considerations and risk leadership practices applications collaboration decision making considerations and risk step up, step back In this module, the important ideas are: Cost / Benefit calculations might not be a complete method for determining business value. When making decisions, it is helpful to include Purpose and Considerations. The Purpose Alignment model is a simple but highly effective way to help us identify the design goal of our work. problem solving culture of trust 1

decision making

what do we do? when do we do it? when do we decide?

leaders must …

deliver the right product Build Trust?

Standish Group Study, reported by CEO Jim Johnson, XP2002 Never or Rarely Used: 64% Always or Often Used: 20% Rarely 19% Sometimes 16% Often 13% Never 45% Does this help us realize that we often over-engineer our designs? The Never and Rarely used not only represent our over-investing in some features and functions, that work might have kept us from developing features and functions that would help us win in the marketplace. Google Docs are competing with MS by only implementing the elements of MS Office that people actually use. Always 7% Standish Group Study, reported by CEO Jim Johnson, XP2002

what’s the value of this required change? Legacy System Name: Phone: Address: Replacement System Name: Address: Phone: what’s the value of this required change? Legacy data entry sequence = Name, Telephone, Address. Replacement data entry sequence = Name, Address, Telephone. The requirement is to customize the replacement. How much “value” did this customization generate? Was it worth $100,000? How about $1000? $1?

and …

consistently deliver business value 9

deliver value? what’s that?

Defining Value calculation Value Calculation Business Value Costs Benefits

Valuing the Inputs calculation Value Calculation Business Value Estimate calculation Value Calculation Guess Using this cost / benefit calculation approach to business value is not only incomplete, it can be gamed. In many cases, we start with the number that will guarantee project approval and then work backwards to determine what costs and benefits will generate this number.

we need some help !

Business Value Model Purpose Considerations Costs and Benefits This gives an overview of the value model and the following slides describe each element of the model starting with Purpose Costs and Benefits 14

where do we start?

Business Value Model Purpose 16

Action Plans (what, who, when) Individual Business Objectives Mission Vision Values Strategic Intent ~ Strategy ~ Purpose Strategic Long-Range Goals Start Here SWOT / 5Q Annual Objectives This module is about improved decision making. Traditional planning models start with Mission, Vision, and Values and then work down to strategy, long-range goals, annual goals, and specific activities (like product and project plans). One problem with this approach is that it does not provide those doing the work with any usable decision filters that will help them design and prioritize their work. Typically, mission, vision, values, and strategy are too nebulous to be used for the numerous product and project decisions our teams make. Purpose attempts to fill this gap by defining a simple decision filter was can apply to business activity, business rule, business process, feature, function, et cetera decisions. Purpose is a highly effective way to improve decision making. Action Plans (what, who, when) Tactical Individual Business Objectives

Purpose Based Alignment Model High Partner? Differentiate Market Differentiating Who cares? Parity Differentiate is how to gain market share. Parity is how to hold market share. Low Low High Mission Critical

Purpose Based Alignment Model High Do we take this on? Innovate, Create Market Differentiating Achieve and Maintain Parity, Mimic, Simplify Minimize or Eliminate While there are many examples of Parity activities, it is helpful to point out some of the Differentiating activities of the team or group you are training. It is also important to emphasize that the Parity activities are important. They are as important as the Differentiating activities. However, their importance does not come from their uniqueness. It is important to emphasize that Purpose not only helps us stop over-engineering or over-investing in Parity activities, features, and functions, it also helps us focus our creativity and innovation on the Differentiating activities, features and functions. Low Low High Mission Critical

financial documentation system How about an example? financial documentation system

3,000 functions! You will want to use your own examples. I use this example when teaching a software development / engineering group because we used Purpose to improve the design on a large, complex project. This helps counter the argument that Purpose is too simple to use on complex projects / products. 21

Purpose Based Alignment Model High Anything here? What goes here? Market Differentiating Anything here? Most are usually here. Assessment of major functions was done in a couple of hours. Broke functions down into 5 major areas. ■ Document Edit ■ Project Management ■ Document Management ■ Documentation Templates and Library ■ EDGAR Integration Only the first of these was differentiating – the rest were at best parity Low Low High Mission Critical

350 differentiators 23

focused on differentiators simplified the rest

better product cut time by 50% results: 60% cost reduction Stated differently, the original project / product plan anticipated spending about 50% of the time and 60% of the money to make Parity features and functions better than they had to be. These reductions were not the only benefit. The end product was much better than originally planned because the developers were able to focus on features and functions that helped this product win in the marketplace.

Strategy? Partner? Differentiate Who cares? Parity Market High Partner? Differentiate Market Differentiating Who cares? The primary challenge in using the Purpose model is to identify what belongs in the Differentiating category. As a rule of thumb, what belongs in Differentiating should be directly linked to the organization’s strategy. Parity Low Low High Mission Critical

strategy = sustainable competitive advantage And, strategy is equivalent with what generates our strategic competitive advantage. As a result, what belong in the Differentiating category are those things that directly generate sustainable competitive advantage.

