Product Owner Success - The Investment Cycle
Teams often run through the motions of Scrum and get very hung up on story points, velocity, committed percentages and as a result struggle to deliver value. But what I’ll share today is what unlocks the value of Scrum; this is what Scrum is really trying to get to: creating a series of small but potentially valuable investments.
See if any of the below problems sound familiar:
- Teams go through the motions of Scrum and don’t really understand why they’re following the framework. It’s become a TACO (Titles And Ceremonies Only) use of Scrum.
- Teams attempt to follow the investment cycle, but they do it in giant batches/investments are too big, so their feedback loops are way too long and risk is way too high.
- Teams have a hard time prioritizing. They spend too much time in analysis paralysis.
- Teams neglect feedback; they get caught up in a roadmap, they shift further away from their customer, they continue to follow a plan and don’t validate their experiments.
Scrum seeks to solve these problems by shrinking feedback loops. As Product Owners, in order to maximize the value of your product, you need to decrease your amount of investment by making smaller bets/experiments to take advantage of quick feedback loops. You also need to make better investment decisions by constantly testing your experiments.
I want to give you a three-step solution to do this – The Investment Cycle.
Step 1: Invest
What does it mean to invest? When we think of investing, we typically think of things like stocks, hoping to get a better return than cost. Or we can think of things like education, investing in ourselves. Investments happen when there are many different things we can pursue, and we have to prioritize and make choices.
Why is that so important? Well, this can vary dramatically, but where I’m based in Cincinnati, the average run rate of a Scrum Team is $1.6 Million per year. That is a big investment in a Scrum team. A PO should keep the run rate of a team in mind as they consider what they’re investing in. Is the value produced worth the cost to develop?
So if this is the cost of our team, how do we know that what we are building is worth that level of investment? Hint: you don’t …at least initially. Something that can help with this is to have an understanding of what outcomes you are going after and how you will measure progress toward that outcome.
The time to learn metric is another effective tool that can help Product Owners to understand how big their investment cycle is. (https://www.scrum.org/resources/evidence-based-management-guide). This metric measures from the time an idea happens to when you can gather meaningful insights off of it. And obviously, the shorter the better. A quick feedback loop helps Product Owners validate their ideas/investments. When we have an understanding of our Time to Learn cycle, how can we shorten it?
Step 2: Experiment
In order to decrease our time to learn, we need to break things down to small pieces of work. Why is this important? Because it enables quicker feedback loops from the actual customer; everything is really just a theory of value until it’s actually released. A refinement session is an opportune time for a Product Owner to ask themselves and their Development Team questions in the refinement process:
- How can we test that we’re getting what we expect?
- How small of a test can we run?
- What’s the minimal effort for the maximum value?
- What’s the maximum potential of this idea or investment?
All of these questions boil down to a two-part question for the Product Owner: How long are you willing to wait and how much are you willing to invest to find out you’re wrong?
A great example of this is the retailer Nordstrom. They had an idea for how to increase sunglass sales in their stores. So they took one of their teams and placed them in a store for a week to co-create a solution with their customers. They prototyped and experimented on what they thought would help them reach their outcomes. For the full overview, check it out here: https://www.youtube.com/watch?v=dS3sD96m8gc
The goal is always that we want to make sure our outputs are moving the needle on our outcomes. The quicker we can do this and get actual feedback on it, the more effective we become. (Side note: I run several workshops around this, if you’re interested: reach out! )
The key is identifying experiments related to the most impactful assumptions. See what you want to validate or disprove by building something while keeping the product vision in mind; prioritize which experiment is most important for the team to work on next. Some effective tools for this include:
- A/B Test – Running two different increments under the same conditions to see what is most effective
- Netflix does this all the time. Have you ever noticed how they changes pictures on shows/movies? They are doing this to see which images best appeal to you as a user to attempt to maximize view time.
- Trap Doors – these are often fake registration links; clicking on a feature coming soon, possibly putting you on a feature list to attempt to get feedback on what customers are interested in
- Kickstarter is a prime example of this. They put together a prototype or pitch deck and see what people are willing to pay for before building the product.
- Wizard of Oz – Not to spoil the movie (I mean, you’ve had like 70 years), but this is when something is working on the front end, and requires a lot of manual process behind the scenes.
- Zappos – the founder built the website without distribution. When someone ordered online they’d buy it off the shelf and ship it, only after they validated their experiment did they build out the infrastructure
So now that you’ve got your experiments, how do you know they are adding value?
Step 3: Validate
Run experiments and ask, does this meet our customers’ demands? Is this helping move the needle? Are we getting a positive reaction from this? If yes, great, it validates our experiment; let’s keep investing in it. Let’s get this idea to our customers and meet our next highest use cases. If the experiment is invalidated we have to make a difficult decision - do we continue to invest in this experiment and try to prove a different angle? OR perhaps we change our investment to something else that we’re more confident in? This is the tough art of Product Ownership
But how do Product Owners know what feedback to trust? Or perhaps what feedback is more valuable?
How often are you checking the value of something after it is released?
If you do these three steps, you can level up your Product Ownership. By effectively Investing, Experimenting, and Validating, you can take your outcomes to a whole new level. But don’t take my word for it! A PO I was working with at a client decided to put this into practice. They were working on a tool for regulatory compliance and other similar companies have worked with this costly vendor. The Product Owner wanted to test out building functionality out on their own, but they didn’t have stakeholder buy-in as the stakeholders deemed it “too risky in case we miss.” So the Product Owner proposed a 2-week experiment to address one of the most complex use cases. They succeeded and this provided the proof needed for stakeholder buy-in and ended up saving over 1 MILLION DOLLARS on the project.
Why was this so successful? He decided to run his product like an investment, experimented, and then validated the results.
If you want the secret sauce for Product Ownership, you can do this to!