Driving Investment Decisions in Agile

Mark ArntzThu, 06/28/2018 - 13:39
Subject

A concern that is voiced over and over in our Agile classes is “How do I make investment decisions when I do so little up-front analysis.”  From a traditional, knowing mindset this is an understandable concern.  I need to know the details before I can determine how much money to spend. 

When you spend a bunch of time and decide not to do something, that is money wasted.  From a Lean perspective, you want to eliminate waste.  You cannot eliminate all waste, but this is where the saying comes in, Agile is barely sufficient or just enough.  We want to do just enough analysis to make the decisions that we are facing at the moment, but not more than enough.

When you spend a bunch of time and decide not to do something, that is money wasted.

The way this is accomplished is in steps with decisions to move forward at each step.

The 3 Steps to Agile Investment Decisions

The first step is to ask the question: “What is the problem that we are trying to solve?”  This is a very high-level question.  Let’s say the answer is “I need a reliable, comfortable car that I can use to get to work and back.”  With that answer, you might already have a good idea of how much money a car like that might cost, how many luxuries you might want included, and how much that would add to the cost; and be able to allocate an upper boundary to your budget for the car.  While this seems very simplistic, it is not really different than the approach we would take for budgeting decisions in Agile.  If after this much analysis it seems worthwhile to continue down this path, then you go to the next step.

Agile Investments are similar to buying a car
Making Agile investment decisions is similar to buying a car.

The next step is to do some more in-depth analysis and come up with a lightweight business case to support your proposed direction.  You will want to ask, what is the return on this investment?  Are there non-tangible benefits that need to be considered?  Are there alternatives to spending money on the car?  Maybe if I ride the subway that might have some benefits that would be more desirable.  This step will result, as I said, in a lightweight business case or project charter.  This document could be taken to the sponsor to help justify the expenditure.  If you are the sponsor in this example it will give you confidence that you’re making the right decision.  The key here is, again, to do just enough work and not more to make the next decision.  Another aspect of this decision is that you are not allocating budget for every minute detail of the car.  You’re allocating budget for a car that will be reliable and comfortable for your commute to and from work.  If the car fits that high-level vision, it would be acceptable.  You know that the more you allocate, maybe the happier you will be during your commute.  But, on the other hand, the more you allocate for the car the less you can spend daily on lunch.

When you finally do allocate the money, you are allocating a bucket of money that you may or may not need to spend in full.  How much you finally spend will be determined and the procurement process continues.  Going now away for the car example and to the software project, as you move forward with your bucket of money you will make tradeoffs as you prioritize options seeking to reach the vision of the project.  Confident that you have allocated enough money to get the thing you are after, but not 100% sure of the details that will be included by the time you are finished.