Succeed Strategically with Your Agile Product Vision and Strategy Planning Playbook

In the first blog post of this series of six, I explained the need for Agile Planning Framework with its four planning levels.  In the second blog post, I explained the four objectives at each planning level, and how to use the proposed Agile Planning Framework to implement and operationalize your customized agile planning playbook.

In this third blog post, I describe how to do Product Vision and Strategy planning (the top level in the four-level planning).  At this planning level, the planning horizon is typically for one to three years, and business initiatives or strategic themes serve as the planning unit which may take several months to complete.   Product Vision specifies the What and Why of the product, while Product Strategy elaborates how to realize the vision with a specific approach, and provides a roadmap showing a timeline for executing the strategy.  Product vision is the guiding North Star, and does not change much, if at all.   Once the product strategy is prepared, it may undergo adjustments and refinements over a period of time, but not too frequently.  If it were to change frequently and/or radically, probably the necessary strategy development homework was not done properly or the product may still be in an early startup phase.

As outlined in the second blog post, there are four objectives at the Product Vision and Strategy planning level.

1. Choose appropriate Product Vision and Strategy framework and its methods for application in your Agile Product Vision and Strategy Planning Playbook
2. Complete preparation for Product Vision and Strategy planning
3. Develop Agile Product Vision and Strategy plan
4. Re-Plan and improve the Product Vision and Strategy planning process

Associated with these four objectives, there are four practices, identified as Practices 1.1 through 1.4 in Table 1 of the second blog post.   I now elaborate on these four practices in this blog post.

Practice 1.1: Choose appropriate Product Vision and Strategy Planning Framework 

As explained in the first blog post, my focus is on the lifecycle of software products or services or embedded software products that are intended for multiple customers in their chosen market segment.  With appropriate modifications, you can use the Agile Planning Framework for different situations, which I will point out briefly; their details are outside the scope of this blog series.  If you are interested in applying the Agile Planning Framework to client-specific projects (either internal or external clients), please contact me.

I first briefly review three well-known strategy frameworks that can be used for Product Vision and Strategy planning.   When market or customer needs are reasonably well known, either Competition-based strategy framework (also called “Red Ocean” strategy framework) or “Blue Ocean” strategy framework can be used.  When market or customer needs are unclear, or when it is not clear who the real customers or users are, “Lean startup” strategy framework can be used.  It is not my intent to cover these frameworks in any depth in this blog series, as many books, published reports, and reviews and critiques, are available on the subject (start with Wikipedia, if you are interested).  By no means, these three strategy frameworks form an exhaustive list.  Many other product strategy frameworks exist.  A good reference on high-tech product strategy development is the book Product Strategy for High Technology Companies by Michael McGrath.  My goal is to emphasize that you should use a product strategy framework that is appropriate to your product business.

Competition-based (aka “Red Ocean”) Strategy Framework:  This framework is applicable to product vision and strategy planning when a product is to be offered in a known, established market space, where the boundaries of the market or market segments are well-defined and accepted, and competitive rules of the game are well understood. Product strategy is based on outperforming competition in order to grab a greater share of existing demand. As the space gets more and more crowded with competitors, prospects for profits and growth are reduced.  Products turn into commodities, and increasing cut-throat competition turns the water bloody – hence the name “Red Ocean”.

In this strategy, competitive advantage is based on either value advantage (such as features, ease of use, total experience, service, quality, performance, etc.) OR cost advantage (initial cost of purchase, cost of service, life cycle cost of ownership).  You have to choose either value advantage or cost advantage as your product strategy.  Compared to competition, a product must create either greater value for customers at a higher cost, or must create reasonable value at a lower cost in order to gain competitive advantage.  This classic strategy framework is rooted in Professor Michael Porter’s seminal work at the Harvard Business School and is the staple of business school courses on strategy.  In this framework, not only product competition (direct and indirect) needs to be considered, but also the bargaining power of suppliers and customers as “competitive threats”.  A very good reference for this strategy framework is Prof. Michael Porter’s Competitive Strategy book, and his other books and articles on the subject.

Blue Ocean Strategy Framework: Blue Ocean strategy framework was developed by W. Chan Kim and Renée Mauborgne, professors at INSEAD and Co-Directors of the INSEAD Blue Ocean Strategy Institute. The Blue Ocean strategy framework rejects the fundamental tenet of Red Ocean strategy framework that a trade-off exists between value and cost.  This strategic approach requires that a product strategy break away from the red ocean of bloody competition by creating uncontested market space that makes competition irrelevant. Instead of dividing up existing demand, blue ocean strategy is about growing demand and breaking away from competition.  A very good reference for this strategy framework is Profs.  Kim and Mauborgne’s Blue Ocean Strategy book, and their articles on the subject.

