out loud, “if we break our current 250 projects into Epics, that would be 2500 Epics. How can we handle that?’. This is where the backlog thinking comes in, and the corresponding transformation of mindset. It becomes apparent that it is impossible to plan 2500 backlog items, and I agree. But what was the difference from before? How can you plan 250 projects if you can’t plan 2500 Epics? It was only ever possible by adding abstractions, i.e. projects regarded as single independent pieces, and that is where we lost sight of reality. A project is many, many small pieces that only a few individuals have full knowledge of. With abstractions, decision makers are left with only project names but are supposed to know how to manage them all the same.

Agile Portfolio Management is an immersing process where “planers” and Decision Makers have to dive into details, Epics, and understand the reality. This leads to being only able to handle fewer items at the same time, and “voilà” small batches become the only option. Once an idea has become a plan, Epics are born. Epics have a lifecycle of their own which aggregate to the lifecycle of the product. The activity of working with the lifecycle is sometimes called “grooming” in Agile buzzword lingo. So that’s what I’ll call it from now on. The grooming activities are probably different depending on context. I’ll suggest some grooming activities for which I use a board, similar to Kanban or Scrum boards, to manage. See next page.

Mike Cohn, (Agile Estimating & Planning)

Portfolio Backlog

Define roughly Epic content

Verify assumptions, rapid prototyping, front

loading

System architecture draft design

Define how to measure

success

Estimation and creation of business

case

Estimation and creation of

business case

Build, Prepare

for launch

Launch Measure success

Gather data and

learn

New idea

Depending on what is important to you, you can choose different styles. A scrum approach would help manage a batch of Epics, creating anticipation and the ability to communicate larger scope. Flow might then be the down side. If high flow is the main driver, then a Kanaban approach might be the solution, focusing on limiting the number of concurrent Epics in the flow and optimizing for Time-To-Market.

The lifecycle follows a Lean Startup cycle, where the whole idea is to learn as fast as possible in order to respond. It is therefore important to follow up on the Epics and handle any important learning. The Epic lifecycle board is another great item that belongs on the Strategy Wall. When your organization is X-large you might need to add abstraction layers, but don’t forget to put them at the same place so that the same people can follow the path between abstractions.

The Strategy Wall Meet the Wall. The Strategy Wall is the heart of communication and collaboration. It ’s accessible to everyone in the company. Too often employees are kept from knowing strategic moves and too often employees complain about unclear goals. No more. [garyhamel.com]

“Most companies are run by executives who know everything about cost and next to nothing about value.”

Gary Hamel, “What matters now”

Projects

Milestones

Old Products

IT Systems

Logistics

Suppliers

New Product Line

Face lift

New Product

Iteration A Iteration B Iteration C Iteration D

The Strategy Wall

When creating your strategy wall it’s important to build it one small step at a time. I’ve heard of other consulting firms who set up a standard room before introducing people who are then supposed to develop it further. Building the content of the wall should take some time. Everyone needs to understand the purpose of all the content, why should it be used and what problems it solves. Where you start does not really matter.

Anything that will provide you with new information which you can use to understand your current situation is wanted. I have shown some tools that fit together. At first sight it can feel like information overload. An essential feature of the wall is that practically every part of your organization should have a hand in creating it. That process is, in it self, priceless. To develop the wall requires a good deal of upfront work and ongoing hard work and discipline to keep the wall fit. Do you think it’s worth it?

Daily Operations Strategic work is not a once-a-year activity, its daily work. All the money you spend should have a strategic direction and be spent wisely. The trick is to get everyone aligned with the overall strategic vision. This cannot be top-down goal setting, but a combination of both top-down and bottom-up at the same time. The direction and goals, are both extrinsic, intrinsic and emerging. Top-down goals are the goals that your C-suites see that need to be reached, they usually have the most over-all viewpoint on what needs to be done. They set the extrinsic goals for the company and these goals need to be managed in some way. Intrinsic goals are the goals that each employee has, each team, and department and so on. These goals are super important for motivation and energy. They should reflect the strategic vision on a micro level. These goals must also be managed. The emerging goals are the goals that appear without much planning. They come from exploration, learning, talking to customers, new technology etc. These constitute newly discovered opportunities. They might be your company’s next new big-bang disruptive innovation. These must be managed as well. To manage all three different kinds of goals, annual planning will invariably fail. The no planning do-what-ever approach will also fail, as will do-what-is-most-urgent-just-now strategy. The only way to manage all three is to manage them simultaneously.

These three types of goals have different cycles, and that is key. Big strategic turns or pivots usually have longer cycles than changes at the product level. For example before a new business model can be reached, several changes to existing products and completely new products need to be developed. The Strategy Wall is a collaboration platform for integrating strategic work into daily business. Beginning with a strategic direction which represents the overall business model, it outlines the current business model, the visionary business model, and the steps needed to get there. By using a business model canvas to show how the business model will develop you communicate how strategy will be implemented to achieve the strategic direction. The business model must be updated and tracked. Every 3-6 months you should have a business model review (or what makes sense in your world). Things will have happened, a product delivery delayed, another project become more urgent, new opportunities emerged etc. The business model needs to be reviewed.

