Here’s a interesting real-life story of a requirement from one of the delivery teams that I have worked with which emphasises how a focus on cost-of-delay helps.

The story concerns requirement RQ-0672 which took 46 weeks to go from being captured as a idea to being live in production.  We have a fair idea of which weeks there were activities happening (green) and which weeks nothing happened (red); shown in the value stream map below (See here to learn more about value stream mapping techniques):

Observation 1: It’s pretty clear there was a lot of “waiting waste”. Most weeks, nothing happened!

We introduced the concept of cost-of-delay to this team – i.e. measuring the opportunity cost to the company for every week this requirement was not implemented. This turned out to be $214,000 per week. Cost-of-delay figures often have high levels of uncertainty (particularly if the benefits of the requirements are around increasing revenue as in this case) but in this case, this number is fairly certain.

This particular delivery stream is capable of delivering a requirement like this within 13 weeks. Had this been delivered within 13 weeks instead of 46 i.e. 33 weeks earlier, this would have improved the company’s revenue by:

$214,000 x 33 = $7,062,000

Wow. Big number, particularly in the content the actual cost of making the change was around $4,200.

Obseveration 2: There can be significant value in reducing cycle time.

So why didn’t we make it happen earlier? The pipeline was setup without a focus on cost-of-delay which means there is no sense of the urgency associated with each requirement – they are all treated the same. Once we know the urgency, then we know what trade-offs to make.

In this case, you could say that it makes sense for the company overall to spend up to $214,000 for every week we could bring forward the go-live date for this requirement. You can also see from the value stream mapping that there was a proof-of-concept done for this requirement. This proof-of-concept took a week to execute – plus some mobilisation time – probably several weeks – hard to know exactly. Lets say 2 weeks mobilisation for the sake of argument. The cost of delaying the go-live by 3 weeks to do the proof-of-concept was:

3 x $214,000 = $642,000

The purpose of this proof-of-concept was to be able to accurately estimate the cost of the change. Remember, this change actually came in at a cost of $4,200. Given the enormous benefits, it would still have made sense for the company to implement this change if the cost had come in at $4,200,000. Perhaps we should have skipped the proof-of-concept stage for this requirement!

Observation 3: Not all estimating activity is truly value-adding

I have selected an extreme example of course. Even so, its real. It happened. It serves to emphasis that some requirements have high cost-of-delay which needs to be managed. A good innovation process design should  expedite these types of requirements by:

• Prioritising quickly based on cost-of-delay (ideally within a week)
• A frequent “pull” of the top requirement from the top of the dynamic prioritised list of requirement
• Fast cycle time from the time of “pull” to go-live through a pipeline which is not clogged up with too many other requirements

I have been looking recently at managing requirements for new projects. I thought it would be interesting to share our top lean-agile tips/encouragements for for managers of requirements (i.e. the product owner role in agile terminology):

Tip #1: Do only enough requirements work up front to enable you to build the first (small) feature. Then learn and adjust!

How much do we need to work out up front and how much can evolve as we build the solution? Defining all the requirements work up front (Big Requirements Up Front) seems attractive. It means that there can be a contractual style relationship between business folk and solution builders. Commitments can be made and, if an external vendor is involved, fixed price deals can be made. If dates, budgets etc. are not met then punishment can be handed out etc.

Yet this is not the way the IT industry is going. The biggest risk in IT development is that the solution delivers little or no value (unused features). The whole agile movement has this in focus. The IT industry has learnt that Big Requirements Up Front actually increase this risk because the delay the point when we are going to get feedback on our requirements. There are always large uncertainties in what the customer needs and how to build it. Its never been done before! A lean-agile approach emphasises learning – build a bit and get a response so we don’t have to get it right first time.

Wait, I hear you say. Doesn’t this mean that you might not take all business requirements into account from the start and have to refactor/reimplement certain features later? Yep, it probably does mean this. IT industry experience suggests that these refactoring costs are typically much smaller than the costs required to get it right first time. (See here for more details).