This strategy framework requires value innovation in the region where a company’s actions affect both the product cost structure and its value proposition to buyers.  New value creation is accomplished through one (or more) of four perspectives: eliminating, reducing, raising or creating.  Cost savings are achieved by eliminating and reducing the factors the product competes on.  Buyer value is lifted by raising and creating elements that the industry has never offered (hence the name ERRC).  Over time, costs are further reduced as scale economies and learning curve kick in.  This approach results in what Blue Ocean strategy framework calls an ERRC Action Grid.  Product strategists need to identify specific factors to eliminate, reduce, raise and create in order to create a blue ocean of value innovation.

An example of applying the ERRC Action Grid to Southwest airline which succeeded in creating a blue ocean of new market demand is shown in Figure 4.  Southwest’s Strategy Canvas and Value Curve are shown in Figure 5.  Data used in Figure 4 and Figure 5 are based on the information in the Blue Ocean Strategy book.

Figure 4: Blue Ocean Strategy ERRC Action Grid and
application to Southwest Airline’s Service Strategy

Figure 5: Blue Ocean Strategy Canvas and Value Curve for Southwest Airline

Southwest Airline created a blue ocean of demand by offering much higher value in friendly service, speed, and frequent point-to-point departures at a lower cost.  Its value innovation offered both value as well as cost advantages.  Southwest Airlines essentially offered flexibility of bus travel at the speed of air travel using secondary airports.  Many additional examples of blue ocean creation are given by Kim and Mauborgne in their Blue Ocean Strategy book and papers.

Lean Startup Strategy Framework:  The Lean startup is a method for developing businesses and products first proposed in 2011 by Eric Ries.    The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration. It is a principled approach to new product development. Lean startup method is good at answering key questions that may come up at an early stage of developing Product Vision and Strategy, such as who are the real customers/users, what are their real needs, what should be the key features that the product must provide to meet those needs, etc.  This is the case with many start-ups of entrepreneurial as well as intrapreneurial variety.  These questions are answered and assumptions are validated (or refuted) by means of a series of small, inexpensive experiments and so-called Minimum Viable Products (MVPs).

Based on the results of such experiments and feedback from MVPs, a lean startup either adjusts its approach or does a strategic shift (called pivot).   I propose the phrase Lean Startup Strategy Framework to denote the lean startup-based approach of small, inexpensive experiments and MVPs to address strategic questions and to validate/refute key assumptions.  So-called A/B testing methods can be considered as part of the Lean Startup Strategy Framework.  When there are two options, A and B, available to implement something (a feature or a story or a user interface), both options are offered to a select set of users that are statistically significant and meaningful, and their feedback is collected and analyzed rapidly to decide whether option A or B is better.  A very good reference for the Lean Startup method is Eric Ries’ The Lean Startup book, and his articles on the subject.   A good source to get started on A/B testing is the Wikipedia page on the topic.

Comparison between Red Ocean and Blue Ocean Strategy Frameworks and Connection to Lean Startup Strategy Framework

Table 2 shows comparison between the Red and Blue Ocean Strategy Frameworks, and suggests their connection to the Lean Startup Strategy Framework.  I hope this helps you make your decision about which framework to use for your specific situation.  Once a startup demonstrates that it is a commercially viable venture, it can follow either Red Ocean or Blue Ocean Strategy Framework to develop its Product Vision and Strategy plan when it grows and tries to scale up.  It may continue to use Lean startup method to validate or refute assumptions even in its growth phase (when it’s no longer a startup).   This is indicated by two thick yellow arrows from the Lean Startup Strategy Framework to Red Ocean and Blue Ocean Strategy Frameworks in Table 2.

Profs. Kim and Mauborgne point out (in their Harvard Business Review, October 2014 article) that the incumbents often create blue oceans—and usually within their core businesses.  Within an enterprise, both red and blue oceans can co-exist for different products.  “The Japanese automakers, and Chrysler were established players when they created blue oceans in the auto industry.  So were CTR and its later incarnation, IBM, and Compaq in the computer industry.  And in the cinema industry, the same can be said of palace theaters and AMC.”  This is indicated by the thick yellow arrow from the Red Ocean Strategic Framework to Blue Ocean Strategy Framework, which delivers much higher profitability (as pointed out in Table 2) due to largely uncontested new markets.

Table 2: Red Ocean, Blue Ocean and Lean Startup Strategy Frameworks

Practice 1.2: Complete Product Vision and Strategy planning preparation

Based on the strategy framework selected in Practice 1.1, necessary inputs for product strategy planning should to be collected and preparatory steps should be completed before the planning sessions or workshops.  These inputs and preparatory steps are listed below. If these steps are not properly completed, actual planning (Practice 1.3) will not be very effective and/or efficient.  Note that many inputs and preparatory steps are common to both Red and Blue Ocean Strategy Frameworks.  Their key differences are in terms of markets and competition, as pointed out below.

