Prioritizing For Profit at Agile 08

© 2008, Enthiosys Inc. All rights reserved. www.enthiosys.com or 650.528.4000
Prioritizing For Profit
Luke Hohmann
CEO, Enthiosys
Agile 2008
http://www.enthiosys.com/insights-tools/prioritizeforprofit1of3/

2
• Founder/CEO of Enthiosys
– Agile Product Management consulting
– Customer needs, roadmaps, business model
– Product management mentoring and training
• Agile product guy
– VP Bus Dev (Aladdin), VP Eng &Product Dev’t
(Aurigin), VP Systems Eng (EDS Fleet Services)
– Board of Agile Alliance
• Author, speaker, blogger
– “Innovation Games”
– “Beyond Software Architecture”
– “Journey of the Software Professional”
– agile PM blog at www.Enthiosys.com
About Luke Hohmann

3
Lather, Rinse Repeat
• Identify the work that needs to be done
• Express it in a way that enables your team to
understand it and build it
• Prioritize the list
• Confirm congruence with your roadmap
• Make your cut line
• Negotiate with development to ensure it fits
identified release windows during release planning
• do it again, again, and again…

Creating Your Backlog
The first step is figuring
out what your market wants!

5
Identifying Market Needs
Customer
Market Needs
provides
Product Mgr
feeds feed
Market
Research
Competitive
Analysis
Trends, etc.
create
Feedback
Elaboration
(Generalization)

6
Expressing Market Needs
Product Mgr
DefectUse Case
Supplemental
Requirement
Market Needs
feeds
Expression
(convergent)
How Market Needs May Be Expresed
Story Sketch of a User Interface
Prototype

7
Market Research
For Market Needs
• An ongoing process of finding answers to
questions that enhance your understanding
of your customers / markets / offerings
– reduces guesswork; increases confidence
– ongoing because you, your customers, and the
larger product ecosystem are not static
• Creates quality segmentations
• Guides product management

8
A Market Research Process
What are your questions?
What will you do with the answers?
What data is
needed to answer the questions?
Acquire the data.
Process / analyze the data.
Present results and take action.

9
What Kinds of Questions?
How big is
my market?
Which
packaging
design will
increase sales?
Which
distribution
channel is best
for my market?
What do
customers want in
the next release?
How are we
perceived relative
to competitors?
How are customers
changing? How can I
prepare for this?
What kind of
products could
we add to our
product mix?
What features
should be in the
next release?

10
Market Research and
User Research Differ
Market Research User Research
Focuses on the who & the what Focuses on the how & the why
Evaluates what larger samples say Evaluates what smaller samples do
Asks people about concepts,
opinions and values
Observes what people do
Asks a market what they will buy Determines how a market will use
Focuses on selling & marketing
the product
Focuses on the requirements
of the product
Primarily drives product strategy Primarily drives product design
Source: MHHE

11
Qualitative Research with
Innovation Games®
Product Box
Identify Exciting Features
Spider Web
Understand Product Relationships

Prioritizing Your Backlog
The nest step is figuring
out what order to do the work!

13
Prioritization Means Ordering
Do This Do OtherDo That
Do This
Do Other
Do That
Do That
Do Other
Do This
Do Other
Do That
Do This

14
To Order You Need Attributes
Do This
Do That
Flip Chart Exercise:
Identifying Prioritization Attributes
Attribute1 Attribute2

15
To Sort You Need Values
Do This value
Do That value
value
value
Flip Chart Exercise:
Valuing Prioritization Attributes
Attribute1 Attribute2

16
It Helps To Group Attributes
Do This yes
Do That no
no
yes
Sales Service
Internal Stakeholders
Does this backlog item
directly improve your ability to do your job?

17
Not Everyone is Equal
Do This
Do That no yes
Sales Service
Internal Stakeholders
Does this backlog item
directly improve your ability to do your job?
yes no
weight 20 10
Sales has
twice the
influence

Prioritizing For Profit
The groups of attributes that matter the most!

19
Three Core Groups
Stakeholder
Alignment
Strategic
Alignment
Driving
Profit
Shows how
you’re meeting
market needs.
Shows how
you align with
the big picture.
Shows how
you’re going to
make money.

20
Three Core Groups
Stakeholder
Alignment
Strategic
Alignment
Driving
Profit
Who? Why? Money?
Flip Chart Exercise

21
Three Core Groups
Stakeholder
Alignment
Strategic
Alignment
Driving
Profit
How? How? How?
Flip Chart Exercise: How Do You Prioritize?

Stakeholders
Who?

23
Stakeholders
• External: Customer personas
Partners
Channel
• Internal: Sales & Marketing
Professional Service
Customer Care
The System
This is a
partial list.
Extend to
meet your
needs!

24
Customers  Personas
• Market segments are groups of customers
that we use for marketing/selling
• “Market Segment” is too impersonal
• Personas are fictitious people for whom you
are designing
– More human/humane than “soccer moms”
– Provides rich, contextual information
(photographs, family stories, jobs, etc.)

