Moving to a Product Centric Approach: Insights from Mik Kersten and Dave West

 

In this episode of the Scrum.org Community Podcast, Dave West, our host and Mik Kersten, CTO at Planview and author of Project to Product discuss the critical shift from project-oriented to product-centric organizations. Mik highlights the disconnect between traditional project-based models and Agile principles, sharing insights from a recent survey. Dave and Mik explore key factors for a successful transition to a product focus, including aligning business and technology planning, managing a portfolio of products, and more. Mik also emphasizes the importance of redesigning quarterly business reviews (QBRs) to link business outcomes with Agile planning. Tune in to learn more and get a sneak peek into the upcoming Project to Product Summit coming up October, where these topics will be further explored by Mik, Dave and many other exciting speakers!

Learn more about the Project to Product Summit virtual event.

Learn more about the Project to Product Summit Executive Experience live event in New York.

Transcript

Dave West: 0:20

Hello and welcome to the scrum.org community podcast. I'm your host, Dave West, CEO here@scrum.org today's podcast is focused on the interesting topic of moving from a project oriented organization to one that is product centric. Product is a key unifying idea in the digital age, but change into that orientation can be challenging. So I'm very excited to have joined me on this podcast. Long Term friend, ex colleague, Dr Mik Kersten CTO of plan view and author of a fantastic book that I actually reviewed on a very, very, very long flight, a project to product. Welcome to the podcast. Mik,

Mik Kersten: 1:04

thank you, Dave. It's great to be here. And I didn't realize it's actually all done on the flight. So I'm glad that flight was long, because the feedback you gave on on that very early draft of the book was was instrumental. So glad they'll fly around the world.

Dave West: 1:17

Yeah, yes, it was one of those flights, you know, those flights where you've seen every movie. Not Not that I'm saying I wouldn't have spent the time seen every movie and I wasn't tired so and then when I got into it, it was, it was almost impossible to put down. It was, it's such a good book and and I do recommend it to anybody that's on this journey, particularly some of the early sections provide some amazing, amazing context. So thank you for writing that book. Mik, and welcome to the podcast.

Mik Kersten: 1:49

My pleasure, Dave. And I'm sure that some of the last two chapters might have put you to sleep as well. So hopefully that helped out

Dave West: 1:55

too. No, no, that no for our listeners, do not believe a word he says, the last two chapters are hard, I'm not going to lie, but they're actually very, very valuable. So, so today, we're going to be talking about this kind of thorny topic. It's you wrote the book. What year did you write the book? Mick, 2018 right. Yeah, yeah. So a few years ago, but it seems now that project to product is even more relevant. But when, when you were writing the book, what you titled it project to product? And it sort of came in from stage left. For me, I'm like, this is an interesting title. So why did you call it project to product? Mick, I'd love to Yeah,

Mik Kersten: 2:39

yeah. And I think for a lot of people that came stage left, anyone in a technology company, that the title made no sense to so because we just and to me, the concept made no sense initially. So I think it was, it was actually me wrapping my head around that this is not the way everyone builds software that the organizations you and I were working with at that time, and many that we continue to work with. They actually preferred the mode of, preferred the mode of throwing work over the fence the technology teams, and not actually setting up these feedback loops between business and technology and strategy and customer feedback in these, in these product value streams, and instead just planning out the work in and didn't just these, you know, it was still snapping back to waterfall fashion and project budgeting and all of that and and that, basically, that inconsistency is what I realized was the problem is that we'd all been, we'd all grown up around, you know, yourself, myself, a lot of our colleagues around building great products and creating value streams that drove innovation, rather than having this this way of throwing the work over the fence. And I realized there's just this massive difference in mindset and operating model between companies that were doing digital innovation, just tech companies, startups, unicorns and the like, and and the way that enterprises were working. And so, yeah, the but it was a really interesting response, as the people who, who'd grown up in this that the title made no sense to that's everything is, you know, you were just always driving innovation through products, uh, projects are still a good thing. What's, what's the issue and,

