Simplify Project and Portfolio Planning with “Real Options”

@mattbarcomb # http://sayat.me/mattbarcomb

SIMPLIFY portfolio & product planning using

REAL OPTIONS

!Matt Barcomb


We need to use a different mental model

The language most often used to discuss product development

is a very bad fit for what really happens.

!

Better language for product developmentcomes from work in areas that most people

are not very familiar with.


Construction ProjectA very poorly fitting mental model


Research & DevelopmentA much closer fitting mental model


Create a portfolio for development activities

• ID benefit segments

• Product lines

• Lines of Business

• Cost centers

• Allocate by capacity

• Fill with options


Fill portfolio segments with development options• Options are: MVPs, features, projects, ideas

• Only independent options allow optionality

• Options provide benefit that

• Options’ benefit may change over time

• Never execute an option unless you know why

• Execution of a product option takes time


A development option

Value pitch:

High-level goals: Obvious dependencies:

Starting triggers Stopping triggers

Open questions Unvalidated assumptions

B-Map Score: Cost Score: B/C ratio:

Option Name:


Development planning should focus primarily on benefit

• Benefit vs. value

• Value means money, benefit means utility

• Benefit better fits non-financial concerns

• Relative vs. actual benefit

• Benefit can really only be relative

• Relative-ize actuals using ranges


Benefit Map (B-Map)• Mind map of key types of benefit (value) created

from doing work on a given product

• 2-3 tiers: what, how, in what way?

• Expiration date or context

• Rank top 5(+/- 2)

• Weigh top 5(+/- 2) rounded to nearest 5%

• Create a 1 (low) - 5 (high) scoring for each


Benefit Map (B-Map)

Product: Galaxy

Revenue

Customer Satisfaction

Product Adoption

Product Awareness

CompetitivenessDec. Mktg

Costs

Sales Reach

Brand Awareness1

Expires in March2

3

4


A completed B-Map

Sales Reach 30% Increase

Revenue 10%Decrease Mktg. Costs 15%Product

Adoption 45%1= <1% 5= >15%

1= <$5k 5= >$50k

1= no change 5= very easy

1= <10% of reg. 5= >40% of reg.

Options ScoresNew catalogStudent grades

43

24

12

31

285295

Product: Galaxy

Revenue

Customer Satisfaction

Product Adoption

Product Awareness

CompetitivenessDec.

Mktg Costs

Sales Reach

Brand Awareness

1

Expires in March2

3

4


ACTIVITY: Make a B-Map !

$1B to research a futuristic tech

!

1) Identify high-level purpose 2) Use post-its; determine benefits 3) Rank & weigh top 3 4) Create 1(lo)/5(hi) scoring rubric


Next, consider risk• Identify risks

• Risk Snapping

• Score 1(lo)/3(hi): likelihood & impact

• Use average score of all risks identified

• Decide how to consider risk

• Multiply with either cost or benefit


Then, determine triggers

• Starting triggers

• Should we start? How do we know?

• Stopping triggers

• Should we keep going? How do we know?

• Use triggers, not deadlines!


Deadlines• Typically artificial

• unsubstantiated promises (bonus-driven development)

• arbitrary target make real upstream deadlines

• Sometimes are real - but often assumed and unvalidated

• Seasonality

• Government/Business activity date


Some triggers I've seen• duration

• seasonality

• stakeholder feedback

• govt. policy

• major biz activity

• competition shift

• media/pr event

• market shift

• technology shift

• employee shift

• major social incident

• better options


Last, think about cost• Learn just enough about cost to start (or not)

• Cost Snapping

• 5-step scale (suggest team-months/weeks)

• Evens, fibs, quarters

• Total Cost mapping (like B-Maps)

• Duration, tech debt, stress, complexity, etc…


What we covered• We do development & design, not construction

• A portfolio is a long-term capacity plan

• Use the power of options and optionality

• Determine benefit first, then risk

• Identify & use triggers, not deadlines

• Learn just enough about cost to decide to start


Individual take-aways• What is one thing from today you would like to

start doing in the near future?

• What would prevent you from doing it?

• What would be the very next step?

• When will you take that step?

• Consider an accountabilibuddy!


Any questions?

Twitter: @mattbarcomb !

Email: [email protected]

www.devjam.com

Simplify Project and Portfolio Planning with “Real Options”

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