Involve the Managers - Redux

Involve the Managers

... the enterprise is using Scrum to manage product development and is attentive to the need for continuous kaizen, and is ever seeking to move toward the Greatest Value.

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Though there are no managers on a team using Scrum to manage product development, there is often more to a corporation than product development. And product development is rarely an island.

An enterprise can often best serve its markets if it can draw on several different products. A grocery store may decide to start a small snack or restaurant business to sell prepared food to those wanting to combine an on-the-run lunch with their shopping trip. Or an automobile manufacturer may go into the banking business to help finance automobile purchases for their clients. Yet these are independent products, each with their own Product Owners. While the Product Ownerss might arguably be able to coordinate their efforts once up and running, there may be substantial risk in starting up the newer one alone, and an existing PO may not want to tie that risk to their own, more safe ROI targets. Yet a broader view might recognize the potential payoff and might offer a better perspective than that afforded to an individual PO, with respect to assessing the risk. The enterprise as a whole might be able to shift funding resources to absorb the risks in ways that an individual product cannot.

Furthermore, an individual product may itself not have the scope, resources, or fallback ability to take major risks. Scrum teams emphasize ongoing kaizen, but kaizen entails only continuous, incremental change. Sometimes a product or even an enterprise needs to go through discontinuous changes to survive. Extreme cases include Sun Microsystems shedding its hardware business, Nokia going from making rubber boots to making cellular phones, and Toyota from making weaving machines to making cars. IBM went from 1985 hardware sales accounting for almost three quarters of their income (in which software was a bundled component) [1], to a services organization where 2015 hardware sales were less than 10% of the income (https://revenuesandprofits.com/how-ibm-makes-money/). In 1986 it aimed to boost its services business from 25% of its income to 40% of its income within six years. [2]

Therefore:

The enterprise management role explores opportunities for synergy between multiple products, initiates partnerships and acquisitions, and are responsible for the kaikaku-level, discontinuous changes in products’ business strategy.

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As a result, POs can retain responsibility for risk management and decision-making at a level commensurate with their scope of influence and of product content control, which is limited to their own product. Mangement can nonetheless raise the risk appetite for the enterprise with radical redirection, recombination, or other action that is broader than can be accommodated within one product alone.

Managers of course work closely with Product Ownerss on all such initiatives. The main difference between Product Owner and manager influence and activity lie in the scope and extent of a change. For example, management may decide that some product (like IBM’s dominance in selling iron and copper) have come to the end of their useful life, and that such products may be put in a mode that supports only warranty replacements or minimal maintenance, while moving the business in a new direction (selling services, consulting, outsourcing, the Cloud, etc.) It is unlikely that the hardware PO will himself or herself take the business in what he or she will perceive as a suicidal direction, even though a broader business perspective may see it is for the greater corporate good. Management can start a new replacement business with a PO who brings a Vision suitable to the new direction. This is a radical, kaikaku change.

Think of an automobile manufacturer moving from carbon-fuel cars to electric cars. It isn't quite as radical as moving from horses to automobiles, yet in some sense it is replacing one kind of product with a completely different kind of product. The thinking behind such a change is less likely to come from within the status quo than from outside. Managers have this responsibility, at an industry level, to take their enterprises and whole industries in new directions. Diesel-electric trains replaced steam trains only with difficulty, with the steam contingency maintaining the viability of their product up until the day the market drove them into bankruptcy. Local digital telephone offices were proven to be economically inferior to analog offices, but the fat that Northern Telecom took the initiative to offer the DMS-100 switch primed the pump for the digital revolution in telecommunications that underlies most communication infrastructure today.

Another example is to acquire a partner or competitor to gain economies of scope or to build technological and market synergies. Again, a given PO who is looking at their own ROI may see this as a threat, because a partnership may in fact lower the gross revenue that flows back to their Value Stream from the market. Management may see that the combined income of a combined organization could be greater than the sum of the parts. Mangement may be able to initiate a change — again, a radical, rather than incremental change — that overcomes the reluctance that an individual PO may have based on their limited focus (to their own product and current market), a basically conservative nature, or even corporate policy or their understanding of their role (e.g., to optimize ROI for their product). For example, the merger between Skype and Microsoft (and, in particular, Lync) might have been seen by each side as a threat to their respective businesses. It is unlikely that POs on either side would have been eager to sacrifice their identity or product autonomy to the other side. Yet two years later the business synergies conjecturally propelled Skype into a slightly larger level of market engagement than before, owing in large part to being merged into Microsoft’s customer base (https://www.theguardian.com/technology/2013/aug/30/skype-microsoft-acquisition-analysis). This was a radical change at the technological, organizational, and business level. Such initiatives usually start at a level above the PO.

Note that management should be looking at synergy between products that each already have their own Value Stream. This pattern is not an excuse for management to subcontract parts of a product development to multiple vendors, unless each component already has market standing in its own right.

Note, too, that it is very hard to get this right. It is easy to sweep aside important facets of value when striving for economies of scope: employee pride in an existing product, market brand loyalty, employee loyalty to the firm, and features that may be compromised away during combination. Mangement decisions should always be well-informed by deep product understanding and solid market analyses. Any responsible Product Owners should readily be able to provide such data and a reasonable information analysis of those data, and any kaikaku that threatens the benefits of the current approach should be entered with eyes wide open. It should be made visible that such decisions are indeed management decisions, and management should bear accountability for the viability of the business, and the maintenance of key aspects of value, in the long term.

[1] Jiri Weiss. “IBM Boosts Sales Force, Accents Client Support.ˮ In InfoWorld, 23 February 1987, https://books.google.de/books?id=1DAEAAAAMBAJ&pg=PA27&lpg=PA27&dq=percentage+of+hardware+sales+in+IBM+income+by+year&source=bl&ots=3DIFRhMavN&sig=0qXbV3eFKuVFj-uh8a43AUaLUmk&hl=da&sa=X&ved=0ahUKEwiqjZ-J0b7XAhXB16QKHXf_BHE4ChDoAQhiMAk#v=onepage&q=percentage%20of%20hardware%20sales%20in%20IBM%20income%20by%20year&f=false (accessed 14 November 2017).

[2] John Gallant. “Software Pricing Strategies: Tough Times bring Independents to the Table.ˮ In Computerworld XIX(52), 30 December 1985, p. 52.

Picture from: Presentermedia.com.