Why product-centric value delivery is the key to transformation


  • Steve Marjot’s tenure as a transformation leader at NatWest demonstrates the necessity for banks and other industries to adopt a product-centric value delivery (PCVD) approach.
  • PCVD leads to faster deployment of new technologies and enhances customer experience, retention, and sales.
  • However, transforming massive firms like NatWest into value-centric ones is not all plain sailing.
  • A key factor in this transformation is evolving finance in tandem by using lean portfolio management principles to reduce administrative burden, simplify governance, and adapt the annual budget process.
  • Key lessons from Marjot’s experience include funding champion portfolios rather than individual champions, demonstrating early quick wins, and understanding that PCVD is a huge cultural change.
  • Fixing funding in this way sets off a flywheel of innovation, transforming core central processes and enabling the use of generative AI and other transformative technologies.

Steve Marjot, head of change center of excellence at NatWest, a banking conglomerate with $33.6 billion in assets under management, has led many agile transformation projects.

He believes product-centric value delivery (PCVD) is the best way to organize teams in the AI era, emphasizing “lean” agile practices with persistent value-flow teams (or “product portfolios”).

But it’s not all plain sailing to transform massive firms, with matrix and functional hierarchies, into value-centric ones. To move from project-thinking in the functional era to product-thinking in the PCVD era, the funding model has to shift in tandem. Firms must also recognize this transformation as a significant cultural shift, and not just a process play.

Doing so ensures the whole firm benefits from PCVD, and leadership buys into the transformation to launch products aligned with market and customer sentiment.

From projects to products

Product portfolio management and value delivery used to be about projects. These were short-term, temporary activities to deliver changes to products and services. The approach allowed firms to start and stop work rapidly, with details on who was doing what and when. However, it led to extensive bureaucracy and resource optimization, hindering innovation and agility.

This traditional approach doesn’t give AI-era firms the latitude to reduce product cycle time, increase efficiencies, and ensure products and services customers love. Marjot’s tenure as a transformation leader shows that banks and other industries need to shift to a PCVD approach, favored by firms such as Tesla, Ocado, and even the Spanish government.

Companies using PCVD organize their IT delivery around value streams rather than traditional functions, leading to faster deployment of new technologies and improved customer experience, retention, and sales (Figure 1).

Figure 1. In the product-centric operating model, IT delivery is aligned to customer journeys or value streams

Source: Infosys

However, Marjot found that these benefits weren’t possible without first transforming finance and, within that, the PCVD funding model.

PCVD and the need to first transform finance

In its agile transformation, NatWest first discovered how value flowed (organizational value streams). They then aligned how they organized the funding (finance) with how they organized the work and the people (development value streams) to deliver solutions. Teams were grouped to deliver on this flow of value, with a focus on long-term strategic delivery. These value streams were then combined into a value portfolio — a set of value streams that delivered a continuous flow of valuable solutions to customers within a common funding and governance model.

PCVD allows business lines in the organization to achieve their long-term strategic roadmap while maintaining the agility to operate within their budget allocations.

They are able to meet short-term needs and address portfolio shocks, such as those posed by the 2020 pandemic or the recent shift from lending to deposit products due to changes in the interest rate environment.

Lean portfolio management principles from the Scaled Agile Framework (SAFe) enable guardrails that reduce administrative burden, simplify governance, and adapt the annual budget process, while dynamically adjusting value stream budgets (Figure 2).

This outcome-focused approach allows leaders to simplify or replace historic bottom-up project prioritization processes.

Figure 2. Principles from lean portfolio management

Project approach Value stream approach
Functional silos and temporary project teams Persistent teams in value streams with continuous value flow
Project cost accounting and funding Value streams funding with lean budgets and guardrails
Annual budgeting and planning with big upfront allocations Dynamic value stream budgets with participatory budgeting
Centralized work with project overload Decentralized work with portfolio Kanban for strategic demand
Speculative ROI with detailed business cases Lean business cases with MVP, outcome hypothesis, and agile forecasting
Phase-gated projects with output-focused milestones Self-managed teams using OKRs to measure business outcomes

Source: Adapted from SAFe

Marjot highlights another benefit of the product-centric approach: investment funding is delivered based on continuous and early feedback on current initiatives, ensuring the right work gets done at the right time. This allows portfolio leaders to make necessary adjustments to meet business objectives, maintain alignment between strategy and execution, and foster operational excellence.

The problem with PCVD funding

Transforming finance processes is a big deal in the PCVD model. There are many interdependencies within the organization, with complex, simultaneous relationships.

Agile-at-scale is more of a cultural transformation than anything else, as our Agile Radar 2021 research confirms. The whole firm must be behind the initiative, and especially in areas where there are competing priorities — such as the need to maintain financial reporting compliance or adhere to capitalization rules — it is even more important to find product portfolio champions. In highly regulated industries, such as banking, the lack of such champions can hinder other organizational changes. These industries often create risk-averse cultures and a “this is the way we have always done it” mentality, historically keeping the organization safe. Understanding the role of finance at the start of any intended transformation, their current culture, and the impact of any change on them (as well as what’s in it for them) is key.

Another problem in changing funding to the outcome-centric approach is something all firms do to some extent, which Marjot calls “budget gaming.” Portfolio leaders who want to be successful play a budget game to get what they need from the annual process to deliver the strategy of their particular portfolio.

But the PCVD approach is predicated on everyone being able to step back from their specific portfolio and their historic behaviors to look at the multiyear investment strategy.

Marjot’s team started to pilot the concept of value streams maintaining a persistent funding level, complementing additional, more strategic, funding allocation. This balance of persistent and aspirational strategic delivery, aligned with key outcomes early in the process, can reduce budget gaming and put greater focus on which capabilities an organization wants to fund.