1. Whom do we serve and what do they want and need most? the 5 questions: 1. Whom do we serve and what do they want and need most? 2. What do we provide to help them? 3. What is the best way to provide this? 4. How do we know we are succeeding? 5. How should we organize to deliver? These 5 Questions are a useful tool to help us identify the sustainable competitive advantage activities – those that belong in the Differentiating category.

the “billboard” test… A basic human need is to want to be needed. Often, we translate this to mean that we want what we do to be Differentiating. One way to filter what is truly differentiating is the idea that, since the Differentiating activities, features, and functions help us gain market share and win new customers, we should be willing to advertise these to the world. If there are questions about whether or not an activity, feature, or function is differentiating, we can ask whether or not we would ever post it on a billboard to win new customers. 29

You Think My Products Are Good? You Should See My Invoicing System! CTO was arguing for significant investments in their financial system but trying to create a billboard makes is clear that this can only be a parity – not a differentiating investment

Order new pages by 2pm and get them tomorrow! This is the billboard they thought they had – but they had wrongly assessed the requirements of their customers. People who use planning tools don’t suddenly run out of paper. 31

We invest more in our WMS than we do in product development This is a billboard that is closer to their real state.

“To be the low cost airline.” - Southwest Airlines This is an example of a highly effective, meaningful, and simple decision filter. 33

“Will this help us be the low cost airline?” - Southwest Airlines Strategy to deliver low cost is keeping the plane in the air. Their target is 20 min turnaround. So… No assigned seating – would slow down plane boarding No “Caesar Salad” – would require provisioning within the turnaround No charge for baggage – slows down checkin All levels of the organization understand the filter and act on it 34

strategy creates decision filters Because we want to improve decision making and push it out to our teams, we can assess our Differentiating activities, features, and functions and define a simple, effective decision filter (just like Southwest Airlines’) that our teams can use for the thousands of decisions they make. 35

decision filters: schedule projects make daily decisions what to develop

cascade decision filters throughout organization

single purchase, multiple credit cards How about another example? single purchase, multiple credit cards This is an example of using the billboard test to separate an opinion from the reality of Differentiating.

Customer Service Market Differentiating Mission Critical High Low Low 39

requires customization

OR Differentiate Parity Market Differentiating Mission Critical High Low Low High Mission Critical

Differentiate Market Differentiating Mission Critical High Low Low

pass the “billboard” test? 43

A fist full of credit cards

Give Me Your Tired, Your Poor, Your Maxed Out Credit Cards

treat exceptions as exceptions Much of the complexity is our Parity process is due to exception handling. We need to assess the value created by standardizing our treatment of exceptions. If the value is low, treat the exception in a one-off manner.

caveats

List Three Professional Options Managing Risks List Three Professional Options common sense not common practice

parity is mission critical Emphasize again that Parity activities are important and necessary. 49

priority purpose is not This is a reminder that when we prioritize our projects and tasks, it could be that we should complete work on a Parity activity, product, feature, or function before we complete work on something that is Differentiating. Getting up to Parity might be the most important thing to do today.

Differentiating changes over time As soon as we release Differentiating features and functions, our competitors can mimic them. So, we need to be thinking several iterations ahead and constantly innovate our Differentiating products, features, and functions. 51

Leadership Influence innovate!

Start Up Practicum Pick an objective, a brand, or a project. Exercise: Pick a project. Practicum Pick an objective, a brand, or a project. 53

What is the purpose? Partner? Differentiate Who cares? Parity Market High Partner? Differentiate Market Differentiating Who cares? For this exercise, have the group (or sub groups) select something they are actually working on. The exercise is much more effective if the participants can use the exercise to make real decisions. For the exercise, use the handout to manage the flow. Parity Low Low High Mission Critical 54

What’s On Your Billboard? This is to help define a decision filter for their projects. If theirs is a parity project, what can they use in the future to identify any differentiating ideas? 55

your decision filter? Just like the previous exercise tasks, ideally the groups define a decision filter. 56

do you have any exceptions? This is to reinforce the notion of treating exceptions like exceptions. 57

other considerations ? The next piece of the decision making model is Considerations. Considerations are the inputs to the decision that we cannot quantify using a number.

Business Value Model Purpose Considerations One point you can make is how Purpose affects Considerations. For example, if the project is a Parity project and you have technical uncertainty, you might treat this uncertainty very differently than if it is a Differentiating project. 59

Collaboration Model flexibility

dependencies Collaboration Model

time to market

volume

risks The next few slides introduce the idea of using uncertainty and complexity to assess the consideration of risk. Remember, that most learning happens when the risk has a 50% chance of failure. From Claude Shannon, Bell Labs, 64

complexity team size domain knowledge gaps dependencies mission criticality team location team capacity domain knowledge gaps dependencies technical complexity complexity This is a representative, not exhaustive list 65

dependents uncertainty market technical uncertainty project duration This is a representative, not exhaustive list