Tip #2: See requirements as a placeholder for a conversation, not the conversation itself.

Consider requirements as a placeholder for a conversation between the people who have a business need and the developer writing the code. They are not the conversation itself.

To align everybody around the direction we want to head in, a short up-to-date document describing the project vision (better a short document which everybody has read than a longer one that hasn’t been read at all). Beyond this, user stories are usually the best format to capture requirements since they capture the intention of the requirement (“in order to”) and who wants this requirement (“as a”). Otherwise, these things are often lost. e.g.

AS A: Flickr member

I WANT TO: be able to assign different privacy levels to my photos

IN ORDER TO: control who I share which photos with

Tip #3: Break requirements down

User stories can be arranged into hierarchies with top level stories which are broken down into smaller stories. Keep breaking the work down until you get to a feature that can’t be broken any further and still retain some business value (a minimal marketable feature in the jargon).

Tip #4: Define acceptance criteria up front

How will we know when a requirement has been delivered? Ensure user stories have acceptance criteria so we know when we are done.

AS A: Flickr member

I WANT TO: be able to assign different privacy levels to my photos

IN ORDER TO: control who I share which photos with

ACCEPTANCE CRITERIA

-

A user cannot submit a form without completing all the mandatory fields
– Information from the form is stored in the registrations database
– Protection against spam is working
– Payment can be made via credit card
– An acknowledgment email is sent to the user after submitting the form.

Tip #5: Collaborate like crazy, preferably face-2-face

Two of the the principles behind the agile manifesto are: “the most efficient and effective method of conveying information to and within a development team is face-to-face conversation.” and “Business people and developers must work together daily throughout the project” Geographic constraints may hinder this but try and get as close to this ideal as you can. Be available throughout development/testing/ etc. for questions (e.g. attend the daily stand-up). If you don’t do this, the fast feedback model won’t work.

Tip #6: Use CD3 for prioritising and be prepared to stop early

Use the economic model cost-of-delay divided by duration as the basis for prioritising requirements. This also means that we have the option to stop early when we have delivered the most valuable requirements.

Tip #7: Smooth the end2end requirements flow

Requirements need to flow into a development team. There is no point developing requirements too early (requirements go stale very quickly). Equally, there is no point having a development team standing idle. Ensure the people who are actually going to build the solution (i.e. coders, not managers) participate the the refining of the user stories. It these people are not available now, wait until they are. It’s counterproductive to create a large queue of requirements that are waiting to be implemented.

Tip #8: Explain to business stakeholders how they need to behave

It’s helpful to explain to business stakeholders what kind of behaviour from them would support a successful outcome:

• Charter the team to deliver the best possible value in a fixed time scale. Be cautious about asking for a fixed scope by a fixed date. The team will probably have to do Big-Requirements-Up-Front (BRUF) in order to have enough information to commit which significantly raises the risk of failure. It may also mean that invisible factors, like quality, are compromised.
• Provide $ cost-of-delay/week and trust the team to make the right trade offs. Saying that “this is top priority” or “the board wants this” etc., gives the team no guidance about how to trade off against other high priority items.
• Trust the team.
• Make sure business people are available to quickly give feedback.
• Insist on getting to see something of business value working in production quickly (30-90 days from project start) .
• Insist on a weekly demonstration of progress.
• Insist on regularly attending the team stand-up.
• Insist that the team commit to dates on near-term work items (typically for the next 2-4 weeks).
• Insist on an up-to-date roadmap covering a longer period. Don’t expect a lot of detail on this.
• Stop/abandon the project early if you feel you’ve got enough value.

Seeking inspiration in what to say to a project which desperately wants it’s stuff prioritised first? Try this…

Hi project!

Our delivery team is committed to managing the capacity of our development pipeline in a way that provides the best outcome for the company as a whole. We use  CD3(cost-of-delay divided by duration) as a framework for prioritisation since this maximises the company’s overall return-on-investment.