Product-centric value delivery: Lessons from the frontlines

PCVD demands a significant shift in mindset toward digitalization, automation, and a steadfast dedication to delivering incremental customer value throughout every stage of the customer journey. Organizations sometimes forget that finance is a key part of this mindset shift.

Here are 10 key lessons that Marjot relates from his experience:

  1. Create a foundation where people want to embrace changes. Understand impediments to current work and assess existing readiness for change. These parts of the organization can become your portfolio champions. Don’t forget this has to include finance, risk, and other things focused on safety. Common impediments are risk governance processes, funding approaches, resourcing approaches, and overly prescriptive frameworks.
  2. Use lean portfolio management. Lean agile principles (as shown above) can be part of a strategic framework to make big PCVD decisions. If any change doesn’t meet these principles, it doesn’t get the green light. For instance, teams might work toward long-term, multiyear strategic roadmaps, instead of an annual project prioritization process. They could fund objectives and key results (OKRs) at the enterprise level to support budget allocation over funding individual pieces of work. They could also fund persistent resource cost bases aligned with organizational capabilities.
  3. Fix the right problem. Firms serious about this work should look at their problem statement for change. “Do we have a data-driven assessment informing our choices?”; “Are we fixing the real issue or just addressing the loudest complaints?”; and “Are our strategic objectives aligned with the organizational mission?” This alignment is key as objectives filter down to individual teams. Examples include validating what works today and should stay, such as capitalization approaches, and what needs to adapt to the new way of working, like resource allocation and recharge processes.
  4. Put the right guardrails in place. Leaders must define how much autonomy to give each portfolio and value stream, and the tests they use to determine this. The lower the delegation of autonomy within each portfolio, the more efficient the portfolio becomes. At the same time, a greater risk appetite is needed for the portfolio to be truly successful.
  5. Fund champion portfolios rather than champion individuals. Funding these champion portfolios gives a clear picture of what a fully funded portfolio would look like, as this approach is the only way to test if these changes are truly driving efficiency, improving cycle time, and delivering better customer outcomes. These champion portfolios can then be rolled up into a new operating model that thinks about governance, work prioritization, approaches to resourcing, reporting of OKRs, portfolio epic prioritization, and the funding model associated with it. Jonathan Smart, in his book Sooner Safer Happier: Antipatterns and Patterns for Business Agility, talks about this as expanding vertically through the organization to ensure lean practices are embedded.
  6. Involve finance from the start. Establishing these first five pillars enables teams to evangelize the PCVD mission and get buy-in across the whole firm. The people most resistant to change in this approach are likely the ones who own the funding model — typically the finance organization and a few key leaders. For success, finance needs to be an active participant in discussions and ideally seen as the leader of the proposed changes.
  7. Assess value stream maturity. Another key outcome of using champion portfolios is that Marjot’s team found they couldn’t separate funding improvements from lean portfolio practices. So a maturity assessment was conducted, which went hand in hand with piloting the funding changes. To effect change, teams must convince the firm that they have clear plans for organizing work, resources, and funding, and for measuring success to ensure accountability for outcomes.
  8. Align all teams. Recognize that many people in the organization have a vested interest in a PCVD transformation. This includes first-line-of-defense control teams, second line-of-defense control teams, audit teams, and the business portfolios themselves striving to operate in a lean, agile manner. Firms can transition from a few interested people talking about concepts to large groups of leaders involved in key discussions and hundreds of people involved in working groups — assessing operating model proposals, raising objections, and testing changes with practitioners. Leaders from all business areas — from finance, controls, risk, audit, and business — should be involved to ensure that the operating model’s specifics are in line. Bringing everyone together also confirms decisions can be made quickly and appropriately. Further, the whole organization must collaborate, so that those capable of intervening and preventing the change are fully engaged, involved, and supportive of each step taken, all in line with the current risk appetite.
  9. Demonstrate early, quick wins. In a multiyear transformation of this scale, always hold the end vision in sight and demonstrate proof points every quarter. Tactical quick wins demonstrate that this remains the right strategic direction and that pivoting to a new way of working is still possible despite setbacks and delays.
  10. Understand that PCVD is a huge cultural change. This is a significant cultural change, with a bit of process change, and not the other way around. At NatWest, the PCVD transformation is still ongoing, with each year bringing new challenges and opportunities.

Moving toward AI-first

Despite the finance-first focus we set out here, agile-experienced firms will also recognize the need for continuous improvement in funding approaches and lean agile maturity at the portfolio level. In the context of traditional annual cycles, firms adopting this approach should expect incremental improvement year-on-year as new practices become standard and set the baseline for further progress.

These lean portfolios require good product definition, robust team topologies, business-IT alignment, a product mindset, and minimum viable product (MVP)-based funding.

Once maturity assessments are established, adjustments to the funding model may need to proceed cautiously. This allows portfolios operating as value streams sufficient time to transition to new methodologies, adopt agile practices, establish team mechanisms and PI planning, and ultimately integrate OKRs.

However, by fixing the funding model in this way, a flywheel of innovation is set off, with lean agile principles then instituted at the enterprise level, with core central processes transformed as a result, along with those needed to take advantage of generative AI and other transformative technologies.

Infosys Knowledge Institute’s extensive research demonstrates that product-centricity is a prerequisite for an AI-first firm — where humans collaborate with AI to produce better results for their customers. This journey, which many firms have already started, is a key driver behind Marjot’s success in current PCVD implementations.

To achieve this future-ready state, teams must reorganize around products, not functions, and think in terms of experimentation and quick wins. It also means transforming finance, instituting lean portfolio funding processes to address budgetary blocks and impediments, and ensuring the whole firm delivers superior economic outcomes for the enterprise and its customers.

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