agile roi: the business case for agility - … · john rudd, president and cfo agile roi: the...
TRANSCRIPT
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John Rudd
• President and CFO of SolutionsIQ
• Formerly a partner in a boutique financial consulting & investment banking firm
• Led the firm’s financial practice specializing in advisory services, mergers & acquisitions, and interim management.
• Filled multiple interim executive roles including CEO, president, CFO, and chief restructuring officer.
• Worked as CFO of a West Coast oil company and a commodity lender for ING.
• Received his B.S. in Economics from the University of Minnesota and his MBA from the University of Southern California.
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A financial guy’s intro to Agile…
• Unsuccessful IT projects
• First impressions of Agile
• Positive results with Agile
• Is there a better way?
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As financial professionals we seek to improve project and portfolio return by focusing on fundamental elements
WIP +
= Project & Portfolio Return
Risk + Project Investment
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As financial professionals, we have taken a rational response to under performing IT projects
• Fixed Scope
• Fixed Schedule
• Fixed Budget
• Monitoring
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After years of perfecting process …
• 30 - 40% of systems projects fail prior to completion 1
• Half of all systems projects overrun their budgets and schedules by 200% or more 1
• 64% of features are rarely or never used 2
1 B.P. Lientz and K.P. Rea, Breakthrough Technology Project Management2 Standish Group Study Report, 2002
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So, why isn’t our traditional approach working?
• Reduced performance
– Locked in waste
– Increased time to market
– Decreased likelihood of meeting the business or market needs
• Abdicated real project control
• And, minimized options
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In fact, through the use of traditional project control methods we have…
WIP +
= Project & Portfolio Return
Risk + Project Investment
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Why Agile?
• Squeeze cash out of work-in-process
• Drive risk out of the project
• Increase project and portfolio return
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What is work-in-process?
• Work-in-process or in-process inventory consists of the unfinished products in a production process.
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Large WIP - Ties up cash
• Allocation upfront
• Harder to get acceptable ROI on dollars invested
• Hampers organizational liquidity
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Typical IT project
-150
-100
-50
0
50
100
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16
Quarterly Cash Flow
-700
-600
-500
-400
-300
-200
-100
0
100
200
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16
Cumulative Cash Flow
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Large WIP - Creates waste
• Early stages require unproven assumptions and unneeded features
• Large cycle times leads to process waste
• Buffering
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Much of the total spend is on waste
“20% of features provide 80% of
the value”
“64% of features are rarely or never used”
Standish Report, 2002
Waste
Buffer
Excess Planning &
Process
Wasted Features
Valued Features
and Planning
Value
Excess Planning &
Process
Wasted FeaturesWasted Features
Buffer
Excess Planning
& Process
Wasted Features
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Outcomes: Squeezing cash out of process
• Free up cash
• Invest capital elsewhere
• Reduce waste
• Lower Costs
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Why Agile?
• Squeeze cash out of work-in-process
• Drive risk out of the project
• Increase project and portfolio return
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Cost & Schedule Risks
• Examples:
– Lack of information
– Inaccurate estimates and schedules
– Unplanned change
– Project off target leading to total Loss/write-off
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Benefit Realization Risks
• Examples:
– Market changes
– Changes in overall economy
– Features used
– Competitive responseToday
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Problems with Traditional Mitigation
Mitigation Problems
Fixed Scope
Fixed Schedule
Fixed Budget
Monitoring
• Upfront comprehensive requirements
• Cost of change is high
• Limited flexibility
• Require hard dates for phases
• Buffering for unknowns
• High capital allocation
• Budget allocation up front
• Locks in waste
• Reports % not value
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Traditional mitigation
• Big and Long
• Less accurate
• Less flexible
• Wasteful
• Increased probability of failure
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Loss of Management Control
• What happened to monitoring?
