Modern Budgeting for Today’s PM World

Introduction and Webinar Setup

Roger Snyder | 00:00-03:30

welcome everyone to Productside product management leadership series today we’re going to be talking about modern budgeting for today’s product management world i’d like to introduce our subject matter expert and myself i am roger snyder the vp of marketing at Productside and i have with me today tom evans principal consultant and trainer at Productside tom is based in austin texas i am based in the santa cruz mountains above los gatos how’s the weather out there tom oh overcast and rainy yeah not the beautiful spring days we had earlier yeah because spring has sprung yet uh and we have a sunny day but we could use your rain that’s for sure yeah suffering from a drought right now all right let’s get into a couple of introductory topics and then we will get to the meat and webinar with tom presenting if you haven’t already we encourage you to join our linkedin group on product management leadership this is a great group where you can see the latest articles and ideas being shared amongst product management professionals and you’re able to even raise questions and ask issues ask about issues and get help from a much larger community use this opportunity to network with your peers the link has been added to our chat group so if you haven’t already open that chat panel and join uh click that link and join our linkedin product management leadership group a couple of administrative tasks i want to go over during the webinar we absolutely want you to engage with us so please ask questions and as you can see from the graphic here use the q a panel to do that um you can use a chat group for comments but we prefer that the questions go into the q a group so that i can keep track of them and we can try to answer them in real time or some of the questions we may save to discuss at the end in our q a session but either way please don’t be bashful write your questions in the q a panel because we love to interact with you and make this more of an interactive session throughout one of the most common questions we get i’d like to answer right now which is will i be able to watch this this recording later and the answer is yes all attendees of the webinar will receive an email with the link of this recording included so you’ll be able to watch this recording at your leisure in the future

About Productside and the Optimal Product Process

Roger Snyder | 03:30-05:30

and then i’m going to go over a couple of slides on Productside and i’ll turn it over to tom if you’re not already familiar with the Productside we are the organization in training and consulting that empower product professionals with the knowledge and tools to build products that matter products that matter to your customers products that matter to your own business objectives and hopefully products that matter to you learn more by visiting Productside.com but here’s a quick summary of all the various things that we are able to do we provide you with the optimal product process methodology a soup to nuts way to think about from the very first idea of a product all the way through to launching that product and making it successful in the marketplace the optimal product process can help you think about the right problems and the right questions all the way through the process of developing and launching a product we provide optimization programs we provide training both public training and private training for your product management teams consulting and contractors and coaching services so like i said check out Productside.com to learn more about the various product management and product marketing services that we provide

Framing the Budgeting Challenge

Roger Snyder | 05:30-05:55

all right tom over to you to talk about today’s topic of the challenges of budgeting and how do we make budgeting more modern to go with agile methodology

Tom Evans | 05:55-11:00

all right so thank you roger and thank you everyone who has joined us today so what we want to do today is just address this topic around you know my modern approaches to budgeting because if we look at the traditional approaches uh those have really kind of gotten in the way and and to kick this off is if we think about the challenges that we’re facing this was a question or a quote that i heard in a training class probably about four or five years ago and the question was or the statement was is our development teams practice agile but our funding is not agile and you know what they’re really saying is is that while we’re trying to be agile within a product development atmosphere we really can’t respond to change because our budgeting processes and our funding models do not allow us to really adapt to uh change and what was interesting is that wasn’t the only time i ever heard that point come up it was after that i started to hear this over and over again and i know as i spoke to other Productside consultants you know that question was coming up and that issue was coming up and so what we want to do is to talk about you know some of the challenges that the traditional budgeting models have for today’s world and then describe some of the ways that companies are approaching new funding models that will allow more agility within that but before we jump into that we do want to do a real quick poll here and what we want to do is just to get a sense of those who are on the webinar where are you where is your organization in terms of its uh agile maturity as it relates to both product development and your funding approaches or your budgeting approaches and we have you know three main options there is one is you know you’re not agile in any of those ways uh number two is we our development teams are agile but our funding models don’t uh have agility to it and then number three is we have strong agile development practices and are implementing uh agile funding models if you feel like none of those apply to you you can go and put none of the above but you know we’re kind of targeting those three main answers there so go ahead and put your best answer in there and we’ll give you a little bit of time to respond to that and we’ll take a look at what those results are

Poll: Agile vs. Funding Maturity

Roger Snyder | 11:00-11:35

yeah when i was out doing training and consulting i encountered this challenge multiple times as well tom where uh it’s like look we want to be in we’re really rolling out agile development but now we need we need to add a couple more sprints and that’s not in the budget right or we need to actually change you know be able to pivot because of market changes which agile development allows you to do but then there isn’t a budget available to support that pivot so exactly yeah we’ve gone to that problem multiple times for sure all right let’s take a look at the results here

