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Prioritizing For Profit


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Luke Hohmann's "Prioritizing For Profit" talk outlines how to create and prioritize a backlog based on customer value, market need, strategic issue, architecture. Targeted at CTOs, VP Eng/Devt, and …

Luke Hohmann's "Prioritizing For Profit" talk outlines how to create and prioritize a backlog based on customer value, market need, strategic issue, architecture. Targeted at CTOs, VP Eng/Devt, and VP ProductMgmt/Chief Product Officers

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    • 1. Prioritizing For Profit Luke Hohmann CEO, Enthiosys
    • 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
      About Luke Hohmann
    • 3. Enthiosys Overview 10101101101011 Innovation Games ® to Generate Ideas Agile Product Management to Build Products Product Roadmaps to Plan Future Products Services to Drive Products Into Markets Business Models for Profitable Products Innovation Games ® to Refine and Prioritize Ideas with Customers
    • 4. Agenda
      • Creating Your Backlog
      • Prioritizing it
        • Challenges with ROI
        • Managing stakeholders
        • Aligning to strategy
        • Driving profit
      • Acceptance Tests
    • 5. 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…
    • 6. Creating Your Backlog The first step is figuring out what your market wants!
    • 7. Identifying Market Needs
    • 8. Expressing Market Needs
    • 9. 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
    • 10. 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.
    • 11. 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?
    • 12. Market Research and User Research Differ Source: MHHE Primarily drives product design Primarily drives product strategy Focuses on the requirements of the product Focuses on selling & marketing the product Determines how a market will use Asks a market what they will buy Observes what people do Asks people about concepts, opinions and values Evaluates what smaller samples do Evaluates what larger samples say Focuses on the how & the why Focuses on the who & the what User Research Market Research
    • 13. Qualitative Research with Innovation Games® Product Box Identify Exciting Features Spider Web Understand Product Relationships
    • 14. Prioritizing Your Backlog The nest step is figuring out what order to do the work!
    • 15. Prioritization Means Ordering Do This Do Other Do That Do This Do Other Do That Do That Do Other Do This Do Other Do That Do This ? ? ?
    • 16. To Order You Need Attributes Do This Do That Flip Chart Exercise: Identifying Prioritization Attributes Attribute1 Attribute2
    • 17. To Sort You Need Values Do This value Do That value value value Flip Chart Exercise: Valuing Prioritization Attributes Attribute1 Attribute2
    • 18. 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?
    • 19. 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
    • 20. Problems with ROI-Based Prioritization Don’t be mislead…
    • 21. ROI = (Gain – Cost) ------------------ Cost But most people can’t tell you the gain!
    • 22. Determining ROI requires market research. But most backlog items are not what you research. (Market != Customer)
    • 23. Comprehensive market and customer research takes too much time and costs too much money.
    • 24. Agilists like small, independent backlog items. Customers like large, interdependent backlog “groups”.
    • 25. Prioritizing For Profit The groups of attributes that matter the most!
    • 26. 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.
    • 27. Three Core Groups Stakeholder Alignment Strategic Alignment Driving Profit Who? Why? Money? Flip Chart Exercise
    • 28. Three Core Groups Stakeholder Alignment Strategic Alignment Driving Profit How? How? How? Flip Chart Exercise: How Do You Prioritize?
    • 29. Stakeholders Who?
    • 30. 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!
    • 31. Customers  Personas
      • M arket 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.)
    • 32. 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
    • 33. Some Techniques Same Time Different Time Same Place Different Place
      • Shared State (electronic)
      • Wiki’s
      • Commenting systems
      • email / workflow
      • Shared State (physical)
      • Innovation Games® Prune the Product Tree
      • Project boards
      • Online Interactions
      • Innovation Games® Buy a Feature
      • Joint spreadsheet ranking
      • Face to Face Interactions
      • Innovation Games® Buy a Feature 20/20 Vision Prune the Product Tree
      • Joint spreadsheet ranking
    • 34. 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
    • 35. Buy A Feature Online - Backlog A list of features with prices. Games can be played multiple times to get preferences among different groups
    • 36. Buy A Feature Game Play Participants and their bids. An integrated chat facility enables you to understand participant motivations.
    • 37. Buy A Feature Online - Results Results of many games played, sorted by number of times purchased.
    • 38. Numerous Features Compete in Tournaments
    • 39. 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.
    • 40. Strategic Alignment Why?
    • 41. 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…
    • 42. Strategic Alignment Do This Do That 1 Global Social Strategic Alignment 1 weight 25 15 Mobile 1 1 5
    • 43. Driving Profit Money?
    • 44. Flip-Chart Exercise
      • What are the primary drivers of profit?
      • How could you reflect that you’re driving profit in your backlog?
    • 45. 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
    • 46. Business Model Framework Driving Profit means prioritizing to your business model! 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
    • 47. Core Value Exchange Models
      • Time-based access
      • Transaction
      • Meter
      • Percentage of revenue gained / costs saved
      • Hardware
      • Service
      • Data / Content
    • 48. 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...
    • 49. 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
    • 50. 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)
    • 51. 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
    • 52. 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
    • 53. 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
    • 54. 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
    • 55. 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
    • 56. Putting It All Together
    • 57. Your Job…
      • use cases
      • bugs
      • features
      • enhancement requests
      • updates
      • stuff… to do…
      markets to serve money to make market driven road maps pile of stuff to do backlog 1. use case 2. bug fix 3. arch change
    • 58. 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.
    • 59. Contact and Content
      • Reach me at [email_address]
      • More about agile and business models
        • agilePM blog and Product Bytes newsletter at
      • Join us at our booth!