Colm O’hEocha – AgileInnova4on
Slow Down to Speed Up Copyright © 2013 AgileInnova4on
1
How and Why Agile Works: Benefits, Challenges and Strategies for Senior
Management
This material is Copyright Protected under the following Crea4ve Commons License: AGribu4on-‐ShareAlike 3.0 Please use this material freely and derive further work from it. BUT, aGribu4on must be given to the original author, and these same rights must govern all derived works. Please use the following aGribu4on: “Colm O’hEocha, AgileInnova4on Ltd. 2013: www.agileinnova4on.eu”
Stacey Complexity Matrix
REQUIREMENTS STABILITY – A shared understanding of what we need to build
SOLUTION CLARITY – A shared understanding of how to build it Copyright © 2013 AgileInnova4on
Plan-‐Driven Project Management in a non-‐simple domain
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Process Control and Complexity CLOSED-LOOP
Empirical - Adaptive OPEN-LOOP
Deterministic- Predictive
Execute Execute
Inspect
Adapt Set Ini4al Target & Plan
Set Target & Plan
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AIM & FIRE
FIRE & AIM
3 Perspec4ves
Lean/Agile in IT
Systems Thinking
People & Mo4va4on
Project Economics
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Theory without pracEce is useless. PracEce without theory is expensive – Ed Deming
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SYSTEMS THINKING Agile PerspecEves
Changing Requirements & Scope Creep
Unrealis4c Plans
Requirements not fully understood
Late Projects
Missed Customer Expecta4ons
Debugging (unpredictable &
unplanned)
Long Hours
Mistakes
Poor Quality
Lost Business
Schedule Pressure
So^ware Development as a System
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Big Projects, Phases Features
(Accepted) Demand Exceeds Capacity
Testers Busy
Delays Tes4ng
Slow Feedback
Keep Costs Down Look for Economies of Scale
Sub-‐OpNmizaNon Principle: “If each sub-‐system, regarded separately, is made to operate with maximum efficiency, the system as a whole will not operate with utmost efficiency” – Lars SkyGner, General Systems Theory
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• Converse: Op4mizing the System may mean sub-‐op4mizing sub-‐systems • Increasing Capacity at the BoGleneck increases System Capacity
• Increasing it elsewhere can lead to longer cycle 4mes & waste • Op4mize the Whole -‐ Consider the Whole Value Stream – Concept to Cash
Are your Development Teams Fully UNlised?
In a stochas4c system, maximising u4lisa4on does not maximise throughput
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60%? 75%? 90%? 100%? 98%?
AGILE & INNOVATION
Agile PerspecEves
You get back to that goddamn cubicle and start thinking outside the box!
• Plan – Small, Single Factor Experiments • Do – Run the Experiment • Check – Look at the Data, What Happened • Act – Apply what you’ve Learnt
Learning in Complex Environments The ScienNfic Method
Copyright © 2010 AgileInnova4on
If failure is
not an opN
on
then innov
aNon is no
t an
opNon
Experimenta4on Design for Maximum Learning
100% Chance of Success
100% Chance of Failure
Informa4on Genera4on
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• IteraNons: Buy High-‐Value Knowledge, Early, at Low Cost
• Make it ‘Safe to Fail’
Crea4vity & Innova4on are maximised when:
• We work in Small Groups – Self-‐Contained, Self-‐Organising, Common Objec4ve
• We can Focus – Low Distrac4on Level, Low Churn in Objec4ves – Specific, Closed Problems to Solve
• We are Mo4vated By Importance of the Work – Feedback: Fast, High Fidelity, Rich
Derived from Amibile et al, 1996
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ECONOMIES OF SPEED
Agile PerspecEves
Investment Period
Payback Period
Profit Period
Investment Curve
Max. Cash Consumed
Self-‐Funding Point
Break-‐Even Point
Cash
Time
17 Copyright © 2012 AgileInnova4on
Cumulated Profits
NPV: Net Present Value – amount we would gain/loose (in todays money) by invesEng in the project
Max Cash Invested
Pay-‐back Month
RoI 3 yrs
NPV
Single Release
Sample Project
Copyright © 2012 AgileInnova4on 18
Team%Size 9
Average%Fully%Loaded%Salary 110000
Annual%Cost%of%Capital 6%
