On mistaking investment mix decisions for prioritization decisions, and getting out of that mess
- IT can’t grant account access because they are building self-service capabilities
- R&D can’t fix bugs/address client requests because they are building new features
- Ops can’t do technology migrations because they are launching new clients
- The business doesn’t invest in building tooling for operational efficiency and quality because we need to capture more revenue
What do all of these these trade-offs have in common?
- They are not sustainable in the long run – leading to an outcome that is clearly far from the global optimum
- They are likely an outcome of falsely identifying an investment mix decision as a prioritization decision
#1 is pretty self-explanatory, so let’s focus on understanding #2.
When we prioritize items, we determine their sequence. We start with the highest priority item and only move on to the next one once the first one is completed, regardless of how long it took. If we would not get to the lowest priority item – we would still consider the overall outcome a success.
When we set an investment mix, we determine the percentage of time allotted to each investment theme. If the theme that received the smallest time allocation will not be addressed at all – we will fail in our mission.
When we mistake an investment mix decision for a prioritization decision, we set the sequence when we should be setting time allocation. As a result, the item that should have received the smallest time allocation becomes the lowest priority item. Since it’s unlikely that we’ll get to the lowest priority item – we’re essentially setting ourselves up for failure.
How to get out of this mess?
Identify when we’re conflating investment mix and priority – here are a few “red flags” which may help us catch ourselves in these situations:
- Everything in our backlog feels like it’s priority #1
- Comparing backlog items feels like comparing apples to oranges – there is no good comparison criteria. The items feel too different.
Set investment mix first, only prioritize within each investment theme
Investment mix guidelines:
- Choose investment themes – good (differentiated) investment themes typically differ from one another in either value time horizon (will start generating value in 3 months vs. will start generating value in 2 years), business outcome (increase revenue vs. cost reduction, for example) or stakeholders served (external vs. internal, for example). Some combination of all three, as well as more use-case-specific attributes is possible.
- Use one backlog – if the same team is working on items from multiple themes, keep work items from all investment themes in one backlog. Use filtering for internal prioritization in each investment theme
- Set, track and revisit – The mix we choose don’t have to be the right mix forever, we can re-evaluate and change it on a cadence that seems appropriate. For example, on a quarterly basis. We should track and course-correct variance from the desired mix throughout the quarter.
- Allocate people, rather than time, when possible – our actual investment mix can easily drift away from the desired mix. The best way to avoid the drift is to assign specific people to do work on each theme. At a large scale, we can form stable teams around each theme. At a small scale, we can designate a person to only be working on items from a certain theme at a given iteration/time-period. Note that this approach trades off collaboration for predictability. Highly mature/disciplined organizations can avoid that trade-off.
- Leverage experts – different roles may be better suited to prioritize items within each investment theme. An architect would have more valuable input on prioritizing tech debt that on prioritizing client requests. An account manager will have more valuable input on prioritizing client launches than on prioritizing operational tooling. That’s not to say that if you’re not an expert, your input is worthless.
- Use a framework – if we chose good investment themes, we are comparing apples to apples within each investment theme. Which means that we can use a framework to ensure that our prioritization stays disciplined and consistent over time. Cohn and Leffingwell suggest several financial and non-financial frameworks. Model-based financial approaches are very sensitive to explicit and implicit assumptions and therefore should be avoided if the revenue impact of the investment is not direct.
- Exceptions are allowed, if we learn from them – no framework is perfect, so sometimes going with an expert’s “gut feeling” would be the right thing to do. These are also typically good opportunities to see if the framework can be refined to more accurately reflect the true value equation.