Organizations thrive – or perish – on the strength of their products and services. Ironically, few companies have developed the portfolio and product management capabilities required to build products and services that customers actually want, use and love, leaving incumbents vulnerable to disruption.
Agile portfolio management is critical to decision-making, because all organizations have limited funds with which to finance all the work they do (i.e., what they invest in). Unfortunately, leaders often make these decisions:
- In isolation without the context of all potential and existing work
- Using problematic approaches, such as LVD (loudest voice dominates) and HiPPO (highest paid person’s opinion)
- With little understanding of capacity and limited connection to strategy.
And what passes for some as Agile product management often isn’t Agile at all, because understanding of the voice of the customer is limited and because businesses typically don’t have the ability to test assumptions, prototype, experiment and adapt.
Portfolio and product management are about “funding the right things” and “building the right things,” respectively. These days, organizations focus primarily on “building the things right” (i.e. execution). Execution is imperative to success, of course: if you can’t execute, you can’t create, deliver and capture value. However, if your focus is only on execution, your ability to identify value may be stunted, eventually leaving little value to deliver. And even less to capture.
Essentially, excellence in execution with subpar portfolio and product capabilities leaves your organization vulnerable to competitors who understand and target your current customers’ needs and, eventually, earn their dollars and your market share.
Excellence in execution with subpar portfolio and product capabilities leaves your organization vulnerable to competitors who understand and target your current customers’ needs…
An Unfortunate Tale of Funding and Product Management
Imagine the following scenario, which is not uncommon. Senior management at (fictional) company Zeta-Alpha Industries has 15 critical initiatives that it wants to complete over the next three quarters, beginning in Q1. Each of the 15 initiatives is considered of equal importance, which means there is no clear ability to distinguish which initiative(s) should get funding and development capacity.
Further, the SVP of technology has declared that five of the initiatives, each of which is relatively large, must be built within two quarters. The SVP of marketing, on the other hand, is adamant that a different set of five large initiatives must be built right away.
The SVP of technology and the SVP of marketing have not met about this. The SVPs occasionally see each other in monthly senior leadership meetings, but it’s more of a status than alignment meeting. They sit on opposite ends of the building, on different floors, and have their own teams with their own priorities. There’s little or no alignment or shared understanding of strategy and objectives. So, lacking cross-functional communication and an agreed-upon economic prioritization model, the portfolio management team funds and equally prioritizes both sets of initiatives.
Lacking cross-functional communication and an agreed-upon economic prioritization model, the portfolio management team funds and equally prioritizes both sets of initiatives [for a total of ten concurrent initiatives].
Unfortunately, the portfolio management team is not aware that its business unit only has the resources to complete three medium initiatives or two large initiatives over the next three quarters. The result? WIP is huge as Product struggles to finish all ten large initiatives simultaneously. Developers work overtime. Creativity and quality are low. Burnout and turnover rates are high. Talent leaves, migrating to the competition, further curbing capacity and increasing lead time.
By the end of the second quarter, 7% of the work is done and no new code has been released to production. Little value has been created, delivered and captured. Customers are frustrated and look elsewhere for solutions.
And, with almost no time to speak to users, Product moves into robotic order-taking mode, not learning and missing the opportunity to provide valuable knowledge to the portfolio team with which to make pivot, persevere or kill decisions. With limited guidance, delivery groups keep on building into Q3 as management has already invested millions of dollars into these initiatives and is unable, or unwilling, to shift or modify funding. In this reality, sunk costs matter and communication isn’t flowing.
An inability to prioritize spreads people too thin and results in starting more work than can be finished, inhibiting any value creation. And a lack of understanding of true capacity often results in overcommitment and overworked teams as executives vie to jump their respective initiatives to the front of the line. Poor funding choices can result in products and services that aren’t aligned with an organization’s strategy.
An inability to prioritize spreads people too thin and results in starting more work than can be finished, inhibiting any value creation.
A Different Way
Understanding capacity (an organization’s ability to build and deliver over a specified timeframe), comparative value (a force-ranked prioritization of initiatives), and the ability to match the two is imperative. The above scenario, while common, could have played out differently using Agile portfolio and product management, which leverage a set of powerful tools, including:
- Economic prioritization/cost of delay
- Capacity estimation
- Shorter funding cycles
- Closed feedback loops
- Hypothesis-driven development and experimentation
Had Zeta-Alpha Industries leveraged economics to align and prioritize on value, used the history of its delivery groups to create a realistic development and delivery plan, and worked closely with Product to test ideas and make funding decisions using data and leading indicators, it might have created real value for its customers in the form of features, products or services.
In the future, relevant stakeholders from Zeta-Alpha’s portfolio management team might meet on a regular cadence – at least monthly – to look at its initiative backlog, review progress, and assess data-driven outcomes from its initiatives. It could use those assessments to learn from its development efforts and adapt when necessary.
You may have worked, or currently work, at “Zeta-Alpha Industries.” Whether you are in marketing or business, IT or product, you are part of a large team-of-teams with limited resources and information (most likely competing against other large teams-of-teams with limited resources and information). The way to best position your organization to win – to maintain or grow market share, sales, and customer loyalty – is through agility and the development of Agile portfolio and product management capabilities.
Hear from the Author at Agile2019!
Corey Post is an Accenture | SolutionsIQ Lean-Agile transformation, portfolio and product management coach with more than 15 years of leadership experience in Agile ways of working and continuous improvement. He will be presenting “Innovation Starts with Agile Portfolio Management” at Agile2019 in Washington, D.C. You can learn more about Corey’s experience and connect with him on LinkedIn and Twitter.