Tom Evans | 11:35-13:05

yeah so if we look at uh you know 93 percent responded are at our development teams agile but we lack the agility in terms of our funding and budgeting models so that’s not surprising that is very typical uh in what i see and i’m i’m glad to see at least a small percentage are responding that we have strong development agile development practices and are implementing agile funding models so that’s that’s that’s good to see and you know as i’ve worked with organizations i i would say i still kind of see this ratio it’s being talked about but i think peop organizations are having difficulties in trying to move ahead in trying to implement some of these more agile budgeting and funding type models so let’s go ahead and look at you know the traditional budgeting model and there’s a really strong assumption that i think that goes into that model is that the world is predictable and so that we can we can predict exactly what’s going to happen here over the next you know six months year you know two-year type uh time frame and so with that that sense that we can predict and control every element of that is we’ve taken mostly a project-based approach in terms of budgeting around product development and so basically what gets approved in this project uh budgeting model is that you have a budget for a very specific scope with a very specific schedule and we shall not deviate from that you know in any way because we can predict exactly what’s going to happen and then you know we assign our resources we expect that to execute exactly how it is but yet as we have seen you know especially over the last few years but you know even before that uh things change and those those change come from uh you know changes within the market competitors uh those of us who do you know are deep in the product development area and i don’t care whether you’re talking software products or you know more manufactured hardware type goods we get into the work of trying to develop those and engineer those and we run into unexpected issues that we had never anticipated and so we have to change sometimes we have to make small changes sometimes we have to pivot but yet because of the standard budgeting module model you know it’s kind of like i have to go back to get approval to make any changes because this scope is what was approved and i love this quote here and this came from bain organization and and they’ve definitely written you know a fair amount in terms of modern uh budgeting but if you look at the traditional budgeting it’s really about control you know and the more that we can uh structure and approve a project with a specific scope we feel like we have control over what’s actually going to be delivered the reality is we don’t have that much control you know yes we have a certain amount of control but it’s not nearly as much as thought as what we thought it was and so what ends up happening when we use these traditional approach is you know there’s one is there’s an assumption that we can accurately scope projects and even if we get down to you know the old traditional approach that we did uh especially in the software world uh having very detailed requirements we still did inaccurately scope those projects both in terms of the requirements and in terms of how much work it was going to take around to those requirements you know we couldn’t accommodate new information and that’s new feedback from the customer you know changes uh or new information about the challenges that we’re facing and actually implementing something from a development perspective or you know competitive moves maybe even uh strategic changes within the organizations and so uh we couldn’t do that and while we say are we we’re doing agile practices which allow us to reprioritize after every sprint in reality if your funding wasn’t approved that way and you’re in a project model you still can’t really uh respond to that change and you know i have heard of situations where companies figured out that they weren’t on the right track but because the project funding model required them to go in a certain direction they went ahead and completed it because that was easier to do than try to go back and uh you know request a a change to their overall scope the final thing that i see happening you know as i look at this is how do we treat our development teams and and we tend to treat them as fungible which means i can move them around to anywhere and they’re going to be equally good no matter what uh you know project work that they’re they’re going to do and i’m going to talk about that a uh a little bit more but that really does actually create a a challenge in terms of predictability and uh uh well actually you know delivering what we expected to i guess it is so you know the you know we talk about this this doesn’t really support the dynamic market that that we’re in and so what we want to do is to explore what are some ways that we might consider to be able to go and better adapt to the dynamic market environment that we’re working in

Roger Snyder | 13:05-13:45

yeah absolutely i would say that that third bullet is one of the bullets that i’ve struggled with several times in my career back when i was running product management teams of uh you know the executive team did not want to diverge even though the writing was on the wall in terms of a competitive move for example in one instance whereas like okay now we’re going to be even further behind when we get this release because now the competitors released a new reporting tool that we’re not going to have on our next release shouldn’t we retrench and it was like no we’ve got to keep going i was like okay so yeah been to that party unfortunately before yeah yeah