Monthly%rate%of%transaction%growth%(8%months) 30%
Maintenance%Costs%%%of%Transaction%Revenue 10%
Year
Month 1 2 3 4 5 6 7 8 9 10 11 12
CostsDevelopment%Costs €82,500 €82,500 €82,500 €82,500 €82,500 €82,500
Maintenance/Support%Costs €0 €0 €0 €500 €650 €1,245 €1,719 €2,234 €2,904 €3,776 €4,908 €6,381
Adjustment%for%Reduced%Variability%T%50%%Less%Change%Mgt
Adjt%for%Reduced%Demand%T%30%%Dev%and%Maintenance%Costs T€24,750 T€24,750 T€24,750 T€24,900 T€24,945 T€25,124 T€516 T€670 T€871 T€1,133 T€1,472 T€1,914
Adjustment%for%Reduced%Risk%T%50%%Chance%Technology%Failure €0
Adjustment%for%Better%Quality%T%10%%less%development%cost T€8,250 T€8,250 T€8,250 T€8,250 T€8,250 T€8,250
Adjustment%for%Less%Overhead%T%5%%Development%Costs%Saved
Costs%Incurred €49,500 €49,500 €49,500 €49,850 €49,955 €50,372 €1,203 €1,564 €2,033 €2,643 €3,436 €4,466
Cumulative,Costs,Incurred €49,500 €99,000 €148,500 €198,350 €248,305 €298,677 €299,879 €301,443 €303,476 €306,119 €309,555 €314,021Costs%Incurred €49,254 €49,009 €48,765 €48,865 €48,725 €48,886 €1,162 €1,503 €1,944 €2,514 €3,252 €4,207Cumulative,Costs,Incurred €49,254 €98,262 €147,027 €195,893 €244,617 €293,504 €294,665 €296,168 €298,112 €300,626 €303,878 €308,085
BenefitsRevenue%on%Feature%Delivery €100,000 €80,000 €30,000
Revenue%on%Transaction%fees €5,000 €6,500 €12,450 €17,185 €22,341 €29,043 €37,755 €49,082 €63,807
Adjustment%for%Prioritised%Delivery
Adjustment%for%Innovation%10%%more%Benefit
Adjustment%for%Motivation%T%10%%more%Value%by%the%Team
Benefits%Realised €0 €0 €0 €105,000 €6,500 €92,450 €47,185 €22,341 €29,043 €37,755 €49,082 €63,807
Cumulative,Benefits,Realised €0 €0 €0 €105,000 €111,500 €203,950 €251,135 €273,476 €302,518 €340,274 €389,356 €453,162
Benefits%Realised €0 €0 €0 €102,926 €6,340 €89,724 €45,566 €21,467 €27,768 €35,919 €46,462 €60,100
Cumulative,Benefits,Realised €0 €0 €0 €102,926 €109,266 €198,990 €244,556 €266,023 €293,791 €329,709 €376,171 €436,271
Net%Benefit%Flow T€49,500 T€49,500 T€49,500 €55,150 T€43,455 €42,079 €45,982 €20,777 €27,010 €35,113 €45,646 €59,340
Cumulative%Net%Benefit%Flow T€49,500 T€99,000 T€148,500 T€93,350 T€136,805 T€94,727 T€48,744 T€27,968 T€958 €34,154 €79,801 €139,141
Net%Benefit%Flow%(Discounted%Cash%Flow) T€49,254 T€49,009 T€48,765 €54,061 T€42,385 €40,838 €44,404 €19,964 €25,824 €33,404 €43,209 €55,893
Cumulative%Net%Benefit%Flow%(Rolling%NPV) T€49,254 T€98,262 T€147,027 T€92,967 T€135,351 T€94,513 T€50,109 T€30,145 T€4,321 €29,083 €72,293 €128,186
Max%Invested T€148,500
Rolling%RoI T100% T100% T100% T63% T92% T64% T33% T19% T1% 23% 54% 94%
10 11 12
Payback%Month 10
3%Year%RoI 0%
NPV €0
%Discounted
1
Not%Discounted
Discounted
Not%Discounted
Discounted
Not%Discounted
-‐€600,000
-‐€400,000
-‐€200,000
€0
€200,000
€400,000
€600,000
€800,000
€1,000,000
€1,200,000
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Single Release
Sample Project -‐ the Business Case
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Self-‐Funding Point
Break-‐Even Point
Max Cash Invested
19
Max Cash Invested
Pay-‐back Month
RoI 3 yrs
NPV
Plan-‐Driven 440K 20 95% 347K
FP/FS Single Delivery a^er 6 months
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Earlier Benefit Accumula4on
REDUCE COST
INCREASE REVENUE
Improved Quality
Improved Business Agility
More Mo4va4on
Reduced Risk
More Innova4on
Less Management Overhead
Less ‘Just In Case’ Demand
ECONOMIES OF SPEED
€ Earlier Benefit Accumula4on €
€ Improved Quality €
Reduced Risk
€ Less ‘Just In Case’ Demand €
0
10000
20000
30000
40000
50000
60000
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Extra Sales Original Xac4on Revenue
Advantage of Early Delivery 14 month Product Growth Phase
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Geeng to Market 2 months
Earlier ≈ +€0.7M (87%)
€ Earlier Benefit Accumula4on €
Sample Project
Copyright © 2012 AgileInnova4on 22
€ Earlier Benefit Accumula4on € Max Cash Invested
Pay-‐back Month
RoI 3 yrs
NPV
Plan-‐Driven 440K 20 95% 347K
Increased Sales
307K 17 286% 753K
-‐€600,000
-‐€400,000
-‐€200,000
€0
€200,000
€400,000
€600,000
€800,000
€1,000,000
€1,200,000
1 7 13 19 25 31
Single Delivery Extra Sales
Earlier Delivery to Market –Months 4, 5 and 6; Stage
