Theory of Value-Based Systems and Software Engineering Apurva Jain, USC Center for Systems & Software Engineering

2 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Context and Definitions – Value-Based SSE  Definition –“the explicit concern with value (financial and non-financial) in the application of science and mathematics by which the properties of computer systems and software are made useful to people”  Practicing VBSSE –“integrating stakeholder value considerations into the full range of systems and software development principles and practices”

3 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Context and Definitions – Value  Origin –from Latin “valere” – to be worth  Definition (Webster) –relative worth, utility or importance  Financial or non-financial (Maslow, Kaplan and Norton)  Key non-financial corporate value drivers (Forbes.com with Wharton and E&Y) –Innovation, ability to attract talented employees, alliances, quality of major processes, products, or services, environmental performance

4 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Key Observations from Literature 1.Organizations are social units – people-centric 2.Assume bounded rationality (Simon) 3.No silver-bullets, not one-size-fits-all (Brooks) 4.Stakeholder values are financial and non- financial (Maslow, Forbes-E&Y) 5.Timeless theories of physics will not apply (from 1-4) 6.Organizational systems affect the bottom line (Burton and Obel) 7.Engineering theories must take the organization in context (from 4 and 6)

5 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Successful Project? Multi-Contingency Organizational Context (Burton and Obel) Key Observations from Literature (contd.) 8.Management theories usually take at least a decade for conclusive evidence 9.Problem and solution space is huge, balance on breadth and depth (T-shaped) Therefore: Avoid reinventing the wheel, capitalize on existing research

6 OUTLINE - Overview - Key Drivers Model Theories - Evaluation What is a Theory?  1960s : System of general laws –Spatially and temporally unrestricted; nonaccidental –Does not work for systems and software  1994 : System for explaining a set of phenomena –Specifies key concepts, laws relating concepts –Not spatially and temporally unrestricted –Better for people-intensive activities

7 OUTLINE - Overview - Key Drivers Model Theories - Evaluation “Your enterprise will succeed if and only if it makes winners of your success-critical stakeholders”  Proof of “if”: –Everyone that counts is a winner…(i) –Nobody significant is left to complain…(ii)  Proof of “only if”: –Nobody wants to lose…(iii) –Prospective losers will refuse to participate, or will counterattack…(iv) –The usual result is lose-lose…(v) Theory W – Enterprise Success Theorem

8 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Making winners of your success-critical stakeholders requires –Identifying all of the success-critical stakeholders (and the contingencies they “bring-in”) (SCSs)…(i) –Understanding how the SCSs want to win …(ii) –Having the SCSs negotiate a win-win set of product and process plans…(iii) –Controlling progress toward SCS win-win realization, including adaptation to change…(iv) Theory W – WinWin Achievement Theorem

9 OUTLINE - Overview - Key Drivers Model Theories - Evaluation VBSSE Theory – 4+1 Model

10 OUTLINE - Overview - Key Drivers Model Theories - Evaluation  Provides insights into various organizational and project contingencies –“What the best way to do x?” “It depends.” –Spans socio-political, environment, cultural, technical dimensions  Component theories include –Benefits Chain, Model Clashes, Network Analysis  Primary contributions include –Helps identify contingent success-critical variables –Applies to whole (socio-technical) system –Appeals to intuition that systems fail because of mismatches. Supporting Theories – Contingency

11 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Environment – Framework (Porter, Burton and Obel)  Systems & Software Project Implications –Process –System Architecture –System Capabilities UncertaintyEquivocalityComplexityHostility Buyers’ Bargaining Power Suppliers’ Bargaining Power Threat of Substitutes Threat of New Entrants Inter-firm Rivalry

12 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Environment – Propositions  Propositions for organization structure –“If the environment has low equivocality, low complexity and low uncertainty then formalization should be high, organization complexity should be medium and centralization should be low” (i) –“If the environment has low equivocality, high complexity and low uncertainty then formalization should be high, organization complexity should be medium and centralization should be medium” (ii) –“If hostility is extreme, then formalization should be low, and centralization should be very high” (iii) –…