“Those formulating the abstraction are making a gesture whose meaning can only emerge in many, many local interactions.”

[wikipedia.org]

Ralph Stacey, “Complexity and organizational reality”

Once the prioritys are set, it is time for planning activities. Planning is also a collaborative process. There are usually many different parts which need to be coordinated. This activity is lead by the cross-team program’s project leaders, product owners, and scrum masters. The roles vary depending on company structure and size. The Portfolio Roadmap and Anatomy are used to explore options and finally agree on a suitable scope, which can then be communicated. The scope usually has a list of things which are highly likely, flexible, and highly unlikely to deliver. It is important to let the teams decide what to commit to, otherwise they can over commit and deliver bad quality which can incur high costs later on. The scope becomes the backlog that the development teams should work with. They start with the most important Business, and coordinate with technical architectural Epics that need to be in place for other epics to proceed. Each team figures out the best way forward. As soon as they can deliver something that is a MMF (Minimum Marketable Feature) they integrate and deploy, following the release cycle. The iterations of your business model follow the release cycle cadence and can be used for launches. The release cycle is simply the pace for when changes to the product are available. Each release is known as a Potentially Shippable Increment and you can choose to take it market or not, use it for demo to early adopters, or for any other use you may find. Using this approach you can introduce new products early and safely in order to feel out the market and be able to change the product, pivot the business model or change investment strategy totally, if needed, without too much loss. The world is getter more and more complex and large launches are becoming riskier and riskier. You need to feel your way forward, it cannot be anticipated in advance. Let it emerge at the pace you need.

Changes in the business model will have impact on tactical execution resulting in new projects, products, updates etc. Exploration of what possible scenarios exist is needed to discover and list all possible actions. Estimations, scoping and a review of the finances are activities needed to be prepared for decision-making.

This means engaging teams to estimate roughly all possible scenarios. This might seam like a waste of resources, but it is the opposite. Engaging teams regularly is the perfect process of immersing upper management with frontline teams and the teams will continuously get better at estimating. Regular insight into and updates of finances are healthy and are needed to facilitate rapid direction change when required. When the P&L, Cash Flow and Business Case Statements are updated, make sure to review the balance so that you don’t loose sight of long term investments. When scenarios and and finances are updated it’s time to make decisions about how to prioritize and move forward over the next strategic iteration. Game day. Prepare presentations of scenarios, business cases, financials, strategic plans, and have a day of Decision-Making. Collect the data from the session and make a decision of how to move forward. Make priority of Epics in a Portfolio Backlog.

Agile Product & Portfolio Management Framework (A-PMF) v1.03

BUSINESS

STRATEGY 3-6 MONTHS ITERATION 1-5 YEARS HORIZION

PRODUCT

RELEASES 1-3 MONTHS ITERATION 3-6 MONTHS HORIZION

CONTINUOUS

SPRINTS 1-4 WEEKS ITERATION 2-8 WEEKS HORIZION

DAILY

BUILDS DAILY ITERATION WEEKLY HORIZION

“Things change, roll with it!

PRICING ANALYZE

PRODUCT LIFECYCLE

REVIEW

COMPETITOR STORIES

INNOVATION EXPLORATION

BUSINESS MODEL

GENERATION

PORTFOLIO ALIGNMENT

PORTFOLIO DECISION-MAKING

PORTFOLIO VISUALIZATION

INVESTMENT REVIEW

POST LAUNCH FOLLOWUP

CUSTOMER STORIES

PRODUCT ROADMAP REVIEW

PRODUCT BACKLOG

GROOMING PRODUCT DESIGN

REQUIREMENT DEFINITION

EPICS

SYSTEM ARCHITECTURE ALIGNMENT

KEY PARTNER

ALIGNMENT

PRODUCT DOCUMENTATION

PRODUCT TRAINING

PRODUCT LUANCH

KEY CUSTOMER

SALES SUPPORT

PRODUCT MARKETING

BUDGET REVIEW

PRODUCT SUPPORT

CUSTOMER RELATION

SPRINT PLANNING

ACCEPTANCE TESTING

TEAM COLLABORATION

SPRINT REVIEW

PRODUCT VALIDATION

SPENDINGS REVIEW

SWOT ANALYZE

PORTFOLIO EXPLORATION

WORK FLOW ANALYZE

REQUIREMENT REFINEMENT FEATURES

ASSUMPTION REDUCTION

Johan Oskarsson

@johanoskarsson

Johan.d.oskarsson@gmail.com

www.captaintrouble.com

Inspirational sources Management 3.0 – Jurgen Appelo The Product Manager’s desk reference – Steven Haines Implementing Beyond Budgeting – Bjarte Bogsnes Beyond Budgeting – Jeremy Hope, Robin Fraser Complexity and organizational reality – Ralph Stacey Business Model Generation – Alexander Osterwalder Portfolio Management for new products – Robert Cooper Agile Portfolio Management – Jochen Krebs Agile Estimating & Planning – Mike Cohn

Thanks to David Jackson for editing and theoretical dialogues.