Aligning the Linear Annual Funding Cycle with the Iterative Product Cycle
Even at this stage of the game, I’m willing to bet that your finance team works on an annual funding cycle. And, for those of you working on a calendar fiscal year, it’s already time for the finance team to begin work for 2022. Yep. You heard me. 2022. I know, I know. You’re a product leader. You think in sprints, maybe in quarters, but it is nearly impossible to know what you’ll need twelve or eighteen months from now. You bang your head on the desk, but STILL they are asking for your expense and value projections. The nerve.
You know that this is what the cycle SHOULD look like:
You’re doing this on small and large scale work every day. That means definition is happening in real time, based on the customers' use of the product, the fast moving digital experience landscape, new players in your market, and so much more. Based on this, we place bets on where we think the product needs to go, we learn from those, and make a whole new set. Extrapolating this out for a year or more of bets is impossible.
But, let’s put ourselves in the shoes of our internal customers - in this case, our brothers and sisters in Finance. Their job is to help predict expenses, so that the company can be responsible for what it spends against what it earns. They are trying to help leaders in the company know what’s coming at them in an entirely different field of view, so that they can invest where there are the greatest opportunities.
And if you’re doing your job well, one of those opportunities is your product, so let’s get them what they need, so that you can deliver on your value. It’s a “help me to help you” scenario, if ever I’ve seen one.
So, how do we resolve this in a way that honors what finance needs without tying the hands of iterative, agile product development? If we do it wrong, we either slow our speed to value for customer and company, OR we run out of money just when we’re hitting our stride. We need to be able to continue the interactive process that allows us to listen, make smaller bets, test and do it all over again.
As a seasoned product professional, it is not only your job to give finance what they need to do their jobs well, you also need to help them understand that in order to do your work well, you need flexibility.
I’ve taken the liberty of writing the following letter to your finance people. While I wouldn’t suggest that you copy, paste and send this on, I do hope that it gives you a positive, solution-based perspective and, possibly, language to help you do the important work of teaching and working cooperatively with your finance team.
Dear Finance Professionals,
It’s that time of year again! The work you do in crafting a realistic and strong budget for next year is so important to our entire company’s success. Thank you for your patience in working with all of our teams.
I want to start by making sure we understand what you need from us so that you can create a budget that sets us all up for success:
Projections on cost for 2022:
IT Resources - who do we need (full time/contract) to deliver this work?
Hardware & Software costs, and other operational costs
ROI/Value metrics - what benefit will the company see based on these investments
High level roadmap of what we’re going to tackle in 2022
Training & education needs
Travel
Does that cover it?
Ok. The next thing I want to do is navigate a tricky tension that exists between what you need and the work we do.
As you likely know, we’re operating in an agile environment, where we are constantly learning, testing, building, and measuring. It’s a very real bet that the roadmap we give you will start to change the moment that we hit “send.” But because we’re trying to build this product in a way that is stable, scalable, and exceeding customer expectations - we need to build that nimbleness into the planning for our budget.
However, this type of system doesn’t exactly set us up for success in giving you what you need for budget projections. While you are working on the next 12-18 months of projections, we are working in shorter sprints so that we can respond faster and in better ways to customer needs.
Creating projections for the next 12-18 months makes us nervous. We want to give you what you need to create the budget that helps us all win (and makes sure that we can keep running at the challenge without interruption), and we also want to make sure the product team is equipped with enough flexibility to respond to the needs of customers when they happen.
I would like to propose a solution that may get us closer to alignment.
First, know that I want what you want. A strong, realistic budget that keeps our company in a winning financial position.
Let’s get aligned on the outcomes of what we are trying to do with our product. As you know, in 2020-2021 our product team has produced the highest ... (this is where you brag about your work a little, and tie it back to the company strategy and goals).
Here’s the big reveal: we didn’t know the need for many of the features that drove these metrics until the product hit the market and we were able to get real-time feedback. So the run rate that our product team needs - it’s critical to our ability to pivot as the market and our customer needs shift.
It is our goal to continue to keep providing quick, quality responses to customer needs so that we continue to have happy customers that lead to more loyalty, more sales, and a better bottom line. In order to maintain our success rate, here is what we propose for a 2022 budget:
Quarter 1 - $350,000
Quarter 2 - $350,000
Quarter 3 - $150,000
Quarter 4 - $150,000
As you can see, we are asking for a total of $1,000,000. We’re staffing up for the first half of the year because we know we’re going to need to have capacity to manage our busy season AND keep delivering on the longer term roadmap. But we’ll be able to scale back to a more stable amount in the back half of the year.
I hope that you see that as a product team, we have deep respect for the important work you do. Literally, we’d be dead in the water without the support you provide. I also hope that you see an opportunity for us to work together in new ways as we think about how to fund product teams at our company.
Signed,
Your favorite Product Manager
Use Your Product Enterprise Canvas
Here’s the thing: this is oversimplified. I know you have to provide a much higher level of detail than what we are showing here. Again - this isn’t a copy/paste/send piece. Rather, I want to help you shape a message that helps you align with your finance team.
Remember our Product Enterprise Canvas? This is also a fantastic resource for helping your finance team (and really, any stakeholder in your company) understand what you are trying to do and why.
Let’s Learn From one Another
Head over to my Linkedin page and join the conversation on how you have found success in working with your finance team. Remember - this isn’t a complaint space, it’s a problem/solution space!
And, as always - if we can help, contact us here.
This is the first of a series Jen Swanson Consulting is producing on the product manager or product team’s relationship with stakeholders across the business- “Stakeholder Management for Product Professionals.” Watch for future posts offering advice, tools and resources on managing relationships with Engineers/IT professionals, Legal/Regulatory/Compliance, Marketing & Sales, C-Suite, Customer Service, and more.