From Projects to Products and Outputs to Outcomes

Tom Evans | 13:45-18:40

well let’s talk about you know some more traditional approaches and so what i want to introduce first here is not necessarily the approaches but some of the foundational concepts that are supporting these you know more modern approaches and so number one is we have to you know take that position that the world is unpredictable and so that we should you know anticipate change is going to happen and then based upon that is and i’m going to describe all these you know in further slides but you know these are those four underlying principles is focusing on outcomes versus output and hopefully that’s a term that you have heard uh before you know think about funding products versus projects uh you know plan around stable teams which you know connects a lot into that funding of products and then you know connecting up to that first bullet is not only do we focus on outcomes but we also want to make sure that the teams that are delivering have accountability on those outcomes that we’re trying to achieve so let’s talk a little bit just a d a bit from that about that project orientation versus that product orientation and so we think about a project there’s a very specific scope that we have committed to we’ve refined we’ve defined all those requirements upfront you know often it’s looked at as a one-time investment and for those of you that do manage products you realize that one-time investments aren’t really uh sufficient to manage a product throughout the life cycle and because it’s a one-time investment once the team the project is over the teams get reallocated to you know another project and then you have you know a very fixed date that you stop on we track you know by our variance against things such as scope schedule cost and what we’re looking at is did you deliver the right output did you deliver the uh scope that you promised that you would deliver when i have a product orientation we’re focusing more on delivering value or thinking of the outcomes that we’re going to be able to achieve both you know for your organization and for your customers we realize that requirements are going to be discovered over time and so yes we have a direction that we want to go we sometimes know exactly what we need to implement but there’s other cases we still have to do some discovery work to figure out how to best deliver that value we’re thinking about investing in our product throughout the life cycle and to be able to do that we need to have stable teams that means we need to have teams that we know are going to be available to us year after year to be able to go and support those investments throughout that life cycle you know we track by how we deliver value and that gets into these product and business metrics and i’m going to explain those here uh in the next slide and we focus on outcomes so we’re focusing on outcomes achieved based upon those product and business metrics versus just based upon what scope was delivered so what’s the difference between all of these well you know output is the ac the feature or you know the uh requirements that we actually deliver and i’m not saying those aren’t important because those important those do end up impacting and uh supporting the delivery of outcomes and those outcomes we can measure in two different ways one of those is the business outcome and that’s typically what your organization is hoping to achieve you know in terms of revenue profitability market share growth you know financial type uh things or you know more strategic type metrics are typically what they’re focusing on but we as product managers can’t necessarily take direct action that specifically impacts those business outcomes but what we can do is to take direct action that impacts product outcomes now how do we define a product outcome you know a a general definition here is a change in human behavior that results from changes to the product and so you know if i have a product that has a high level of interaction with a human if i can make a change to it and i improve the way that they’re able to use that product that is a product outcome and we have this expectation that by improving product outcomes that will also have a impact on improving business outcomes and sometimes those are very correlated sometimes they’re not clearly as correlated but we know you know through our expertise in our marketplace and what we’re hearing from our customers that if we make these product changes or i achieve these product outcomes then we’ll also achieve those business outcomes and so there’s a strong there yeah there’s a strong correlation there to where you know the outputs that we create and i’m going to put on my little drawing pin just for a second so the outputs that we create the features the capabilities we include in our product will impact product outcomes which then will impact these business outcomes and so when i’m looking at achieving outcomes you know these are the things that we are focused on here of having an outcome focus and this goes back to the point that i said earlier is that there are times where we don’t always know exactly what output is going to help us achieve those outcomes or we at least know directionally but we still have some discovery work in terms of determining what specific output needs to be had and so instead of focusing and budgeting around a specific output what we really want to do is to budget around outcomes that we believe that we need to achieve that will help achieve those business outcomes

Roger Snyder | 18:40-19:26

so tom when you don’t know exactly what output is going to be needed for that outcome to come to pass that’s where agile really comes in handy right because exactly yeah throw out a new benefit or new feature out there see whether in a few weeks sometimes see whether or not it actually starts to generate the the change in behavior or an increase in usage that you’re looking for which could then lead to the increase in adoption of that product if you’re talking about an i.t product or it could increase the amount of customer referrals that then increases the number of sales right so yeah that’s when you’re agile then you can throw out these these features that output in your top circle and see what happens and then be able to iterate and come up and and keep fine-tuning that so you get to the outcome you want and modern budgeting just doesn’t allow for that kind of experimentation right yeah or traditional budgeting doesn’t allow for that type of experimentation yeah the modern budget is going to it is going to allow that and it and i think you know along that line is there’s times where we think we know the right output but then when we create that output it doesn’t achieve the outcomes that we were expecting to and so you know that again ties back into the agile methodologies is i’d rather discover that sooner than later i’d rather spend you know a few weeks or maybe even a few months trying to deliver on that and discover them in the wrong direction and be able to pivot and adapt versus uh you know spending six eight ten months working on something because that’s the output that we promised and then discovering that we were not on the right track yeah agreed yeah

Stable Teams and Predictability

Tom Evans | 19:26-26:30

now i mentioned this one earlier is the funding of stable teams and so um one of the things that i have experienced and and i i’m going to give a couple of of uh scenarios that i have experienced but uh probably three four five years ago i can’t remember exactly i was working with a company in the construction industry and one of the things that they had traditionally done is to use the project approach and so they would have a project the product manager would go and execute that project with a set of development resources and as soon as that project was done then that the project team would move to something else and they really started to realize that that had a significant impact on the productivity of those product development teams but also it made it really difficult for the product managers to make commitments in terms of what they were going to deliver to their business partners you know and so they were more of an internal i.t group and so they made that decision that said you know what we’re going to go and have stable teams and with those stable teams we expect that we’re going to have better predictability around what we can deliver we can make commitments around what we’re going to deliver to our uh you know internal business partners and so by the time that i was working with them they had been doing that and it had made a significant uh difference in terms of that predictability of being able to deliver uh you know what they were hoping to to improve the overall product outcomes and business outcomes that they wanted to achieve about a year and a half ago i was speaking to another company in in a financial area and you know that one of the complaints that i was hearing from many in in the organization is our t we just have no predictability because our teams keep moving around and as a speaking to the general manager you know i brought that up and he goes well i think product development teams are fungible what do you think i said i don’t think they really are because you lose lots of productivity in the process and so when we start focusing on having stable teams available for products one is we know we have a commitment throughout the life cycle and i’m not saying that team stays exactly the same you know every single year but you have some stability around it which gives you predictability but also they’re going to give you better estimates because they’ve created domain knowledge around your problem area that you’re solving as well as the product itself and they’re going to scale up or ramp up faster every time that you’re wanting to do something new and so the organizations that i’m aware of that use this just have a much better uh delivery consistent delivery than those that are treating their product development teams as a fungible uh resource right right yeah one of the principal fundamentals of of being able to come up with a predictable agile delivery schedule is understanding your velocity and if your team is constantly changing there’s no way you’re going to be able to get predictable at what your velocity is that’s right exactly yeah yep so we also have a question tom we have a question from joanna um and joanna i’m going to ask you to unmute i’m going to press the button here allow you to talk and maybe you can ask your question

