Theory of Value-Based Systems and Software Engineering

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”

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

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)

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

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

“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

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

VBSSE Theory – 4+1 Model

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

Environment – Framework (Porter, Burton and Obel) Systems & Software Project Implications Process System Architecture System Capabilities UncertaintyEquivocalityComplexityHostility Buyers’ Bargaining Power HIGH LOW Suppliers’ Bargaining Power LOWHIGH Threat of Substitutes PROACTIVEREACTIVEPROACTIVEREACTIVE Threat of New Entrants LONGSHORTLONGSHORT Inter-firm Rivalry HIGHLOWHIGHLOW INSPIRATIONCONTROLINSPIRATIONCONTROL

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) …

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 ControlINSPIRATIONCONTROLINSPIRATIONCONTROL

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…

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

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) …

Technology – Frameworks (Al-Said, Boehm) Systems & Software Project Implications Staffing Process System Architecture

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) …

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

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

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

VBSSE Theory – 6-Step Process

The Incremental Commitment Model (ICM)

VBSSE – Phase Configuration

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