– Information is suspect
– Measuring progress not value
– Mid-stream changes difficult
• When things go wrong
– Spend more, or
– Kill the project
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Evaluate project more frequently
• Every 2-4 weeks
• Meaningful evaluation
– Measure delivered value
– Examine working product
• Prioritize actively
– Clean breaks
• Make the right decisions
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This allows us to manage investment
• Fail fast or stop early
• Succeed early and double down
• Invest money from one and move to another
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Expand Options
• Maintain scope
• Expand/Accelerate scope
• Reduce scope
• Reprioritize
• Shut project down
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Feature chunks - Measure return
• Transparency to Manage on value
• Market and customer feedback
• Management Influence
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Outcomes: Drive risk out of the project
• Enable rapid course correction
• Fail fast and stop early
• Succeed early and double down
• Real management control – created options
• Management influence
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Why Agile?
• Squeeze cash out of work-in-process
• Drive risk out of the project
• Increase project and portfolio return
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We have made progress toward our fundamental goals
WIP + Risk + Project Investment
= Project and Portfolio Return
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Portfolio Implications
Characteristics Results Problems
Larger projects
Longer projects
Serial approach
Fewer projects
Span annual budget cycles
Value only at end of project
Less diversification
Reduced portfolio options
Few real options or ability to change
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The traditional portfolio approach
• Fewer Investments
• Limited control within period
• Can’t offset costs with returns
• Can’t measure portfolio return
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An Agile portfolio approach
• Feature Chunks
• Quicker to Market
• Reallocate investment
• Increase/Delay/Stop
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Maximize portfolio return through
Increased diversification
Ability to monitor and manage performance within the budget cycle
Ability to redirect funds from losers to winners
Optimize portfolio within the budget cycle
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Reallocate funds to strong performers let’s change the game
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Actively Manage Portfolio
• Reevaluate priorities constantly
• Reshuffle portfolio continuously
• Start/Stop projects
• Recognize increments of value
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Outcomes: Increase project and portfolio return
• Increase portfolio diversification which helps reduce risk
• Continually redirect from losers to winners
• Reclaim control of the portfolio management
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Why Agile?
• Squeeze cash out of work-in-process
• Drive risk out of the project
• Increase project and portfolio return
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Traditional vs. Agile Approach
• Big and Long
• Less Accurate
• Less Flexible
• Increases risk of failure
• Less management control
• Wasteful
• Small and short
• More predictable
• Iterate every 2-4 weeks
• Increases probability of success
• Active management control and influence
• Eliminate overhead and unnecessary features
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Agile Benefits
• Free up capital
• Reduce unnecessary cost
• Recognize return earlier
• Zero in on current market and customer needs
• Increase project and portfolio return
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How is this done?
• Break big projects into smaller chunks
• Evaluate projects more frequently
• Inject market and customer feedback
• Actively reprioritize project portfolio
• Reallocate funds to strong performers
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Not unchartered territory
• Agile practices are not new – since mid 90’s
• Collection of proven practices proven
– Scrum
– Extreme Programming (XP)
• No longer a grassroots movement:
– Wider adoption among Fortune 1000 companies
– 75-80% of IT organizations have some Agile practices*
– 15-25% have established a repeatable Agile process*
“Current State of Agile Methods Adoption”, Gartner, December 2008
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Why Now?
• Reduce risk inherent in large IT investments
• Improve organizational liquidity
• Get more from shrinking capital budgets
• Maintain flexibility to quickly take advantage of emerging market opportunities
• Provide a game changing impact to your organization during troubling times
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• Founded: 1979
• Employees: 250+
• Headquarters: Redmond, WA
• Full range of services—from training and consulting to software development and talent acquisition
• Leading provider of Scrum
Certification Training
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Upcoming SolutionsIQ Webinars from VersionOne
Apr 29 Building your Business Case for Agile
Methods for calculating the value of implementing Agile within your organization
May 13 Tracking Agile Progress: Is it working?
Soon Agile Portfolio Metrics: A Dashboard for Executives
Soon Strategies for Maximizing Agile Portfolio Value
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Thank You
• Following this presentation, participants will receive an email with links to a recording and copies of today’s slides
• For more on SolutionsIQ:
www.SolutionsIQ.com
+1(800)235-4091