Iterative and incremental investment cycles, when applied in a product development context, offer predictable, repeatable structure and measurable benefits to product development teams. In a classic product model, the product owner is accountable for investment estimation, funding requests, and the resulting product budget. Iterative and incremental investment cycles answer three questions for the product owner and engaged product stakeholders:
1. What level of investment is necessary to accomplish the highest product priorities?
2. Will approved funding meet the investment estimate?
3. What budget decisions and product roadmap changes must be made, once the funding allocation is approved?
Ideally, the product owner leads a funding evaluation process every 3 to 6 months. This evaluation frequency creates the opportunity to adjust product investment plans in light of constantly changing business conditions and business priorities. When product owners frame investment recommendations and funding requests with current information from company stakeholders, customers, suppliers and vendors, and the broader market, they are more likely to adjust their product priorities and roadmaps to reflect new forecasts, insight, and economic realities. This approach reduces waste, increases freedom of action, and expands the range of business outcomes available as a result of continuous funding certainty. For definitions of terms and underlying assumptions used throughout this white paper, please refer to the Baseline Definitions and Assumptions sections at the end of the document.
As an ongoing activity, the product owner estimates the product investment necessary to accomplish the highest product priorities and meet product roadmap objectives. In advance of an upcoming, scheduled funding cycle, the product owner facilitates a collaborative conversation to create the product investment estimate. The product owner invites a variety of people to participate in the conversation, including product development team members, product end users, other product stakeholders, and supporting vendors. Prior to the conversation, the product owner ensures that all participants have access to the list of product priorities and the current product roadmap. A typical conversation agenda includes several investment considerations:
● Product team size and team member skills necessary to deliver future product priorities and provide product support - it is assumed that product development team members are dedicated to the product team
● Product roadmaps with planned feature releases and associated go-to-market activities
● Innovation plans for experimentation and learning
● Licensing and procurement plans
● Supply chain conditions
With feedback from this conversation in hand, the product owner defines the level of investment to recommend for funding analysis and approval. Line items for the investment recommendation typically include:
● Cost of the dedicated product team
● Physical plant / office space
● Software licensing and support
● Hardware procurement and support
● Equipment procurement and support
● Training and skill development
● Material components required for product development
● Marketing and merchandising cost
● Compliance and legal cost
● Hosting and technology platform cost
● Logistics and fulfillment cost
● Customer service and product quality support
On a recurring 3 to 6 month evaluation cycle, the product owner submits a product funding request and meets with the product funding team for a collaborative conversation. The product funding team often consists of a product manager (or another senior leader from the product development organization), a commercial leader (representing the sales organization), a marketing leader, and a finance leader. Other product funding team members could include a product engineering leader (commonly in support of a digital or data-driven product) and a product operations leader (if fulfillment, manufacturing, and supply chain business capabilities support the product in the marketplace).
Throughout the collaborative funding conversation, the product owner and product funding team analyze and refine the product funding request until the request is approved. Even in the event of a planned product decommission and market exit, some funding is required for the product team to perform necessary decommission activities. When analyzing the product funding request, the product owner and product funding team discuss product investment recommendation details:
● Product roadmap objectives and timing
● Product revenue streams and profitability
● Business climate and market conditions
● Large cyclical costs or extraordinary one-time costs
● Operational considerations
● Immediately available funding sources
When the conversation participants reach a funding decision, the product owner revises the product funding request and records the decision rationale in the funding request. When the product owner publishes the revised product funding request, the product funding team formally approves the request and takes action to allocate funds from the chosen funding sources.
Following approval of the product funding request, the product owner evaluates the current product roadmap and product backlog priorities through the lens of funding constraints and opportunities. Product backlog dependencies, which require up-front payment to satisfy, frequently serve as targets for the product owner’s analysis. When funding expands, the product owner can choose to accelerate development and release of product enhancements that had been contingent upon acquisition of new, enabling team skills, equipment, or technology. When funding contracts, the product owner can illustrate transparently the new, fiscal reality by pushing out delivery target dates and moving product backlog items, which depend upon immediate purchases, down the list of force ranked priorities.
Once the product funding team delivers funds allocated for the approved time horizon, the product owner updates the product budget and adjusts the product roadmap to reflect changes required to meet the new budget. Product budget elements subject to revision include:
● Hiring and onboarding new product development team members
● Adjusting compensation, incentives, and the size of the incumbent product development team
● Investing in skill acquisition and training for product development team members
● Procurement of material components necessary for product development
● Executing marketing and merchandising plans
● Changing the physical plant footprint for product operations
● Updating equipment, furniture, hardware, software, and general technology used to enable the product development team and enhance the product
● A product is a vehicle to deliver value. It has a clear boundary, known stakeholders, well-defined users or customers. A product could be a service, a physical product, or something more abstract. [Source: Scrum Guide 2020]
● The product owner is accountable for the success of the product, as defined by the product vision and product roadmap. The product owner role is dedicated.
● The product owner maintains a continuously elaborated, force ranked set of product priorities (product backlog) and a depiction of product roadmap objectives for the 3 to 12month time horizon.
● The product development team is structured and empowered to organize and plan how to accomplish work at an agreed upon level of quality—the definition of done. The product developer role is dedicated.
● Product developers decide how to accomplish work prioritized by the product owner. Product developers work together to accomplish incremental product goals, checking in with each other at least daily to inspect and adapt their plan. [Source: Scrum Alliance -Team Roles & Accountabilities]
● Product investment estimates, funding requests, and product budgets are supported by standard templates and tools, used throughout the product development organization.
● The product funding team is responsible for analyzing, refining, and approving funding requests submitted by the product owner.
● Once the product has been funded, the product owner is accountable for the product budget and product expenditures.
● The “classic product model” includes a dedicated product owner, a dedicated product development team, and a prioritized, continuously elaborated product backlog. Current Agile mindset practices in your organization may differ from this model. If it doesn’t make sense to adopt this product investment approach now, consider adopting the approach at a future point in your Agile mindset journey.
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