17.11.2023 | Felix Rüssel

Software Profit Streams Part 1: What are Software Profit Streams?

  • Agile Leadership
  • Profit Streams

With the concept of Value Streams, there is a clear focus on value creation and the provision of valuable results.

The concept of software profit streams builds on the customer-orientation of value streams and looks at how sustainable profit can be generated from valuable product deliveries.

The concept of value streams plays an important role in agile organisations and also plays an important role in the underlying theory, such as in the Scaled Agile Framework (SAFe®). The focus on customer focus and the generation of value for customers and the organisation itself is thereby strengthened. 

However, it is often neglected to take a structured look at the exact value and the specific economic goals of the results provided. 

The concept of software profit streams, which is presented in the book of the same name by Jason Tanner and Luke Hohmann, closes this gap. 

I would also be delighted to meet you at one of our training sessions on profit streams to analyse together the possible applications of software profit streams for your products.

→ Profit Streams™ Software Pricing Fundamentals Training

Software Profit Streams

In October, several KEGON experts successfully completed the Certified Profit Streams Trainer (CPS-T) enablement programme. They spent almost a whole week in Lisbon together with other proven experts in business agility, start-up financing and agile forms of organisation learning, discussing, questioning and ultimately applying the concept of software profit streams by advising several start-ups for a whole day. The conclusion of all participants was very positive, even enthusiastic. One participant of the Enablement Week went so far as to categorise the week as "life changing" because the concept of many relevant blockers and dead ends can be overcome. Even if many of the individual parts have been taught at universities for a long time, the holistic overall picture is what contributes significantly to the "aha!" effect and the effectiveness of the concepts. This can be categorised in a similar way to the Scaled Agile Framework, where the individual elements have also been known for some time but it is the interaction that creates the added value. 

But why do the software profit streams elicit such a positive response from many experienced business agility experts? 

A look at the current state of many business agility implementations reveals the same challenges time and again:

  • A very strong focus on the orchestration of development activities (in SAFe terminology: Agile Teams, Agile Release Trains, Solution Trains - all the way to Lean Portfolio Management). Effectiveness in terms of efficiency is often considered less intensively.
  • In many places in the product development process, there is talk of "focus on creating value", but often without it being clear to those involved what kind of value is being created and how this can be quantified in a well-founded manner. This is often the trigger for purely subjective, often qualitative statements about the value of investments. 
  • Fundamental strategy finding processes are also addressed and demanded in many places in agile product development approaches, but are not backed up with concepts. 
  • Even Lean Portfolio Management (LPM), which is known from SAFe® and is very valuable, must be categorised as a strategy implementation tool in its current state. However, LPM offers excellent starting points for thinking ahead in order to seamlessly integrate strategy development processes.
  • Product management in larger agile product development organisations is often dependent on the preliminary work of "strategy workers" and product strategists (often also referred to as "product marketing") and falls far short of the possibilities of strategic product management with an approach focused on backlog management. This is particularly noticeable in organisations that develop highly complex products such as vehicles and that still share many traditional beliefs at their core, even though large agile product development units may already have been implemented.

Which topics are NOT addressed?

  • Currently, some of the approaches and methods described are strongly focussed on products that have a significant software component (hence "SOFTWARE Profit Streams - Software Enabled Solutions").
  • An implementation strategy is not described in more detail; the call to simply carry out certain experiments with regard to software profit streams dominates.
  • Software profit streams do not describe a new approach to portfolio management - but rather the elements IN a portfolio that need to be evaluated against each other in terms of their attractiveness.

Preview Software Profit Streanms Part 2:

In the next part on Software Profit Streams you will learn more about the basic idea behind the concept and the tools available.

If you want to know more about Software Profit Streams, you will find the ideas summarised by Jason Tanner, Luke Hohmann and some other experts in the book of the same name. More information is available on the official portal: https://profit-streams.com/