What Does an Investment Mindset Look Like in Agile Product Development?

One of the important things I learned during my college Finance Investment studies surrounding establishing an investment strategy for the stocks we would want to invest in.

Before making an investment, you want to establish a strike price that establishes your buy and sell limits so that you have a clear understanding of the value you want to receive or the loss you are willing to accept as part of making your investment.

The reasoning behind this was:

1. Setting an Upside Strike Price — You gain two positive aspects to setting an upper strike price:

a. Reduces Risk — A stock that is like riding a wave, but eventually it will break. Human psychology can cause us to keep holding on to that last bit of higher stock price and before we know it the stock starts dropping. It is better to get out early, take out our pre-determined profit, and reduce your risk of losing money unnecessarily.

2. Setting Downside Stike Price — It is all too common that when someone buys a stock and it starts to drop, they will hold on to the stock often until they have lost their entire investment, hoping until the bitter end that it will rebound and regain some of our losses.

We need to change how we do technology planning, from one that is aligned with annual planning/funding cycles that focus on the delivery of large projects with fixed dates to one that identifies both an upside and downside value proposition and works in small segments of easily managed work.

By moving away from large project work we are then able to focus on developing and delivering a smaller set of identified value to start with, which would be like setting our upside strike price.

Invest in ideas that are aligned to strategies with targeted outcomes and start with a small amount of work to prove your hypothesis, which reduces your risk and cost exposure inherent in large projects.

By starting small and working in a prototype way of working you are also setting your downside strike price. Prototyping allows you to set a downside strike price by being able to stop an investment idea if the idea won’t deliver the value that is sought.

Technology represents a significant portion of the expense for most companies, and not having a strong approach to aligning value against cost and risk, you run the inherent risk of building stuff you don’t need or more likely building more than what you need.

Be transparent with your intent and outcomes so that you are laser-focused on value outcomes that deliver long-term value to the organization.

Come see me at Enterprise Agility World Conference on 11/5.

To talk to me about Transforming your Agile Planning you can reach me at michael@soundagile.com