Dave West: 4:15

and I remember very the actual moment. So, so I sat down, you'd sent me the manuscript. It was long, and I was like, nothing to watch, on, on, on the on the video system. And I opened it up, and I was like, and I saw the title, and I was like, no, no, no, we can't call it this. That's just just ridiculous. That's a silly idea. And then I started reading, and the early chapters talk a lot about BMW and car manufacturing, and your your and I've subsequently also visited that particular factory. So thank you for the for the connection and and this moment, you sort of like realization of flow and of the faux. Focus on outcomes and the manner, you know, etc, etc. Was, was that when this all became real, when you spent the time with these, with these organizations that were building very sophisticated products, you know, like cars or software products, or is that when it happened, when this realization happened,

Mik Kersten: 5:21

it was through is, is over this two, three month period when I realized, just having spent, and, you know, there's the there's the big bank story in the book, is, yeah, realizing that these organizations were were going Agile, and the rate just creating agile teams, right? And what you were calling it at that point in time that the water scrum fall, a term I still hear regularly, and we still see very regularly. I can't based in organizations. It's a flawed organization design that we're seeing. And I realized that the problem was not with these organizations ability to make agile teams or squads, or whatever they were doing at that point. Scrum was gaining ground and helping at that team level, but that everything above the team level was the wrong operating model. So agile, of course, was was meant to be bigger than just teams, and it was around feedback loop, and was around lead, and was around these things we call product concepts. But I realized that if the way that you're funding and organizing and investing in technology is entirely through projects, you're actually going against all those Agile principles and that we needed a new way of of looking at, and a new way and a new organizational and operating model for these, for these large companies. So the realization was, well, in all these large enterprises, this is not happening, and then seeing that how everything was just beautifully aligned to product value streams in the car manufacturer. It made me realize, okay, this is not, it's not that this is impossible at these large enterprises. It's just that they're not thinking by the right way.

Dave West: 6:53

And so and the why now is also kind of interesting as well. So you this was, what, five, six years ago, that we were, that you were thinking about this, but it's, it seems to be even more relevant now. Do you think it's because digital the right, the rise of llms, the rise of, you know, the importance digital is in every single enterprise, has made this even more relevant again, or, or even more more relevant, as it were. Yeah,

Mik Kersten: 7:26

I think it is that. I think it's there's there's just been this, obviously, this very long wave of digital transformation and and it's still continuing, and it's still, you know, we're still saying the same things as we were saying 10 years ago, which is it's still not producing the expected results. And I think organizations have realized that agile, that scrum practices, that these are good things, but that they need to be scaled up, and they need to be scaled to the team of teams level, all the way up to the way that the strategy and and leadership functions. And so I think ai, ai and cloud have definitely pushed on that, because if you're moving to cloud and your costs are growing not decreasing, you realize something's wrong. Something's wrong in the way that you're actually funding and investing and in technology. And that's happened. There's a lot of organizations have realized that, and they realize they're not even able to measure cloud costs for their value streams so they actually can get the right view of the footprint. It's as if a car manufacturer did not know the cost of manufacturing particular car or model. How would the CFO let the organization get away with that? So but yet, that's where we are. So I think that it's the growing investment technology that's made both the finance organization and basically strategy and leadership realize that these agile concepts can't just be at the team level, that they actually need to be how the entire business functions. And it's surprising to your point, David, it's been six years how long it's taking, and I think we are seeing the certainly what we're seeing, I think, or a lot more organizations at that leadership and operations level, realizing they need to make a shift, but still quite lost in terms of how to execute on that so,

Dave West: 9:09

so And ultimately, it seems to mean to me that organizations need to, As you rightly said, adopt this product mindset, align around products, and then fund and around products, and then build an operating model that sort of operationalize it. But those organizations are finding it incredibly hard. Do we have examples of organizations that have successfully transitioned to that, to those those bits, or is it, you know, there's elements of their business that they've got the mindset and maybe they've aligned, but they're still funding using projects or, you know, if we it, have we seen successful, complete transitions to this, to this, to this approach? Yeah,