Joanna | 26:30-27:00

hello uh thank you just wondering about the ability to build stable teams in a third-party delivery model where you don’t have these resources internally

Tom Evans | 27:00-28:10

that that definitely changes it um here is i mean i’m going to give you some high-level guidance and this is based upon one of the agile consultants that i’ve talked to several times over the years and if you think about the third party delivery model too often the third party delivery model follows exactly the project scope that you know the approach that we’ve been talking about where we come out with a very specific uh scope and we negotiate that scope in detail we come up with you know a schedule and now we expect that third-party delivery team to deliver exactly to that you know scope on schedule within budget and no we can’t make any changes around it or we do you know that gets into a very contentious type relationship and even then you know uh the more modern approaches to working with third party is to focus on you know funding teams versus funding uh just a single project and so while yes you may have some challenges in terms of maintaining that same team you know over a long period of time uh that is you know that’s at least a starting point is if we start funding a team of people that is available for product management to use i think you’re going to achieve a better level of stability than treating it like a project model which is the traditional approach to working with third parties also

Roger Snyder | 28:10-29:05

yeah when i was managing a product uh team that we had our development resources in india we actually were able to stand up three scrum teams and we did assign each scrum team to a different functional area of the product with the expectation that they were going to be stable and remain on those areas as i recall we had one on ux we had one on the on the user front end we had one doing all of the back-end work and we had another team on reporting and administration and that did seem to work once we got them stood up and they started developing their domain knowledge and kept them in those three different tracks that worked very well we worked with them for 18 months as i recall so that worked very well yeah no excellent yeah and and i think uh you know one of the points that i wanted to make in terms of these uh stable teams is you know this is not an irrational approach to uh stable teams this is an irrational approach which means as business priorities change the size of those teams will change and they may be moved around but what we want to avoid is constantly changing them after every project cycle is done uh and trying to keep them as stable as we possibly can throughout you know at least a you know a time frame and so it’s a it’s a rational approach to it versus a irrational approach to saying we have to have absolute stable teams and we can’t change them right no it’s a really good point you don’t want to become a feature factory that just keeps spitting out features that don’t have any business outcome objective tied to them right so there is that challenge of you don’t want that that inertia to happen i think you’ve described the right thing again where once you you are looking at major product releases and knowing the business outcomes for those up front that’s the justification for keeping those teams excellent

Accountability Loops and Measuring Value

Tom Evans | 29:05-33:40

now the last point around this is accountability loops and so this is where you know if i think about a lot of what i see in project or product management is i have talked to product management teams where they feel like success is we achieve we delivered the features that we said we were going to deliver on budget and that’s not success the success is did we actually achieve the outcomes that we said we’re going to achieve and so i think this requires an orientation or a mindset change within the organization and also with the product managers to start thinking about not just being a delivery team but being a you know contributor to business outcomes and deliver that product outcome now there are going to be times you know especially when you’re in discovery phases that maybe you won’t be able to fully commit to outcome but at least you can start committing to what hypotheses or what new learnings are we going to gain and maybe create a learning commitment you know versus a necessarily a product or a business outcome but again those are all accountability type loops that are the right way to be thinking about you know the more modern approaches to funding so what we don’t want to necessarily do is just a project status report or count story points that are being delivered again i refer back to an agile consultant that i’ve worked with a multiple times and and and he loves to say this it’s not about you know the velocity is important but don’t make that your ultimate measure it ought to be value delivery right now again they’re gonna i say not typically appropriate because there are going to be times where you have long development cycles because you’re trying to put some foundational uh product in place and you know project status reports may be the only indicator that that you have but once you have product in the market then you can start uh implementing more of these accountability uh type loops that we’ve been talking about

Roger Snyder | 33:40-35:05

yeah i wanted to touch base on that hypothesis point then you make a really good point there in parenthesis it’s okay if hypothesis is not validated right that’s in fact a good thing because in the old way of budgeting even if you started to have concerns huh i’m not thinking that this is product’s going to actually do the right thing but we’re going to keep going we’re just going to keep pedaling here if a hypothesis is tested and not validated you have saved a ton of time and money not going any further until you understand why didn’t this work out and you know let’s just do some more building and measuring learning before we move forward and this this actually creates more accountability in the organization and this is something that your finance and your executive team will appreciate because then they’re like wow the team’s being honest with us and telling us when things don’t happen and we’re able to react a lot faster when when a theory doesn’t pan out so this should actually be a positive as tom goes into the next phase of talking about these modern orbs these modern things

