Prioritizing For Profit

© 2008, Enthiosys Inc. All rights reserved. www.enthiosys.com or 650.528.4000

Prioritizing For Profit

Luke HohmannCEO, Enthiosys

http://www.enthiosys.com/insights-tools/prioritizeforprofit1of3/http://www.enthiosys.com/insights-tools/prioritizeforprofit2of3/http://www.enthiosys.com/insights-tools/prioritizeforprofit3of3/

2© 2008, Enthiosys Inc. All rights reserved. www.enthiosys.com or 650.528.4000

• 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


Enthiosys Overview

Innovation Games® to Generate Ideas

Agile Product Management to Build Products

Product Roadmaps to Plan Future Products

10101101101011

Services to Drive Products Into Markets

Business Models for Profitable Products

Innovation Games® to Refine and Prioritize Ideas with Customers


Agenda

• Creating Your Backlog• Prioritizing it

– Challenges with ROI– Managing stakeholders– Aligning to strategy– Driving profit

• Acceptance Tests


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!


Identifying Market Needs

CustomerMarket Needs

provides

Product Mgr

feedsfe

ed

Market Research

CompetitiveAnalysis

Trends, etc.

create

Feedback

Elaboration(Generalization)


Expressing Market Needs

Product Mgr

DefectUse CaseSupplementalRequirement

Market Needs

feeds

Expression(convergent)

How Market Needs May Be Expresed

Story Sketch of a User Interface Prototype


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


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.


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?


Market Research and User Research Differ

Market Research User ResearchFocuses 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


Qualitative Research with Innovation Games®

Product BoxIdentify Exciting Features

Spider WebUnderstand Product Relationships


Prioritizing Your Backlog

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


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


To Order You Need Attributes

Do This

Do That

Flip Chart Exercise: Identifying Prioritization Attributes

Attribute1 Attribute2


To Sort You Need Values

Do This value

Do That value

value

value

Flip Chart Exercise: Valuing Prioritization Attributes

Attribute1 Attribute2


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?


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 hastwice the influence


Problems with ROI-Based Prioritization

Don’t be mislead…


ROI = (Gain – Cost)------------------Cost

But most people can’t tell you the gain!


Determining ROI requires market research.

But most backlog items are not what you research. (Market != Customer)


Comprehensive market and customer research takes too much time and costs too much money.


Agilists like small, independent backlog items.

Customers like large, interdependent backlog “groups”.


Prioritizing For Profit

The groups of attributes that matter the most!


Three Core Groups

StakeholderAlignment

Strategic Alignment

DrivingProfit

Shows how you’re meetingmarket needs.

Shows how you align withthe big picture.

Shows how you’re going tomake money.


Three Core Groups


Strategic Alignment

DrivingProfit

Who? Why? Money?

Flip Chart Exercise


Three Core Groups


Strategic Alignment

DrivingProfit

How? How? How?

Flip Chart Exercise: How Do You Prioritize?


Stakeholders

Who?


Stakeholders

• External: Customer personasPartnersChannel

• Internal: Sales & MarketingProfessional ServiceCustomer CareThe System

This is a partial list.Extend to meet your

needs!


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.)


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 casebug fixarch change

do this

do that

the other thing


Some Techniques

Face to Face Interactions• Innovation Games®

Buy a Feature20/20 VisionPrune the Product Tree

• Joint spreadsheet ranking

Online Interactions• Innovation Games®

Buy a Feature

• Joint spreadsheet ranking

Shared State (physical)• Innovation Games®

Prune the Product Tree• Project boards

Shared State (electronic)• Wiki’s• Commenting systems• email / workflow

SameTime

DifferentTime

Same Place Different Place


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” ideasOnline• Captures data for sophisticated analysis of

preferences• Preliminary trials indicate faster/more

accurate results than traditional tools

Goal:Prioritize Backlog / Portfolio


Buy A Feature Online - BacklogA list of

features with prices.

Games can be played

multiple times to get

preferences among

different groups


Buy A Feature Game Play

Participants and their bids.

An integrated chat facility enables you to

understand participant motivations.


Buy A Feature Online - Results

Results of many games

played, sorted by number of

times purchased.


Numerous Features Compete in Tournaments

15

15

7

745

15

14 7

7

14 7

1

2

3

4

5

List of projects

14 Each dark square represents one game

7 Each light square represents the “winning” projects


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?


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…


Strategic Alignment

Do This

Do That 1

Global Social

Strategic Alignment

1

weight 25 15

Mobile

1

1

5


Driving Profit

Money?


Flip-Chart Exercise

• What are the primary drivers of profit?

• How could you reflect that you’re driving profit in your backlog?


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


Business Model Framework

Customer ROI ModelQuantifies Return

EnforcementProtection of Rights

LicensingTerms and Conditions of Use

Type of Value Exchange

The way you make money

Profit EngineCauses More

Money Making Events

Customer Value AnalysisIdentifies Value

PricingHow much money you make

Driving Profit means prioritizing to your business model!


Core Value Exchange Models

• Time-based access

• Transaction

• Meter

• Percentage of revenue gained / costs saved

• Hardware

• Service

• Data / ContentCharity?


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...


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


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)


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


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


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, trainingor implementation fees, or ongoing management costs. - June 29, 2005, San Jose Mercury News


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


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


Your Job…

pile ofstuff to do

backlog

1. use case2. bug fix3. arch change

• use cases• bugs• features• enhancement requests• updates• stuff… to do…

markets to serve

money to make

market driven road maps


A Backlog Prioritized for Profit


Strategic Alignment

DrivingProfit

At least oneitem for every stakeholder.

At least one item that aligns to strategy.

At least one item that drivesprofit.


Contact and Content

Reach me at [email protected]

More about agile and business models– agilePM blog and Product Bytes newsletter at

http://www.Enthiosys.com/insights-tools/

Join us at our booth!

Date post:	24-May-2015
Category:	Business
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