Mik Kersten: 9:56

so that's a great question. And a year and a half ago, we just thought. Did to do a study that the project, product, state of the industry survey, to try to get a better sense of this. And in that set, you know, this was a set of 36 different organizations, and that where we measured their data. So they were, they were, by the nature of that study, the organizations we had data for was actually coming from the plan view, vis solution. So that was a little bit of self selection, but it had a much broader survey component as well. So a few 100 organizations in the survey, and what we saw connecting those two data sets, both the survey data and the actual system data. Of you know, how are they organizing? How is workflowing? Is that a third across that that set was actually scaling their product operating model. So it means that they had created product value streams that they were organizing according to those value streams, and that they had actually, they were, they were scaling this up. So two thirds, by the way, in the set of organizations, two thirds had started the effort. They had started making the shift, but not operationalized it sufficiently for that to meet our criteria of, for example, seeing understanding dependencies between value streams, right? That's one of the things that we test for, understanding how much, how much, what the capacity of each value stream is, and so on. So I think what's happening now is we have absolutely seen organizations that have done this at scale with success that have and you know, success does not necessarily mean that every single aspect of what product operating model has been fully implemented. I think it just means that this is the that the structures in place. So the product value streams are all defined, that the product value streams are measured, that there's an alignment between the, basically the value streams that people do in the work, so the organizational structure, so that you don't just have agile teams, you actually have those probably structured into teams of teams, and that those are aligned to value streams, and that the basically the architecture of the of the software, of your digital offerings, is aligned to that as well. So there are absolutely some, some, I think, some really interesting success stories of organizations who've done this. Organizations of you know, I think you you'll most remember them, CBA, Commonwealth Bank of Australia. They've done some, made some amazing progress on this. And it really is around putting together all of the pieces, right? Because maybe in the early starts of, start of the journey, we always our whole process. Make sure that you're measuring flow, you're seeing flow, so you understand why you need to do this. What's the ROI on doing it? But then, of course, flow is just not enough. So, you know, making sure that you're actually connecting some kind of outcomes, so things like OKRs and so on, that you're putting in place these product management practices such as planning and roadmaps, not just at just really elevating what the Scrum teams are doing to what you're replacing, what you're replacing, Gantt charts and project plans with roadmaps and funding capacity. So when those elements are in place, we now have a very good number of large organizations, and it does tend to be the earlier adopters who've actually made that transition in terms of their operating model. And of course, then the later stages of a transition are things like capacity based funding for persistent value streams. The same way we love persistent teams and not mucking with team structure all the time, just evolving it to remove burden on the system. We're seeing the same things at the product value stream level as

Dave West: 13:16

well. Yeah, our data, we surveyed about four and a half 1000 organizations, and we found very similar data to you. We found that majority, 70% are actually somehow aligned to product, but but only probably about 3020, to 30% of them were actually really kind of delivering it in that way, and which is very consistent with the data, that you're consistent, yeah, yeah, yeah, and, and it is really interesting. So, so you mentioned some of the key indicators for success. You mentioned, you know, the the ultimate destination is long lived, clear, basically, managing your product portfolio, looking at the capacity, looking at the value, managing in a consistent and unorganized way. What are some of the sort of mid you know, you talked about flow flow, managing flow and having flow metrics in place. You talked a little bit about total cost of ownership, business roadmaps, things like that. What are the sort of, like, broad kind of indicators of we're on this journey, we're being successful? Well,

Mik Kersten: 14:28

I think, I think you actually just rammed off the key ones, right? You added one that which I didn't, which I think is at a business level, it becomes the most important one is that you are managing a portfolio of products, which means you can see that portfolio, you understand what you're investing in it, and you understand the value that you're getting. Value that you're getting from each of those products. So an interesting telltale sign, which is, I think, kind of late in the journey, is that organizations, when they see this portfolio, they know where to double down. And this is whether the macro environment is driving more investment or more more cost cutting or rebalancing and or. Yeah, they know where, where to pull back, right? So if you ask in the technology leaders, when's, what's, what were the last three products that you've sunset, they need to have that portfolio view. And Dave, I know you've, you've helped me sunset some. And we because, of course, products have a life cycle. And so if you actually start looking at products, at a portfolio, and deciding, well, where, just like you might look at a stock portfolio, where in this portfolio, do I want to invest? What's my cost basis for this? What's the in the end, the lifecycle profitability, which you know, don't tells us is the number one thing to to optimize for is, like a product portfolio, that's that's really the telltale sign is when the organizational and really the layers of leadership down from the CEO, are actually managing and measuring that way, where that portfolio, reviewing, that portfolio, becomes a part of the quarterly business reviews, right? So the same way that we're doing our and that that's actually connected to our scrum cadences, right? That that's so I think when the one I would add to the set that you had, because you mentioned the managing the product portfolio is actually aligning the management of that portfolio to your agile planning as well. So you understand, for example, we need, you know, we might need to move on of our Scrum teams between these two value streams because we're investing more in our backend services right now, or APIs, and they need more capacity there. Rather than looking at, okay, let's, let's add four more resources from a contractor on that team, which, which doesn't really work. So it's, it's making sure that you're, you've got visibility into the portfolio, and then you're applying Agile principles to how you manage that. Because really, with the capacity for that portfolio is defined by by the agile team supporting it. So, so the other thing that was, was going to say, the other thing as one of these success indicators, is actually seeing the business planning and strategic planning cadences and the Agile cadences aligned and connected.