Modern Budgeting Models: Product Funding, VC Model, Emergent Work

Tom Evans | 35:05-50:00

yeah so let’s go ahead and get into that and talk about you know the different models and these are three of those that i have uh seen talked about and they’re not necessarily exclusive of each other but they’re definitely you know approaches to con consider and my little foot note down there across the bottom is in the end these all do tie back to the idea of being able to fund stable teams and and so it ultimately kind of falls back still to a team funding type model versus a project type funding model and so when i think about product funding you know this is where you as a product manager are defining what those objectives are that you want to achieve both from a product and a business perspective i identify my goals and my key themes that i want to achieve but i may not have it fully detailed in terms of all of the requirements that necessarily need to be implemented and so you know of course the challenge around this has to be trust and you know when you present this directional thing your senior management team has to trust you that you’re going to be making the right decisions and ultimately that’s why the traditional funding model still weighs so heavily is because i think there’s still a significant lack of trust that are going on with organizations yes you know what okay did you want to say something roger no you’re right okay that lack of trust is it yeah of traditional funding models for sure yeah one of the things that turned me on to you know this thought and this probably goes back five or six years ago is i was in interviewing a ceo within a financial services company and he says you know this is not his exact quote but this is his his basic thought is i don’t want my product management managers having to come back to the well each time they need to change something or do something new and so what we did when we thought about product funding and i’m not saying this is the only approach to do this but we went and worked with him to create an annual product plan and that annual product plan was not necessarily a list of all the features and capabilities we’re going to uh deliver but it was about their strategy it was about the direction that they wanted to be able to achieve and what budget it was going to take for them to be able to go and achieve that direction and so that gives them flexibility in terms of their execution you know with all these things that we’ve been talking about experimentation and learning be able to adjust the new information reprioritizing based upon you know actual feedback that we’re getting and you know it does allow us to respond to emergent needs which is the topic i’m going to talk even a little bit more about in a couple more slides

another model and this tends to be more for what i would say early stage maybe more innovation type approaches is more of a vc funding model so if you think about the vc funding model they give you a little bit of money if you can approve that you can deliver value based upon that they’ll give you some more money and then they’ll give you some more money and you know organizations are starting to use this vc funding type model for those things that are in those earlier stages of uh you know potential uh you know especially the the longer term horizon and the key here and this goes back to the point you know roger made uh you know earlier is it’s okay at some point here to receive a no and i think we as product managers often feel like if we reach a point where the answer is no we failed no we didn’t fail we actually had great success in helping our companies understand this isn’t the right direction to go in and i think that vc funding model really helps support that especially for those you know more innovative type approaches that you may want to experiment with yeah i love this model for an organization that is able to put aside a certain product development budget but then uses inside that that annual budget this model for for placing bets learning the results of those tests and then continuing to invest where it makes sense yep yeah absolutely and then the last part of this is to anticipate emergent work and this is one of these things that i just i find to be kind of funny because uh you know especially those of you that are in a software world but this happens in in in other markets too is that we you know even if we do like an annual planning cycle we take you know uh our requirements we book our resources a hundred percent with is assuming nothing is going to change throughout the year but yet inevitably things are going to change and so as soon as things change we’re trying to go and reshuffle our priorities our teams around etc and now these commitments that we made start slipping out we get teams frustrated between because they’re being switched around different uh projects and we end up impacting both our customers and our internal teams you know from a satisfaction and from a morale perspective and so this was a concept that i actually even learned longer ago is this idea of planning for emergent requirements and i think many organizations if they look at their history of emergent requirements they’re going to see a pattern that comes out that says every year we have this percentage of things that emerge and so why go and book a hundred percent of our resources and then have to completely smooth things around when we know emergent things are going to come along i have presented this model to several customers and i had one customer who’s just like yeah this is exactly what we need to do because we we do this all the time we book our resources 100 percent and then we create all kinds of stress in the organization when new things come around we know it’s going to come around i presented this to another customer and the vp looked at it says i don’t want anyone to think that they have any slack no we’re going to book them 100 and so i was like okay you know you’re missing the point is we’re not we’re not giving them any slack it’s just that we’re not you know creating lots of stress every time that we have to move things around and so i think this emergent you know at least managing and being accepting of emergent work being part of our budget is another way that we can start approaching more modern type funding agreed yeah and this emergent approach especially with agile just means that you don’t have a sprint plan that goes all the way out to the end of the year you have a sprint plan that’s only right right in front of you that you know you need to solve immediately and the future can be that reservoir of emergent uh capability emergent resource so it’s it can be done that way or it can be done where you’re saying well like i keep 20 uh available and that’s for bug fixing and for small stuff and then when it comes along the bug fixing the small stuff can move aside and make room for that emergent one yeah there’s more than one way to tackle this but the approach is super sound yeah exactly and so you know when you look at this you know how do how do we which of these do we use and what i’m saying here is you know be open to a variety of these and so don’t assume it’s just one model you know i would say that for the most part if we’re looking at you know a a product plan and ideally a multi-year product plan that that is a budget that is really kind of focusing on those short-term horizon changes that we need to as well as those medium terms those are things that we already already have anticipated and that we can go and include a solid direction you know within our budget and that’s probably going to be the majority of our budget but we also want to be thinking about those things that are emerging and that’s usually you know a little bit longer term type horizon type activities that are going to take a little time to uh address but those are going to happen they’re going to come up and so we can perhaps treat each one of those you know with its own individual business case but those are our emergent needs we’ve already anticipated emerging are going to happen so that’s a part of our budget also it’s just that we don’t know individually what all of those are going to be and then i think if we’re looking at some more innovative type work within our business unit or within a product line you know we can again set aside a certain amount of our funding for that long-term horizon or what we typically talk about horizon 3 type investments and you can go and look at different organizations or really probably harvard business is the one that i think has said the most around this in terms of you know we can’t just fund horizon one and horizon two type activities because those have more predictability we have to always be looking at you know that horizon three and so i think it supports just sound business strategy when i’m creating a product line uh budget or i’m creating the business unit budget to be thinking about these three different horizons in these three different scenarios of funding requirements yeah and use each of these different approaches to budgeting to suit the needs of the business that allows them for this kind of flexibility and this capability i’m excited about the idea that you know now you’ve got some budget set aside for the innovative hypothetical chest your theories fail fast kind of work and you have money set aside that’s going to be used for you know you’ve got your cash cow products that there’s a plan yeah exactly yeah yeah most everything that’s in your multi-year plan you know that that those are things that are still you know either in the growth stage or in a you know maturity phase you know of your product life cycle where the emergent stuff is probably growth or even earlier and your innovation is definitely you know tends to be earlier in that overall product life cycle right