Uncertainty Complexity Colts Bulls Cows Sheep Simple, young projects High Colts Bulls Simple, young projects Dynamic Market Large Challenging projects Uncertainty Cows Sheep Complex Mature market Laissez faire Well behaved As we assess for complexity and uncertainty, we treat the project accordingly. Low Low High Complexity

portfolio management Uncertainty Complexity One way to view our project portfolio is an uncertainty / complexity view. Complexity

your considerations? This continues the exercise we started after the Purpose training. For this portion of the exercise, we want to continue the same projects the teams selected for Purpose. 69

prioritize If the groups have been trained in the collaboration process, they can use it to prioritize their considerations. Otherwise, they can use some method to identify the most critical decisions. 70

Business Value Model Purpose Considerations Costs and Benefits Now that we have framed our decision model, we start to make decisions. Costs and Benefits 71

costs and benefits ? While costs and benefit are not the only inputs to a decision, they might still be critical or the most important inputs. 72

Business Value Model Purpose Considerations Costs and Benefits Now that we have framed our decision model, we start to make decisions. Costs and Benefits 73

it’s a conversation 74

resolve differences It is likely that, in a collaborative environment, there will be differences of opinions about the specific inputs to the decision model and the resulting decisions. One tool is to use the collaboration process to resolve the differences.

group chunks high – medium - low Once there is general agreement as to the decision, it is useful to create iterative chunks of how you will implement the decision. This is similar to iterative release in agile but can be applied to a broad range of decisions. 76 76

What are your largest value chunks? Continuing the exercise, what are the most important (and therefore highest value) chunks to deliver?

what can you defer? Are there decisions and chunks you can defer? We sometimes attempt to make decisions before they need to be made. There are likely examples you can use about the types of things you can defer. 78

what do you need to add to make a better decision? One thing to consider in making deferral decisions is to identify chunks that we can deliver early that will help us make better future decisions. Can we gather important information in the first chunk that we can use to refine and improve our decision model?

“build” a chunk…

at the end of the “chunk”

the value inputs change? did the value inputs change? Now, as things change, ask whether or not the model inputs have changed.

adjust BV model run the chunk features thru model Once we have delivered a chunk, it could be that the inputs to the decision model have changed. We might now know more about some of the considerations or the costs and benefits. As the inputs change, we adjust the model as needed.

now you can ask…

Do we have enough business value to go to market? Another factor is decision making is whether or not and when we have enough value to deliver.

Should we continue? If we do not yet have enough value, we should ask ourselves if we should continue. In other words, if we continue with our current decision and plan, will it eventually generate enough value to go to market?

What goes in the next cycle or chunk? Continuing the exercise and after identify the high value chunks, what would you next add? 87

run candidate features thru model re- prioritize

build highest value chunks objectives / projects / ideas value Model STOP build highest value chunks No Will we ever have enough value to deploy? prioritized chunks Adjust value model if inputs have changed objectives / projects / ideas Value Model Expressed as a process flow, this shows the process of using the value / decision model in the normal dynamics of the marketplace. Do we have enough value to deploy? Yes deferred

summary

Business Value Model Purpose Considerations Costs and Benefits Now that we have framed our decision model, we start to make decisions. Costs and Benefits 91

it’s a collaboration

what do we do? when do we do it? when do we decide?

Uncertainty Complexity Colts Bulls Cows Sheep Simple, young projects High Colts Bulls Simple, young projects Agility to handle uncertainty Need agility Tight Teams Process definition to cope with complexity Uncertainty Cows Sheep Complex Mature market Laissez faire Well behaved As we assess for complexity and uncertainty, we treat the project accordingly. Need defined interfaces Low Low High Complexity

Complexity Assessment Attribute Score Team Size Mission Critical Geographical Dispersion Team Maturity Domain Knowledge Dependencies 96

Complexity Assessment 1 2 3 4 5 6 7 8 9 10 Dependencies Geographical Dispersion Team Maturity Domain Knowledge Team Size Mission Critical 97

Uncertainty Assessment Attribute Score Market Technical Dependencies / Scope Flexibility Duration 98

Uncertainty Assessment 1 2 3 4 5 6 7 8 9 10 Market Uncertainty Technical Uncertainty Project Duration Uncertainty Dependents/ Scope Flexibility This is a nice visual way to display the uncertainty or complexity.

Remember: Loose Coupling and Strong Cohesion Colt Project Bull Program Sheep Project Cow Project One way to simplify highly complex, uncertain projects is to break them down into less complex, less uncertain components. Remember: Loose Coupling and Strong Cohesion

Uncertainty Complexity Colts Bulls Cows Sheep Trader Workstation High Colts Bulls Trader Workstation Swiss Electronic Stock Exchange Uncertainty Cows Sheep Matcher “Lights Out” This is an example of breaking a highly complex, highly uncertain project (the Swiss stock exchange) into components. Low Low High Complexity

team size and experience market uncertainty domain knowledge team capacity technical uncertainty These are examples of considerations but are not an exhaustive list.