Inputs and preparatory steps common to both Red and Blue Ocean Strategy Framework-based planning

• Get business strategy inputs that will drive the Product Vision and Strategy planning
• Prepare a draft list of key market segment(s) and key customers
• Prepare a draft list of business initiatives, strategic themes, key milestones
• Decide rough timeframe to realize the product vision
• Identify people required for Product Vision and Strategy planning, their specific role and responsibilities, and get their buy-in to carry out this work
• Determine various planning sessions and their schedule, and invite the required people to those sessions

Inputs and preparatory steps for Red Ocean Strategy Framework-based planning

• Collect inputs on strengths and weaknesses of major competitors (direct and indirect) and information about all competitive threats

Inputs and preparatory steps for Blue Ocean Strategy Framework-based planning

• Collect inputs on where the Blue Ocean of new market demand will need to be created
• Prepare draft inputs for the ERRC Action Grid: what needs to be Eliminated, Reduced, Raised and Created in order to develop a Blue Ocean demand without much competition

Practice 1.3: Develop Product Vision and Strategy agile plan 

As pointed out above in this blog post, many seminal books exist on Competition-based (Red Ocean) Strategy, Blue Ocean Strategy, Lean Startup, and product strategy.  Plenty of material is also readily available on-line, along with training, coaching and consulting services from experts in those areas.  In this practice, you should use the nuts and bolts from an appropriate book or related material applicable to your chosen strategy framework after you have completed Practices 1.1 and 1.2 above.    

Product Vision and Strategy planning effort may span over several calendar weeks with a series of meetings and workshops attended by senior executives, product management team, and appropriate stake holders invited for specific meetings or workshops (senior technologists, and senior representatives from marketing, sales, manufacturing, etc.)  As pointed out in the first blog post, three to nine days of total planning effort is typically required depending on the product size, duration and complexity for a one to three year product horizon (240 workdays per year).  A product vision and strategy plan should be revised or fine-tuned at the end of each release cycle.  If you consider additional two to five days of effort to prepare for planning (Practice 1.2), and two to five days of effort to revise and maintain the Product Vision and Strategy Plan, it still amounts to only 3% of total time for planners at this planning level.

The end results of Product Vision and Strategy planning is a set of key artifacts listed below.  Many artifacts are common to both Red Ocean and Blue Ocean Strategy Frameworks, with some key differences as noted below.

Product Vision and Strategy Plan (elements common to both Red and Blue Ocean Strategy Frameworks)

• Business needs the product will fulfill
• Target customers and users
• Key capabilities of the product that will meet the business needs of target customers and users
• Technology platform and stack to be used: such as three-tier web, or mobile clients and cloud-based servers, Java stack or .Net stack, etc.
• Key components to be licensed from third parties (Buy vs Build decisions)
• Major architectural considerations and high-level product architecture
• Value offered by the product to customers and users
• Value offered by the product to you (product vendor)
• Budget for the product allocated by major business initiatives or strategic themes or release cycles. The budget is agile as these numbers are revised (ramped up or down) based on project execution results, customer feedback, and inputs from the environment (changes in market and economic conditions, competitive response, etc.)
• Product sales method
  • Direct?
  • Through distribution channels?
  • Bundled with other products or services?
• Target price for the product
• Sources of revenue and the business model: license fee, subscription fee, support and maintenance fee, volume discount, etc.
• Service and support model for the product
• Business case for the product: return on investment
• Risks and the risk mitigation plan
• Assumptions and experiments needed to validate/refute them (may use Lean Startup method)
• Action items

Product Vision and Strategy Plan (elements applicable only to Red Ocean Strategy Framework)

• SWOT matrix: strengths, weaknesses, opportunities and threats from your direct and indirect competitors compared to your product
• Your sustainable competitive advantage: Specify whether and how it is based on either Value advantage OR Cost advantage (initial cost of purchase, cost of service and life cycle cost of ownership).

Product Vision and Strategy Plan (elements applicable only to Blue Ocean Strategy Framework)

• ERRC Action Grid: What needs to be eliminated, reduced, raised and created for your product to develop a Blue Ocean of new demand without much competition
• Strategy Canvas and Value Curve for your product illustrating how it will create a blue ocean of new demand
• Your sustainable competitive advantage based on both value advantage AND cost advantage (initial cost of purchase, cost of service and life cycle cost of ownership).