Implementing Change: Priorities, Culture, and Pilots

Tom Evans | 50:00-54:30

so we’re going to uh use a second poll here and probably we’re not going to get a lot on here but we want to see whether any of you are using any of these modern budgeting approaches and so the one is kind of that outcome-based annual product plan and whether it’s annual or multi-year that’s that’s okay uh using the vc funding model uh you know budgeting for unknowing emergent work so not trying to book 100 of my resources but allowing some flexibility for that emergent work and then i’ve included a fourth one and it just says we don’t necessarily have a defined product plan but we are you know funding teams versus funding individual projects so those are the four main options and then uh select none of the above if you’re not doing any of those right so if you’re you’re kind of doing just output based stuff

that’s right yes yeah and if you have a little more of an outcome focus then uh you can look at one of those other four right that makes sense yep interesting okay well it’s kind of encouraging as i’m seeing the numbers change we’re still waiting for all the input but at least some of these techniques are already in use that’s really encouraging yeah that’s great

okay we’re going to look at the results so wow okay so annual product plans based upon outcomes is showing a a strong direction there uh there’s also the uh fund the teams without a defined product plan so those two i think is a very positive uh approach and ultimately i only see about 22 percent saying none of the above so i’m hoping if you are moving in these directions that we’ve been talking about that when we go back to the first poll that you know over time and i re i realize this is a change management process which we’re going to talk about here in a few slides but over time you know that movement of saying our budgeting process is not agile does allow you to start thinking about it in a more agile type approach so i’m really encouraged by seeing these results here yeah this is very encouraging it’s great well let’s talk about you know making that change and you know i think one of the first steps in making this change is we need to have really clear business priorities in the organization and i will tell you when i do training classes and i talk about product managers aligning their product strategy to the business strategy how many times i hear a product manager say i don’t know what our business strategy is well it makes it really difficult for us to align what the value delivery to the business priorities when we don’t know what those are and so i think you know that’s one of those changes that have to occur is businesses have to be much clearer in terms of what their priorities are to be able to guide an outcome-based approach at a product team level agreed yeah this is huge yeah you know the second part here is this cultural change and and i’ve put up here some content that comes from a concept called beyond budgeting and i’m not going to get into the whole beyond budgeting type thing but as you start to look through the points that they’re talking about in terms of their principles what i realized is they’re talking about agile principles and so you know there’s agile principles uh are really a cultural change that have to happen in the organization so things like you know trust and transparency and focusing on delivering value etc all of those things you know are a part of that and without that cultural change happening within an organization it’s going to be hard to move into you know some of these more modern approaches uh to budgeting so that’s really kind of my key message is there has to be that cultural change to be able to accomplish these absolutely so if we look at what does it take to implement these well we got to establish clear business priorities and make sure that you know from the top down those are clear many organizations are starting to implement concepts like okrs objectives and key results as one of those ways that to create that clarity and that transparency around business priorities and then helping the and with that then as product managers if we’re using okrs we can start aligning our outcomes to those business priorities so i think that’s a really positive step forward that we see organizations starting to implement we have to work on that cultural change which means we have to develop a sense of trust that says senior managers trust us with a more dynamic budget than what they have been willing to trust us in the past that we are the right people on the front lines who can make the best decision but on the other side we have to be accountable we have to be able to demonstrate to to them that we’re using those budgets widely wisely so we have to do our part on our side to be able to uh create that sense of trust and as any change that you’re doing in an organization you know don’t try to jump into this you know all feed in right at first you know into the deep end of the pool here is let’s you know start off with some small bites and so you know start with some pilots and the organizations that i know that have been testing different type of budgeting approaches and funding models would do this as they approach it with a pilot see what worked what didn’t work maybe understand what other changes need to be done organizationally and then they start slowly rolling that out across the organization yeah that’s been my advice as well that you know trying to boil the ocean by changing the whole way companies budget product development is probably not going to be very successful and so pick one thing and try it out using maybe the vc funding model for example and and then see the results demonstrate the results to the rest of the organization yep well that is what we wanted to cover today so i think uh roger i’ll let you take it forward in terms of uh the poll and the uh uh q a