Dave West: 16:58

That that, yeah, I, I have to say, though, this is rare still. I know you said, but out of that third to see that complete transformation, that complete consistency, and the thing that's annoying, Mick and I say, I'm going to get on my soapbox for a minute, is it's just so obvious. It's just so obvious that when you step back from an organization's ability to innovate digital technology and and how fundamental digital is to everything that they do then that but they still operate in a in this free lunch, kind of like we can invest in something and disappear. I was talking to a lady I was at the product owner conference in the in the Netherlands, 850 product owners. It was absolutely one of the most refreshing agile conferences I've been to in a long time. I sent this lady who works at the Natural History Museum in the Netherlands and and she was talking about how the fact that they and they because they have a project oriented approach. And every they create these amazing products, and then they go on to the next thing, and then they go on to the next thing, and then they go into the next thing. And then somebody's using this product that they created for project planning cycles ago, and they're like, Well, hang on a minute. It's no longer secure because it's was on an infrastructure. That's how do I need to change it to support this new biodiversity indicator, or whatever? I don't know, I don't know much about biology, as proven by me, just even using those words biodiversity. But the point is, and it was just like, well, and then the business gets it. They're incredibly smart, and the technology people get it. But there seems to be this disconnect. Why is it such a problem? Why? Why can't Why is success so challenging in this, in this regard, from your perspective, well?

Mik Kersten: 18:57

And so I'll just, I think, first of all, it is right. So I think we're seeing this just, I know, in my own coaching and support of these organizations, one of the first things I ask right now is, what, what do you do on your QBRs and your quarterly business reviews? Because it is challenged and it's disconnected, right? And you'll have the people on the technology side who actually have got their act together on scrum of sums. They've got their product backlogs, right? They've got their Nexus sprint planning, whatever they've set up, it'll be there, but it'll be connected from the quarterly business reviews. And of course, the work being planned for them is then disconnected from their capacity. So there's, there's basically this, all of these great ideas coming from the Chief Digital officer's office, wherever else, on things that should be built that are completely disconnected from the reality of what can be built and how it should be built. And then, of course, there'll be a lot of people on the technology side who have great ideas as well on things that can be built with, let's say, the other technology platforms that are there today and the investments have been made to date. So I. Yeah, it's, and it's back to this thing, right? And this is, this is really the difference in a product operating model, business and technology are not separated. So I think as long as we've got disconnected agile planning Cadence from a disconnected business plan cadence, you're not, you're not a product company, you're not a technology company. And so this is, I think, as simple as connecting. And of course, this means that retrospective, right, your sprint, retrospectives, your Nexus retrospectives, those have to be connected to the reviews you do in your quarterly business reviews, and then the retrospectives that you did on sales and marketing. But it is, as you said, Dave, it actually is that simple. So I think it's a great question as to why it has been so organizations have been so challenging putting this in place. And I think a lot of the guidance that they're getting is just to scale this thing out from technology, rather than actually looking at, okay, well, here's how you redo your operating model that connects business and technology. I

Dave West: 20:57

think that's key. I think ultimately organizations need to accept this paradigm I talk about, you know, the product as a mindset, an alignment and a funding model. And if you can get those three things aligned around this product, then magic, amazing things happen. And the most amazing thing is, it becomes simpler. Everything gets simple because strategy is connected to execution. There's no like, Okay, this is our business strategy. Okay. Now we need to go away for a month and create our technology strategy. Oh, and then we need to take away, and it's just seamless. It flows through and just makes sense. Measures make sense all the way across. It's just, it just gets very, very straightforward.

