Empowered Teams still need Annual Plans

Empowered teams get to decide what to build based on first-hand customer knowledge around pain points and unmet needs. Annual planning is the opposite right? It is big upfront planning which often puts business goals above customer needs! That’s not quite true. Done right, annual planning is incredibly important for empowered teams.

Waterfall is a bad process for modern software development but that doesn’t mean that all process is bad. Annual planning is the same. Big upfront, feature-confirmed annual planning leads to poor outcomes but the practice of thinking ahead to focus on our key objectives enables us to avoid short term optimization traps. We just need to do the planning in a way that lets us be flexible to adapt when change inevitably arises.

The Challenges of Empowered Teams Without Long-Term Planning

Empowered teams need context to enable high quality decisions. This includes a compelling long-term product vision, a coherent medium-term strategy and targeted short term objectives.

The short-term objectives get the bulk of the attention as they are the most imminent challenge that stream teams need to deliver upon. However, this short-term focus can sometimes lead to challenges:

1. The Risk of Short-Term Thinking: When you have to deliver each quarter there can be a tendency to “play it safe”. Rather than taking bigger risks, which could potentially have bigger pay-offs, teams can focus on smaller and simpler changes.

2. The Risk of Over-Optimization: Teams may inadvertently focus on local maxima instead of global maxima. There's a tendency to continue improving existing features indefinitely, potentially missing opportunities for transformative change. As the Pareto principle suggests, 80% of the results often come from 20%. We need to recognize when it is better to move on from one feature to the next.

The Power of Good Annual Planning

Annual planning, when done right, can provide a framework for empowered teams to align their efforts with broader strategic objectives. In the article around Product Strategy we introduced the concept of DIBBs (Data, Insight, Belief, Bet). We can reuse the same format for our annual planning, but shrink the bets from the 3-5 year timeline for our product strategy to a 1-year annual-plan timeline.

1. Data: How is the product performing in both customer behavior and business metrics? How is the market performing? What are your customers saying in your research?

2. Insights: What meaningful patterns or conclusions can you draw from the data?

3. Beliefs: Based on your insights, what do you believe to be true about your market or customers? This is where we identify the core customer pain points and unmet needs.

4. Bets: What features can we build to take advantage of the opportunities you have identified?

The word Bet is chosen because it signifies that we have uncertainty. We don’t want to blindly build these features because there is a high risk of failure. Instead we need to focus on ways to reduce the risk around our bets. For each bet we should list out our core assumptions around why we believe that this bet will achieve the desired business goals.

1. Desirability Assumptions: Do customers really want this or have we fooled ourselves into thinking that they do? What evidence do we have to support this?

2. Usability Assumptions: How would customers find this feature? Would they know how to use it?

3. Feasibility Assumptions: Can we technically build this? Does it require skills or technology that we do not have in-house?

4. Viability Assumptions: Is this sustainable from a business perspective? E.g. will we earn more than we spend?

Avoiding the Pitfalls of Bad Planning

While annual planning can be powerful, many organizations use it as a top-down way to define what features are to be built. Because this is the status quo, we need to actively work against this tendency. Here are some common mistakes that teams often make.

1. Focusing on Deliverables Instead of Assumptions: When defining our bets it is critical to define the assumptions that underpin the bet across all four assumption categories. This approach shifts teams from output mode to learning mode.

2. Excluding Teams from the Process: Developing an annual plan without involving the teams who will execute it often leads to a lack of buy-in and misalignment.

3. Set and Forget Mentality: An annual plan should be a living document. As teams validate assumptions and gather new information, the bets should evolve accordingly.

Empowering Teams Within a Long-Term Focus

Annual planning and empowered teams are not mutually exclusive concepts. When done right, annual planning provides the strategic context that empowers teams to make better decisions and creates alignment across the organization.

Remember, the goal is not to predict the future with perfect accuracy, but to create a shared understanding of priorities and direction. By focusing on outcomes rather than outputs, involving teams in the planning process, and maintaining flexibility in execution, companies can harness the benefits of both long-term thinking and agile, customer-focused development.

In the end, successful product development is about balancing seemingly opposing forces: long-term vision with short-term execution, strategic alignment with team autonomy, and planning with adaptability. By mastering this balance through effective annual planning, organizations can set their empowered teams up for success, driving innovation and delivering value in an ever-changing market landscape.