25
Integrating Their Feedback
• Product Management “expert” can
simply prioritize based on their
knowledge
• Can ask small groups to prioritize
using in-person techniques
• Large groups need special tools
“infinite” backlog
use case
bug fix
arch change
do this
do that
the other thing

26
Some Techniques
Face to Face Interactions
• Innovation Games®
Buy a Feature
20/20 Vision
Prune the Product Tree
• Joint spreadsheet ranking
Online Interactions
Buy a Feature
• Joint spreadsheet ranking
Shared State (physical)
Prune the Product Tree
• Project boards
Shared State (electronic)
• Wiki’s
• Commenting systems
• email / workflow
Same
Time
Different
Time
Same Place Different Place

27
Innovation Game® Buy a Feature
• A list of 12-20 items (features or projects)
are described in terms of benefits and cost
• 5 to 8 invited stakeholders given
limited “budget”, must reach
consensus on projects to “buy”
• Captures very rich information about
customer motivations, trade-offs,
objections, actual collective needs
In-person
• Provides rich opportunity for “new” ideas
Online
• Captures data for sophisticated analysis of
preferences
• Preliminary trials indicate faster/more
accurate results than traditional tools
Goal:
Prioritize
Backlog / Portfolio

28
Example Tournament

29
Buy A Feature Online - Backlog

30
Buy A Feature Online - Results

31
Buy A Feature Online - Chat

32
Case Study:
VeriSign Global Customer Support
Context 46 project ranging from small to very large.
Problem The VeriSign leadership needed to quickly identify the high-
priority, most globally supported projects.
Engagement
Profile
VeriSign project managers prepared the portfolio for the
games. Enthiosys structured the process into three
tournaments involving ~50% of the global customer care
organization and facilitated the games.
Results • Very clear separation of the “winning” projects – the
original list of 46 was prioritized to the top 7 projects
• High degrees of collaboration – even when collaboration
was not required to purchase an project!
• Participant chat logs provided detailed explanations
behind the bidding – the meaning behind the choice.
• Participants considered the process fun.

Strategic Alignment
Why?

34
Aligning to Strategy
• Get a copy of your strategy
• Work with your portfolio/executive team to
understand it’s weighting
• Demonstrate alignment with backlog
…and, yes, I know, this can be really hard,
especially when you don’t have a clear strategy…

35
Strategic Alignment
Do This
Do That 1
Global Social
Strategic Alignment
1
weight 25 15
Mobile
1
1
5

Driving Profit
Money?

37
Flip-Chart Exercise
• What are the primary drivers of profit?
• How could you reflect that you’re driving profit
in your backlog?

38
Some Primary Profit Drivers
Reduce Costs
– Licensed components
– Workforce
– Development tools
– Operations
– Fewer features
– Platform architectures
Increase Revenue
– Time to market
– Access to market
– Multiple product
opportunities; product
families
– Synergistic product sales
– New service offerings
– Enhance operations

39
Business Model Framework
Customer ROI Model
Quantifies Return
Enforcement
Protection of Rights
Licensing
Terms and Conditions of Use
Type of Value
Exchange
The way you make money
Profit Engine
Causes More
Money Making
Events
Customer Value Analysis
Identifies Value
Pricing
How much money you make
Driving Profit means prioritizing to your business model!

40
Core Value Exchange Models
• Time-based access
• Transaction
• Meter
• Percentage of revenue gained / costs saved
• Hardware
• Service
• Data / Content
Charity?

41
Time-Based Access
• Grant “right to use” for a defined period of
time (even if you don’t actually use)
– Perpetual (like Microsoft Windows)
– Annual (like many ERP)
– Rental
– Subscription
• Pay After Use...

42
Transaction
• Transactions: Measurable units of work
• Exchange of money is always tied to the
transaction but value (and price) is often
associated with an attribute
– Duration of a phone call
– Time of day call is made
– To whom the call is made

43
Meter
• Constraining a well-defined resource
• Consuming a well-defined resource
– Concurrent (e.g., concurrent user)
– Identifiable resource (e.g., named user)
– Consumptive (e.g., you have 100 hours)

44
Hardware
• Associate the amount charged
for the software with some
element of hardware
– Software anti-piracy dongles – you pay for both
the dongle and the license SDK/run-time
• Huge challenge: software becomes “free”,
especially in embedded software
– Home appliances: microwave ovens
– Information appliances: router/VPN server
– Consumer electronics

45
Service
• The exchange of money is tied to a service;
software is required to provide the service or
is intimately related to the service
– Symantec: anti-virus updates
– AOL: email
– Red Hat: Linux-related services
such as support or upgrades
• Often associated with
subscription pricing

46
Revenue Obtained /
Cost Saved
• Charge based on revenue obtained or costs
saved, often in terms of percentages
– Retail yield management
ServiceSource, with annual revenue between
$25M - $50M, says it receives compensation
based on the revenue it generates for its
clients and charges no consulting, training
or implementation fees, or ongoing
management costs.
- June 29, 2005, San Jose Mercury News

47
Data / Content
• The software creates unique data/content
• The exchange of value provides access to
these data
– FICO scores
– re-processed government data (patents,
TIGER/Line® files)
• Often associated with
subscription pricing

48
Driving Profit
Do This
Do That 1
Increase
sales via
Intern’l
partners
Lower Our
Customers
Operational
Costs
Driving Profit
1
weight 25 15
Lower Our
Operational
Costs
1
1
5

Putting It All Together

50
Your Job…
pile of
stuff to do
backlog
1. use case
2. bug fix
3. arch change
• use cases
• bugs
• features
• enhancement requests
• updates
• stuff… to do…
markets to serve
money to make
market driven road maps

51
A Backlog Prioritized for Profit
Stakeholder
Alignment
Strategic
Alignment
Driving
Profit
At least one
item for every
stakeholder.
At least one
item that aligns
to strategy.
At least one
item that drives
profit.

52
Contact and Content
Reach me at lhohmann@enthiosys.com
More about agile and business models
– agilePM blog and Product Bytes newsletter at
http://www.Enthiosys.com/insights-tools/
Join us at our booth!

Prioritizing For Profit at Agile 08

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