Using this approach, if the work you need us to do is not prioritised straight away, we will explore the following options together with you:

1. Wait. The project shouldn’t start any related work until the bottleneck resource is finished with higher priority work.
2. Redesign the solution to reduce the scope of the work required. Smaller pieces of work block the pipeline for shorter periods and increase the CD3 priority score (if the cost-of-delay remains the same).
3. Redesign the solution such that the work is not is not needed. This can either be by pursuing a tactical solution which later will be replaced or by finding some way of not needing that functionality after all.
4. Increase capacity at the bottleneck. This could be temporary or permanent. If we see it as a temporary bottleneck, the best would be that other project members go help with the bottleneck for a while if they have the skills (T-shaped individuals, please!)
5. Abandon project. It may be that the project simply isn’t as valuable as other projects we could work on and we don’t see this changing any time soon.

We believe these options create value for the company. There are two further options which generally don’t add value for the company:

1. Start more work in parallel. It’s finishing work that makes a difference, not starting it. Starting too much at once means that we lose focus, overhead/switching/coordination costs increase and some value is delivered later than would otherwise have happened.
2. Complain to senior management to get the priority score of the work increased. This can be by increasing the cost-of-delay for “strategic reasons” or because we have “suddenly” found some extra $ benefits of the project. If this kind “tampering” really really can’t be avoided, we insist that it is the cost-of-delay which is manually adjusted such that the increased urgency of this work is communicated to all teams that are involved in producing the feature. This way we avoid a situation whereby one team considers a feature very urgent and another team considers it less urgent.

In the interest of the company as a whole, we want to steer you away from these last two options.  “Removing roadblocks” is often perceived as a core skill in our management culture but exercising either of these option is not normally removing a roadblock to value creation.

We look forward to exploring this further with you to get the best outcome for the company as a whole!

Best wishes

The delivery team

I spent some time this week evaluating the Value, Flow, Quality training course developed by  the agile consultancy Emergn. The course provoked some reflections on what adopting a lean-agile mindset means…

Intuitive Decision Making

The course asserts that way we make decisions is largely based on our intuition. Studies of how CEO’s make decisions shows that, although they often believe they are making rational fact-based decisions, it’s actually coming “from the gut.”  This kind of expert intuition is powerful stuff and can almost be magical – fire-fighters who run out of the house seconds before the floor collapses, chess masters who can glance at a board and declare that white can win in 3 moves, etc.

It was argued in the course that good intuitions take a long time to build up. Within IT development, the high variation both in the type of work, the length of time of most IT implementations and the short lifetime of most teams makes it hard to spot patterns. In a lot of cases, the feedback actually comes after the project is finished.

Lousy Rules of Thumb

Consequently, our intuition about IT development isn’t that great. So we fall back on more general rules of thumb. Which of these do you like?

• Minimising cost is good
• A standard process makes things easier and more efficient
• If the customer needs something, then it must be done
• Detailed plans allow us to monitor progress and stay on track
• Ensuring clear handover points normally gives the best outcome

The course contended that these are fairly lousy rules of thumb for a product development context. It’s not that these are never true in a product development context. It’s more that applying them without knowing why rarely gives a good outcome – and often has the opposite effect to that intended.

So this is what a Mindset Change looks like

This made me think about what a lean-agile “mindset” really is. What we mean is replacing these general rules of thumb with some more powerful ones which are more relevant for product development. For us to accept this, we need to understand the “why” of these new rules of thumb (which is what the training course tries to address).

Let’s try some out. Which of these lean-agile oriented rules of thumb do you like?

• The customer doesn’t know what he/she wants
• Reducing batch size is good
• Speed is normally more important than predictability
• Maximising total value is good
• A collaborative approach normally gives the best outcome

If you like these better than the first set, then you are already travelling the lean-agile path!