Mik Kersten: 21:47

That is, I think, such an important point. I think that's one where, where organizations just need boring guidance on the fact that is, it is go it does get simpler. Because when you don't have this in place, so you've got the business planning cadence, you've got your Agile Scrum planning cadence, and then you're mapping the two, and you're mapping the two because there's an offset of multiple weeks, right? There'll be sprint and quarterly and monthly and quarterly cadences on both, but they're offset. So now you're doing mapping the way you're funding. The work being done by the Scrum teams, of course, is now a different mapping because you've got project codes or programs that have to be mapped to in the end, what's doing, you know, the people doing the work, which is, which is the teams. So the complexity of that mapping is at scale is just mind blowing. And I think people under appreciate exactly what you said, which is that creating these as part of one process and one operating model actually simplifies things tremendously. The finance team will rejoice, because they're not being constantly asked to to move around project codes and reallocate right? So the simplification, and this is the simplification that technology needed to live and breathe every day. So then even under and this was back to the project, I probably think I never quite appreciated the complexity that these companies had put in place, and the overhead and all that waste from having these completely misaligned delivery and production models.

Dave West: 23:08

Yes, I spend an awful lot of time talking to people that sole job in life is to do translations and, and, and there's entire departments of people who review the disconnects between these two worlds and manage it to some level. And those people could be delivering so much more valuable work. They could be creating innovation. They could be helping customers go, you know, complete their journeys or extend their journeys with the products. It's so disappointing, and And instead, what they're doing is managing translations between the business and technology and I hope. No, I believe it says stop the word hope. I believe the product is going to enable organizations to really manage this transition to digital age fully and really navigate finally, away from water, Scrum fall and other perils that are these two disconnected organizations trying to work together? Yeah,

Mik Kersten: 24:14

exactly. And so I think we're at the point where there has been enough of a acceptance of the fact these product operating models work, and enough evidence, both from tech companies and from the first batch of enterprises and organizations who've successfully made the shift. And so now it's really a question, well, how, how are you going to operationalize it in your organization? Because others have done it, and the you know, the time to market, time to value, feedback cycles, the simplification are just, are just massive. So,

Dave West: 24:45

yeah, I mean, the data does support it. And McKinsey did a study where they found that, you know, that it is directly correlated, and they have lots of smart mathematicians or statistics people, and they said that it's basically. This product operating model directly correlates to business performance, simple, including share price, which is like, oh my god, well, then that is important, you know, and it's going to affect all four one KS or whatever. But so that that's good. So that's cool. So, alright, so, and I know we could talk about this for for days. Mick, I'll be honest and and there might be an opportunity to continue this conversation, but we'll, we'll, we'll call that out at the at the end, but we have to, unfortunately, wrap this up. So the for our listeners, you're sort of sitting there, maybe on your peloton bike, or you're in a commute, or you're, you know, on a train or a plane or or maybe you're just ironing shirts, which is a hobby that you and I both love. Um, what would you tell them to start with? Maybe they're somewhere on this journey, but what? What should they be thinking about the most? What would you encourage them to start thinking about?

Mik Kersten: 25:58

So I'll throw it something new, something that I've been people lately on this, I think related to what we've been talking about, is because I think we talked about a lot about the success, success criteria as we put in place, I would start with just basically redesigning your your quarterly business review. So, and it might feel a little bit waterfall, is that there's something on a quarterly basis, but I actually find it forces that conversation with business and technology to at least on a quarterly cadence, connect up the backlogs with the business outcomes that are needed with actually reviewing the right things like, Do we have enough capacity? What are bottlenecks? And all those sorts of things. So just redesign your your QBRs around the product, operating the model, and just start there and then, and then improve it every quarter, right? Because the whole point of this is data driven, continuous improvement. So then improve it some the following quarter, and what happens? And there's, there's already so much groundswell around agile in these organizations, around DevOps, around all these practices, that's really that that Keystone that needs to be addressed, because if it doesn't change, if you don't start the process of changing that again, you'll never realign and simplify in the way that we described,

