... the team has formed and is looking to the Product Owner for leadership in setting business priorities.

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The Product Owner does not sequence the PBIs, or has ordered the requirements into groups with many PBIs having the same priority.

Therefore:

 The Scrum Team needs a single, well-formed, sequenced list of Product Backlog Items that allows them to focus on maximizing value delivery. Without it they can generate features that are never or rarely used, deliver features at the wrong time which sub-optimizes revenue, or become confused and disoriented and unable to deliver anything.

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If that is not the case, use the 3 legs that Scrum relies on, transparency and then the organization can inspect and adapt. This can be done in several ways, for instance that the Scrum Team always seeks the highest value, and when done with the Sprint ensures that as many stakeholders as possible are present at the Sprint Review. As the Development Team does not have the full knowledge to choose work for the Sprint Backlog on a strategy based on “Highest Return on Investment,” stakeholders will provide feedback on optimizing the sequencing of the Product Backlog. This should lead to process improvement and the organization finding a Product Owner.

One of the more extreme ways to make this transparent is for the Development Team to intentionally work on low (lowest) value PBIs. In one instance the ScrumMaster asked the Development Team what they thought were the lowest value PBIs. Having the Development Team pointing them out, ScrumMaster suggested the team take them into the next Sprint. The Development Team worked on the PBIs during the Sprint and presented them during the Sprint Review. The Product Owner and other stakeholders were present, got furious, fired the ScrumMaster — but did however provide an ordered Product Backlogs thereafter.

See also Sacrifice One Person.

Picture from: PresenterMedia.com.