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


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


• 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


There’s nothing more wasteful than brilliantly

engineering a product that doesn’t sell.


• 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


• 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


FASTER CARS NEED BETTER DRIVERS


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


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)


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


Most of the success/failure of a

product is determined before we pick our first developer or fill out our

first story card


• 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

16


• 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


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


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)


• 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


• “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


• 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)


• 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

CONTACT

Rich Mironov, CEOMironov Consulting233 Franklin St, Suite #308San Francisco, CA 94102

RichMironov

@RichMironov

[email protected]

+1-650-315-7394