Red Zone - Yellow Zone
INTRODUCTION
Understanding value is one of the most important concepts of improving the output from the development or organization. It is the role of the Product Owner to assess this. To your help you will have to take help from the technical side as well as the input from Marketing and Sales.
TIME AS VALUE
Especially in a situation where the entire product is hosted like in the gaming industry, it is very easy to view the time as a factor in the equation. Selling large quantities of goods (e.g. fast moving consumer goods) is also very similar situation, but actually the same principles are true for most situations.
The basic formula is:
Total Value is the total value for each customer that uses and pays for the product, either by buying it or in whichever way we charge for it. Functionality that increases customer happiness, marketing or supporting sales can also be assigned value, albeit more difficult to calculate.
Time on Market is the time this functionality is present for the customers. As this potentially is infinite, we normally have some kind of limit to the horizon which we are looking at. This gives the fact that we normally can say that delivering functionality x time units earlier will have it on the market x time units longer.
VALUE OUTPUT CURVE
One of the most important tasks of the product owner is to prioritize the work to achieve the maximum value output.
To be able to address the issue of maximizing value output it is important to understand the value output curve. The fundamental theorem here is that the value produced is not linear to the effort put in. Instead, value comes in plateaus.
It is the product owner’s role to:
- Define goals to reach the plateaus and make it possible to release and capitalize on the value produced by this.
- Supervise that the goals are not significantly missed or overshot.
Our goal is to hit the sweet spot of the value output. In the value output diagram, we see this as the area between the red zone and the yellow zone. Sometimes this is referred to as the “Green Zone”
The Red Zone:
If we miss the goal and get into the red zone, we may end up with no value at all. Missing single items may render the entire function useless. It is like delivering a car, but forgetting to bring the key.
The key to avoiding the red zone is to understand the actual usage of the system and all the stakeholders involved.
The Yellow Zone:
Ending up in the yellow zone is somewhat less dangerous as the red zone. However we have spent effort in doing things which not significantly increase the value, effort that could have been spent in some other area.
In a situation of new product development, where the release may not be imminent, the cost of the yellow zone is not as big as with a live product, as it most of the time is paid off in subsequent sprints. For a live product, a lot of time we will get part of the yellow zone effort back if it has led us closer to future goals.
Double Jump:
It can be easy to miss apparent partial goals that could be released to bring value and thereby directly reaching for a higher goal. This way value is lost.
To summarize; the capability to efficiently find and hit these goals is what brings the real value as a product owner. As a product owner this is what you have to do and the way to do it is to understand the domain, the market and to some extent the development process.
It is however not easy. There will always be questions like: Is feature X possible to launch without the proper administration tools? Or will the administration tool just bring us into the yellow zone? And timing issues like: For how long can it live with feature Y without the possibility to modify it? How will feature X be perceived by the users used to see X together with Y?
On the other hand, if this would easy, people like Jeff Sutherland would not say that it is worth having the product owner the highest paid employee if that means you get the best product owner.
MULTIPLE TRACKS
The situation would have been quite simple to handle if it had only been one feature at a time taken into account. However, it isn’t. We will most probably have multiple curves to move along at the same time and their pivot points are different. This means we have to value different levels of completeness that will take different amount of time on features of different values.
This definitely makes the role of product owner complicated. However it is your job as a product owner to make these estimates. You cannot rely on anyone else doing it and this is really the essence of your job. This is how you will bring value. If you can’t you are probably on the wrong place.
SHORTEST JOB FIRST
A common and potentially difficult tradeoff is done when there are multiple value curves which different horizons. In the picture below, the black line will clearly bring the best value, but it might anyway be so that the value would be maximized by first following the red line. This way we can get functionality out earlier, keeping customers happy while developing along the black line.
The idea is to increase value, but it may still be a very difficult negotiation to take, as probably most stakeholders will say that the black functionality is the most important and get focus. However in this case they are wrong. You know that, you just have to convince everyone else of it.