13 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Management and Leadership Style – Frameworks (Burton and Obel)  Systems & Software Project Implications –Staffing –Process LeaderProducerEntrepreneurManager Preference for Delegation HIGH LOW Level of Detail in Decision-Making LOWHIGH Reactive/Proactive Decision-Making PROACTIVEREACTIVEPROACTIVEREACTIVE Decision-Making Time Horizon LONGSHORTLONGSHORT Risk Preference HIGHLOWHIGHLOW Motivation and Control INSPIRATIONCONTROLINSPIRATIONCONTROL

14 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Management and Leadership Style – Propositions  Propositions for project structure –“If an individual is a leader, then  “Centralization should be low (i)  “Formalization should be low (ii)  “Complexity should be medium (iii)  “Incentives should be results based (iv)  “Coordination and control should be loose” (v) –“If an individual is a manager, then  “Centralization should be high (vi)  “Formalization should be high (vii)  “Complexity should be high (viii)  “Incentives should be procedure based (ix)  “Coordination and control should be tight” (x) –“If an individual is a producer, entrepreneur…

15 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Technology – Frameworks (Perrow)  Systems & Software Project Implications –Staffing –Process –System Architecture CRAFTNONROUTINE ROUTINEENGINEERING ILL-DEFINED WELL-DEFINED PROBLEM ANALYZABILITY FEW EXCEPTIONS MANY EXCEPTIONS TASK VARIABILITY

16 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Technology – Propositions  vs. Strategy –“Nonroutine technology is a misfit with a defender strategy” (i).  vs. Management Style –“Nonroutine technology is a misfit with a manager leadership style, except in small organizations” (ii)  vs. Organizational Climate –“Nonroutine technology is a misfit with an internal process climate” (iii)  vs. Organizational Environment –“Nonroutine technology is a misfit with a high equivocality environment” (iv) –…

17 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Technology – Frameworks (Al-Said, Boehm)  Systems & Software Project Implications –Staffing –Process –System Architecture

18 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Technology – Propositions  Maintainer vs. Developer –Ease of transition is a misfit with freedom of COTS (i)  User vs. Acquirer –High levels of service is a misfit with freedom of COTS (ii)  User vs. Acquirer –Application compatibility is a misfit with freedom of COTS (iii) –…

19 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Supporting Theories – Utility  Provides a rich theoretical method to infer subjective stakeholder value over a set of choices  Component theories include –Maslow, Simon, Multiple attribute utility theory  Primary contributions include –Helps determine Pareto optimality –Works well with subjective preferences –Provides rich fodder (stakeholder utility functions) for other theories

20 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Supporting Theories – Decision  Provides a plethora of techniques and models to enable decision making  Component theories include –Game theory, options theory, statistical decision theory  Primary contributions include –Helps determine risks and opportunities –Works well with uncertainty –Not wedded to a particular decision theory, such as bounded rationality, economic man, etc. –Provides rich fodder (competing investment options) for other theories

21 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Supporting Theories – Control  Provides theory augmented models for state measurement  Component theories include –BSCs, BTOPP, Risk management  Primary contributions include –Helps determine necessary conditions for enabling control –Works well in situations requiring stability AND adaptability –Provides rich fodder (risks and opportunities) for other supporting theories

22 OUTLINE - Overview - Key Drivers Model Theories - Evaluation VBSSE Theory – 6-Step Process

23 OUTLINE - Overview - Key Drivers Model Theories - Evaluation The Incremental Commitment Model (ICM)

24 OUTLINE - Overview - Key Drivers Model Theories - Evaluation VBSSE – Phase Configuration

25 OUTLINE - Overview - Key Drivers Model Theories - Evaluation Conclusion  It provides a unifying theory for practicing VBSSE that is: –Entirely theory-based  “There is nothing as practical as a good theory” – Karl Lewin –Built on existing research –Empirically validated (TBD) –Simple  Derived from simple rules, provides step-by- step guidance