Q&A: Complex Orgs, Finance, and Non-Software Products

Roger Snyder | 54:30-57:10

please let’s ask the poll first and then we got a couple questions that we’ve got queued up um so let’s go in and launch that poll we want to get your feedback on how effective and helpful this webinar was and while we’re letting people answer that question let’s answer a question that we received a little while ago can modern budgeting this is from an anonymous attendee so i’m not going to ask them to speak can modern budgeting work in a complex global organization with different legal entities responsible for the product and its team members repeat that last part of it again um with different so complex global org with different legal entities responsible for the product and its team members

Tom Evans | 57:10-59:00

yeah the answer is yes and and uh i’m actually working with an organization right now that is in that situation to where you know they’re very complex they have you know regional entities they have global entities and and i i i i and they are definitely exploring you know some of these modern budgeting approaches and as i said you know i think a big part of that is it’s going to take you know a mindset change you know organizationally before they can fully uh reach out to that but we’re definitely looking at how they can start to implement some of these approaches you know in that kind of complexity of an organization because still in the end each of these organizations have to do a budget um and they you know sometimes that budget is just at their level in terms of their organizational level their legal entity level sometimes that budget is going up higher to you know an overarching corporate entity but in either cases they have to do that and it is very doable to be able to implement some of these concepts again probably start small yeah would be my advice because changing a big global organization the way they budget is going to be and be patient right it’s going to be something that’s going to take time for sure right yeah yeah the organization i’m doing some work with right now you know they are very clear in terms of you know the change management being across multiple years so this is not going to be next year we’re going to look completely different and i think if you go out and also look at some of the beyond budgeting writings that are written out there you’re going to you’re going to see that they did a slow transformation in implementing those practices that went across you know multiple years like you know 10-year type time frames to uh be able to implement the uh the full range of those concepts right okay wow 10 years that’s amazing yeah it turns out it takes a lot of patience yes yeah that’s impressive all right a couple more things that we want to talk about and then we’ve got a couple more questions to answer too so you can go to the next slide i think it’s a plug for our next digital product management course which is coming up on april 25th so you’ll see a link dropped into the chat box to go sign up for that course this is just one of the topics that we discuss in our digital product management course where we talk about the need for more modern and and effective approaches to your development cycles and to working with the rest of the organization like your budgeting cycle okay uh let’s move on to the q a so another question came from greg i believe it was hold on a second here because he put it in the yeah in the chat so greg i’m gonna hit the allow to talk button and see greg if you could unmute and ask your question

Greg | 59:00-1:01:00

yeah thanks a lot can you hear me yes we can awesome thank you so much for the presentation today this is really helpful and it’s certainly timely for me um for context i’m working in an organization where in general we do a lot of our product and initiative planning tour you know at the beginning of the year uh with the goal towards achieving outcomes that are you know business that are advantageous for business um a lot of what you’ve shared with me it really kind of resonates because i can see how as an organization we we don’t take a mature approach or at least a well-informed and consistent approach to funding let’s say not just moonshots but even emergent work and and for me and and this is impacting me directly so the question i have for you is in your experience how have you or folks that you’ve worked with most effectively kind of brought this kind of this meta-related topic to executive stakeholders to essentially apprise them that hey the way that we’re taking making decisions may not be fully informed or kind of is is constraining us here is how we could potentially think about things in a different way that’s something i would very much like to do and i’m wondering how you’ve seen that be most uh successfully executed either yourself or with some of the clients that you’ve worked with