List of key business initiatives and Strategic themes: These initiatives and themes (often modeled as large epics) may take several months to complete and deliver.  They seed the product backlog and will be broken down into features (often called epics) that fit in success release cycles.  Later on features will be broken down into stories to fit in successive sprints of release cycles.  The items in this list are prioritized (rank-ordered).  This list is dynamically maintained by adding, deleting, revising, refining, and re-prioritizing items it by the product management team based on project execution feedback and inputs from the environment (market, business, customer feedback, competitive response, etc.).

Product Roadmap:  This artifact shows how the key business initiatives and strategic themes (represented as major features or epics and feature groups) will be realized over a time line, typically organized by the next 3 to 4 quarters or release cycles, as illustrated in Figure 6.  The roadmap is dynamic; when a quarter ends, it is retired from the roadmap and a new quarter is added.  Features may be categorized in three swim lanes, typically basic, differentiated and delighters (game changers).  Additionally, a roadmap may capture key milestones, such as product demos in major tradeshows, filing patents, etc.

Figure 6: Product Roadmap

Workflow for monitoring Product Vision and Strategy plan execution:  A Kanban workflow is designed to help visually monitor the execution of Product Vision and Strategy plan as illustrated in Figure 7.  Optionally, Work-in-Process (WIP) limits can be placed on the workflow status columns, cycle time can be measured (for example, cycle time from “Approve and Fund” status to “Measure ROI” status), and swimlanes can be added to the workflow (based on a suitable criteria, such as priority or source of work items).  Then appropriate steps can be taken to reduce the cycle time as part of continuous improvements.  The workflow also helps align the release planning and release plan execution (the next lower level of planning) as explained in the next blog post in this series.

Figure 7: Workflow Design for Monitoring the Execution of
Product Vision and Strategy Plan

Wasteful activities to be avoided during Product Vision and Strategy Planning:  Activities that do not produce adequate value or represent opportunity costs should be avoided or minimized.  Some examples:

• Annual budgets: they encourage a “Spend or lose” mindset that is counterproductive for agile projects.  It is better to commit budget tied to key initiatives or to the next one or two release cycles, and adjust the budget based on project results.  The budgeting process itself needs to be agile.
• Details at the level of stories: At the Product Vision and Strategy planning level, this level of detail is unnecessary and represents waste; moreover, these details will invariably change with the passage of time.
• Planning a roadmap for more than four quarters: there is not much to gain in projecting a roadmap more than four quarters in future; it is also wasteful as those details will change with time.
• Overly complicated workflows for monitoring the plan execution: few status columns (4 to 6) and at most few swimlanes (2 to 4) is adequate in most situations.

Practice 1.4: Re-Plan and improve the Product Vision and Strategy planning process

A Product Vision and Strategy plan is not static or frozen.  You will need to revise it based on:

• Release reviews and retrospectives
• Key feedback from sprint reviews
• Key feedback from customers
• Inputs from the environment (changing market and business conditions, and competitive response).

You should improve the Product Vision and Strategy planning process itself as well as your Agile Product Vision and Strategy Planning Playbook based on the derivative feedback from production use of your product, release reviews and retrospectives, and inputs from the environment.  Derivative feedback means second-order feedback or feedback derived from primary feedback flow.  If desired business results are less than expected over 2 or 3 release cycles, it is derivative feedback based on the sequence of feedback from multiple release cycles.  As it is likely to represent a trend, it warrants a fundamental reexamination of the product strategy, and make adjustments as required.  Agile Product Vision and Strategy Planning Playbook used to capture the strategic planning process will then need a revision too.

If your business is not product-based, but is driven by client-specific projects (either internal clients or external clients), the nature of competitive dynamics changes.  For internal clients (typical of an IT organization inside an enterprise), the competition is more likely to be “build vs buy” choices.  For client-specific projects, you will need to make the fundamental choice between Fixed Price / Flexible Scope, or Fixed Scope / Flexible Price as your strategy.  For external clients (typical of IT service providers in open market), there is still the option for selecting and applying either the Red Ocean or Blue Ocean Strategy framework to the overall service business.  Most of these vendors today are swimming in the Red Ocean, but once in a while value innovation is created with a blue ocean of new demand.  This happened during 2000-2010 with phenomenal growth of Indian IT companies, such as TCS, Infosys, Wipro, etc.

The past two blogs of this blog series:

• Blog 1: Failing to Plan is Planning to Fail: Succeed with Agile Planning Framework and its Four Planning Levels
• Blog 2: Failing to Plan is Planning to Fail: Succeed with Agile Planning Framework and its Four Planning Objectives

If you have questions on how to implement and operationalize your customized Agile Planning Playbook or to implement a more comprehensive Agile Lifecycle Playbook covering the entire agile project lifecycle, please let us know.