Payments & Increased Transac4on Revenue
Sample Project
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Max Cash Invested
Pay-‐back Month
RoI 3 yrs
NPV
Plan-‐Driven 440K 20 95% 347K
Increased Sales
307K 17 286% 753K
Less Demand 182K 13 609% 977K
-‐€600,000
-‐€400,000
-‐€200,000
€0
€200,000
€400,000
€600,000
€800,000
€1,000,000
€1,200,000
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Single Delivery Less Demand Previous
Fewer Features than Planned were built as they weren’t really necessary
-‐ saves Dev Team 30% costs € Less ‘Just In Case’ Demand €
Sample Project
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€ Improved Quality € Max Cash Invested
Pay-‐back Month
RoI 3 yrs
NPV
Plan-‐Driven 440K 20 95% 347K
Increased Sales
307K 17 286% 753K
Less Demand 182K 13 609% 977K
Improved Quality
148K 12 851% 1.1M
-‐€600,000
-‐€400,000
-‐€200,000
€0
€200,000
€400,000
€600,000
€800,000
€1,000,000
€1,200,000
1 7 13 19 25 31
Single Delivery Improved Quality Previous
10% Less Development & 50% Less Support Costs finding/
tracking/fixing bugs and reworking features
Sample Project
25 Copyright © 2012 AgileInnova4on
Summary Max Cash Invested
Pay-‐back Month
RoI 3 yrs
NPV
Plan-‐Driven 440K 20 95% 347K
Increased Sales
307K 17 286% 753K
Less Demand 182K 13 609% 977K
Improved Quality
148K 12 851% 1.1M
Increased InnovaNon
-‐ -‐ -‐ -‐
Improved MoNvaNon
-‐ -‐ -‐ -‐
Less Risk -‐ -‐ -‐ -‐
…. -‐ -‐ -‐ -‐ -‐€600,000
-‐€400,000
-‐€200,000
€0
€200,000
€400,000
€600,000
€800,000
€1,000,000
€1,200,000
1 7 13 19 25 31
Single Delivery Improved Quality
• Payback Period reduces from 20 to 12 months
• Max Cash Funding from 404K to 148K • Year 3 RoI improves from 95% to 851%
• è NPV from 347K to 1118K§ §(Assumed Discount Rate 6%)
Some Benefits hard to quantify…
Total Cost of a Process
Cost of Process Capacity
Cost of Delay in the Process
Cost of Capacity vs. Cost of Delay
Its Easy to Measure
this
We are Usually
Blind to this
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MOVING TO AGILE Agile – AdopEon
Good Judgment comes from Experience. Experience comes from Bad Judgment.
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• Ri – discarding the kata
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• Shu – embracing the kata
• Ha – diverging from the kata
AdopNon
TransformaNon
• Agile is an IT thing – Senior Mgt don’t need to be involved • Our Technology/Customer Base/EcoSystem are too Complex
for Agile • We Work in a Fixed Price/Scope/Date Environment • FuncEonally demarcated organizaEon structure • Fear of Transparency (criEcism, micro-‐management) • Mistrust/Fear of Self-‐OrganisaEon (they’ll ease-‐off, run amok) • A lot of ‘Legacy’ and ‘Technical Debt’ • Agile can’t work in a Highly Regulated Context • Regular Access to Customers or Users impossible • We’re rewarded as Individuals, not as a Team
30
FricEon Points – Plan-‐Driven vs. Agile
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These are barriers to
be worked through
(Con4nuous Improvement).
Organiza4ons are tack
ling and surmoun4ng th
em
every day
BBC Worldwide -‐ Kanban The evidence shows that over the 12-‐month period:
-‐ Middleton, Joyce 2010
• lead Nme to deliver sooware improved by 37%
• consistency of delivery rose by 47%
• defects reported by customers fell 24%
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32
Lightweight, Emergent Methods
“Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulaNons give rise to simple and stupid behavior.” Dee Hock, CEO Emeritus VISA Interna4onal
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Copyright © 2012 AgileInnova4on & InspireQS
Colm O’hEocha AgileInnova4on Limited
www.agileinnova4on.ie [email protected]
Training & Coaching
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This material is Copyright Protected under the following Crea4ve Commons License: AGribu4on-‐ShareAlike 3.0 Please use this material freely and derive further work from it. BUT, aGribu4on must be given to the original author, and these same rights must govern all derived works. Please use the following aGribu4on: “Colm O’hEocha, AgileInnova4on Ltd. 2013: www.agileinnova4on.eu”