Tom Evans | 1:01:00-1:03:05

yeah so so i’m going to say in a general sense the words you use are exactly the approach that i would take on that is is to present to the management team saying hey here’s some of the challenges that we’re facing because of you know our current budgeting let me give you some very tangible and specific aspects of how this impacted us in a negative way and i wanted to present to you some examples of how we might change that now i’m saying it this way based upon the assumption that you have a management team that is very receptive to new ideas and you know feedback like this if uh if your management team is not that receptive you know and you don’t feel like you’re going to get a a positive reception then you might want to spend a l you may try and i don’t know to what extent you can do this is you know maybe do some experimentation just you know on a small scale yourself uh to experiment with some of these different approaches you know such as emergent needs or maybe allocating a certain amount of your budget to you know the horizon three type things you know experiment to the extent that you can you know safely do that and then start to demonstrate uh the results of that and then i think you know the third part of that is you probably need to reach out to other stakeholders who are also feeling that impact and get their buy-in so it’s not just you going up to the organization but it’s also you and this group of other stakeholders who uh feel the same way so yeah it a lot of it kind of depends upon the politics within the organization but i think what you talked about from the beginning is right on target awesome thank you so much yeah i just want to amplify a little bit what tom said um get someone from your finance department get someone from your sales team because they probably both experienced not being able to respond you know the finance folks will have the outcome of wow we launched this product and it was a miserable failure they’re going to see that so get the data on that and then the sales team is going to have the experience of i asked for something that was really urgent and couldn’t get it done for a year and if you can bring a combination of those stories to bear and have like tom said abroad based of folks that all are advocating for this new approach i think that’s going to provide a lot more valuable data to back up your request for consideration of a new way to go about this and again go to that team saying let’s start small i would love to pick one product line and try this for six months right so yeah and i think your point roger around the finance team is if you’re going to run into a barrier finance may be one of those barriers and so if you can find that person within finance who has that more forward thinking type approach that you can get as a accomplice in in this process or you know a stakeholder and helping promote this then that’s going to help you advance this uh much easier than if you’re uh having to fight against finance also exactly so i want to point out that we popped into the chat box the the link to the digital product management course and we’ve also provided a coupon code to save 500 on that that online course uh today use that promo code on your checkout when you’re in the the checkout when you’ve got your cart and you’re being asked to pay that’s where you can apply this code all right tom a couple more slides and okay are there any more questions or are we all good i’ve got one more question but if we’ll i’m going to leave it to the very end just to make sure we’re getting the rest of this we’ve got another webinar coming up this friday and it’s on output to outcome driven success so it’s it’s diving deeper on the very topic that tom was talking about earlier which is how do you shift from tracking story points and tracking whether or not you just got that thing delivered on time on budget to being outcome driven and so sign up for this webinar on friday if that’s an area where you’ve been struggling to help make a shift in your organization so check out that webinar here’s the link in the chat box to go sign up for that and if you need help transforming your team we will also put a link in the chat of being able to contact our consulting group and they can help you out in terms of the bigger thing of like hey i need help changing the skill level of my team or i need help addressing how do we go about trying to change the way we do our processes and our organization then check out our our abilities with our expert team that can help you there uh the last question that we had was a question about okay i get this in software but how do i apply this technique when it’s not about software suppose it’s consumer packaged goods

Tom Evans | 1:03:05-1:06:00

yeah you know some of it still you know applies and and clearly you know here’s here’s kind of the key difference between software and more consumer packaged goods or you know manufacturer type goods is my you know development cycle so with software you know i have that ability to only work on a small set of requirements you know deliver those work on another set of requirements and that gives me a lot more flexibility in terms of you know what i want to achieve and i can i and i can deliver something potentially within weeks or months where for a lot of the consumer packaged goods and and or you know uh more physical type products and the companies that i’ve worked with they uh you know have development cycles that sometimes can be a year and a half or two years long and so i think the key here is that i can still take an annual product plan approach uh you know to those i can still have certain outcomes that i want to achieve i think what we want to avoid in that particular world is when we get funding for a specific initiative you know whether that’s a new product or a a product enhancement is is to committing to a specific scope on a specific schedule i think you still want to try to do it more of a theme based type approach where we say directly this is what we want to achieve because you know that you know just like software you’re going to run into things that don’t work the way that you want you’re going to have to pivot you’re going to go and do some concept testing with customers and you’re going to get some feedback so i think it’s more anticipating you know the emergent needs or the changes uh within that without locking yourself into saying here is the exact scope and the exact schedule that we’re going to deliver on so that would be you know how i would apply those concepts and then the companies that i’ve talked to in the last couple years that are more physical products those are things that we have talked about yeah one company that i worked with did have a dedicated budget though for uh testing and experimentation so even though they were working on very large launches of of consumer package products they would still have a small budget that well relatively small it was a big company so it was actually a lot of dollars but they were doing things like experimenting throwing out prototypes or ideas and focus groups and testing those ideas with consumers before they would make the commitment to to build a line in their case to actually produce this product so they were doing some of that h3 innovation vc funding style yeah exactly experimentation where they would either they started with focus groups but they would actually even do pretotypes and prototypes to see whether or not that product was going to take with a a good-sized audience so using that h3 innovation and the vc funding approach was was how they were going about it and that was very very uh insightful and it was exciting to see that a non-software company was applying these modern majors

Closing and Next Steps

Roger Snyder | 1:06:00-1:08:00

perfect great well we’re at time thank you so much everyone for attending today i hope you found this helpful we really appreciate the feedback we’ve got a lot of resources that we provided in the link and then the recording will come to you in the follow-up email have a great afternoon thank you again tom all right thank you roger and thank you for everyone to everyone who attended all right have a great day everyone talk to you later bye