“How much is my product idea going to cost and when will it be done?”
This is the question that makes every Product Owner’s heart skip a beat. It puts us in a very tricky spot.
Does the person asking for this idea really know everything they want before we start developing the solution?
Does our scrum team know how to build this?
Have we built something like this in the past?
Do we have dependencies out of our control?
This puts us in a very “waterfall” type of mindset. Everybody involved, requestor and scrum team, are going to guess at an answer when they have the least amount of information.
According to VitalityChicago.com’s research, waterfall projects are successful 26% of the time vs. 42% of the time for agile efforts. Not too much to brag about either way, but a 16% lift by adjusting the approach is pretty easy to justify.
Let’s transition to this question instead:
“How much are you willing to invest in your product idea?”
Now the focus shifts to how valuable the request is, instead of how much it costs.
Hopefully the requestor can provide this information. If not, it shows us that more research needs to be done around the request before we invest our time.
Every request must have a quantifiable outcome. If not, why are we spending our time? This gives the product owner a way to compare different requests against each other before deciding which request to complete first.
A personal example of where this worked like a charm:
A medical device executive had an idea to improve medical device inventory tracking. His research showed that inventory issues were costing the company $10MM a year. He expected to have to live with this issue for at least 5 more years. Therefore, this is a $50MM opportunity (not issue).
Here is how the conversation went:
Me as the Product Owner: “This is a $50MM opportunity. Our scrum team costs $31K per sprint (two-week sprints). Typically, something like this would take around 12 sprints (24 weeks) for us to give you a working prototype. Team cost is $372K."
"Here is what you will get for your investment in us. Every two weeks we are going to show you our progress. You will slowly see your idea come together and have a chance to enhance your ideas and even change your mind."
"With this information, how much are you willing to invest to see if we can solve this problem?"
"I would be willing to spend $2MM to solve a $50MM opportunity."
"Great", I responded. "Let's capture that 2,400% return on investment.")
Now we are in business together.
We started by allocating $400K for the first 24 weeks of work. We know we have the ability to spend up to $2MM., but we are going to limit our financial exposure to $400k. Remember, in 12 weeks we could have a business disruption (see Covid-19). If that happens, we could use the remaining $1.6MM for something else.
Or we could be so happy with the $400K investment, that we decide to keep moving forward with a pilot. Which is what we were able to to do here.
This is scrum’s "secret sauce"! We make a decision. We do just enough work to see if we are on the right path. We review it together. And then we make the next decision. No more guessing what you want 9 months before you will see the first outcome. No more overspending on an idea that we are not sure is valuable.
Back to our example: We completed the prototype in 14 sprints. We took two additional sprints because the requester asked for the ability to count inventory from a photo sent by the sales representative.
Originally were will building a mobile app that the sales rep would input their stock on hand every week. The sales reps “complained” that the process was too time consuming. They said it would be easier if they could just take a photo of their stock on hand and the application would be able to do the counting for them. Genius!
When this request came up during sprint 7 (of 12), the scrum team did research on imaging and inventory management techniques. We estimated it as a 2 sprint piece of work, thus it would cost an additional $61K and 4 weeks. An easy decision for the customer to make.
The final outcome:
Working prototype completed in 28 weeks for $510K ($434K scrum team and $66K for additional hardware the scrum team had to purchase to build the prototype)
We sent the prototype out to a group of 50 sales reps for 6 months. We tracked their usage and did physical counts to see if the images were providing an accurate count. The prototype had a feedback button where the sales reps could provide immediate feedback via text or voice.
The greatest solution in the world that is not easy to use, is no solution at all.
Product Owners and Agile Leaders: Change the conversation from “Cost” to “Investment” and see how the tenor changes in the relationship. We are all in the organization together. One of us cannot “win” and the other “lose”.
Let’s be partners in this!
Good luck, be well, and make Good Products!
About the Author: Thomas (Tom) Auld is the Product Owner and Founder of Auld Consulting, LLC. He helps Organizations, Product Owners, Agile Leaders, and Scrum Teams build the mindset and techniques to do "just enough, just in time" in order to minimize risk and maximize value.
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