Dave West: 27:08

actually and that there's an organization that I work with called gyno therapeutics, ai plus CRISPR technology. They're using AI to basically make smart decisions about the protocols that they're that they're doing the CRISPR stuff. Gosh, I've talked about biology a lot today. I think you must be seeping in, living in Massachusetts. But the what's interesting about them is that they were relatively small, and they grew because they've been incredibly successful and an amazing organization with some, you know, scientists that are going to cure some of the most horrible genetic diseases that this world has ever seen. And so I'm really excited about the work that they're doing. But what's interesting is they scaled. They were finding they were doing Scrum and Agile, and they've got these cross functional teams, technologists, scientists, you know, research associates. And what they found as they scaled that they had to take a step back and really align those quarterly business views. They work in a quarterly they use OKRs, and have a very clear quarterly cadence, even though they're incredibly agile, and even though some of the experiments fail in hours or minutes. Maybe, I don't know, but they have this orderly and they literally did exactly what you described, and they reset their entire cadence to be and because of that, it drove this adoption. And their products are really interesting because their products align around outcomes and diseases or problem sets, or, I don't know what you want to call them, and so what they've found is that this real life, this helped them realign around this, and really helped that cadence. So it's interesting that you mentioned quarterly business reviews, but I we, I have some evidence that would support that, which is, which is really, really, really, cool. That's a great, yeah, well, so So thank you for spending the time and and before we go though, we do have to do a shout out. There is a pretty amazing event about to happen, and that is the project to product Summit. That's hard to say, isn't it, project to product summit that both of us are speaking at. They wouldn't allow us to be on stage together because of the certain legal reasons that stopped that ever since the last time we did that. But we are both going to be there, and we're going to be presenting some of these ideas. What are you going to be talking about at the summit? Nick,

Mik Kersten: 29:42

I'd say, a great question. Dave, I think so. I'm just putting together my talk right now. I think it'll, I'll just extend this conversation into my into my slides, because I think we did hit on some of the key topics. And for me, it's, it's just, we just need to see those organizations moving, moving faster at that and really the catalysts and for moving. Faster, like, like, completely revamping your QBRs tomorrow.

Dave West: 30:04

Oh yeah. And I'm actually going to be talking about the Agile product operating model. And how do you get there? How do you move to it? Because increasingly, organizations, as they're scaling Scrum and Agile, you know, whether it's using safe or or less, or elements of Nexus or combination of all of them, which many of them are, that they're sort of reached this ceiling. And so what's, how do we move to that next level? So I'm going to be talking, so I'm coming at it from a slightly different angle, but I think we're going to end up providing the audience and many other talks that are going to be providing the audience with really some very practical things that they can take away and take advantage of this opportunity, this, this, I want to say, revolution that's happening around us, around so I'm excited to be to be speaking there, as I know you are. So listeners, if you're interested in joining this event, there's both an executive event where, you know, we sort of talk at a very high level, and to talk about some of those QBRs and all that stuff, or the general event, where we'll be very much focused on some of the practical things we've got those two events, feel free to go to project, to product summit.com sign up to attend some amazing speakers, and some there's going to be some really interesting things that are going to come out of this event. And if you you sign up, there's an online event that you can you can attend, and obviously some of these sessions will be recorded. So if you sign up, you'll get access to their recordings. If you have to pop out and and go to your quarterly business review or do what you know, sort of like real work, as it were during the day. So please attend. That's project product summit.com they'll be on the notes for this podcast. If you just click on those, you'll you can see it, and then you can click straight there. So Nick, thank you for spending the time today. Really enjoyed this talk as always.

Mik Kersten: 32:03

Thank you, Dave. Great, chatting with you and yeah, looking forward to the project approximate

Dave West: 32:07

as well. Well. Thank you for listening today, everybody. This is the scrum.org community podcast. If you liked what you heard, subscribe, share with your friends, and of course, come back to listen to some more. I'm a very lucky person. I get to have a variety of guests talking about everything in the area of professional Scrum Product thinking, as you heard today, and of course, agile. Thank you, everybody