1. 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

2. decision making

3. what do we do?
when do we do it?
when do we decide?

4. leaders must …

5. deliver the right product
Build Trust?

6. 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

7. 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?

8. and …

9. consistently deliver
business
value 9

10. deliver
value?
what’s that?

11. Defining Value calculation Value Calculation Business Value Costs
Benefits

12. 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.

13. we need some help !

14. 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

15. where do we
start?

16. Business Value Model
Purpose 16

17. 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

18. 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

19. 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

20. financial documentation system
How about an example?
financial documentation system

21. 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

22. 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

23. 350 differentiators 23

24. focused on
differentiators
simplified
the rest

25. 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.

26. 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

27. 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.

28. 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.

29. 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

30. 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

31. 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

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

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

34. “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

35. 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

36. decision filters: schedule projects make daily decisions
what to develop

37. cascade
decision
filters
throughout
organization

38. 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.

39. Customer Service Market Differentiating Mission Critical High Low Low39

40. requires
customization

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

42. Differentiate Market Differentiating Mission Critical High Low Low

43. pass the “billboard” test?43

44. A fist full of credit cards

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

46. 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.

47. caveats

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

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

50. 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.

51. 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

52. Leadership Influence
innovate!

53. 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

54. 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

55. 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

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

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

58. 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.

59. 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

60. Collaboration Model
flexibility

61. dependencies
Collaboration Model

62. time to
market

63. volume

64. 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

65. 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

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

67. 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

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

69. 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

70. 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

71. 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

72. 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

73. 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

74. it’s a
conversation 74

75. 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.

76. 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

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

78. 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

79. 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?

80. “build”
a chunk…

81. at the end
of the “chunk”

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

83. 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.

84. now you can ask…

85. 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.

86. 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?

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

88. run candidate features thru model
re- prioritize

89. 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

90. summary

91. 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

92. it’s a
collaboration

93. what do we do?
when do we do it?
when do we decide?

95. 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

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

97. Complexity Assessment1 2 3 4 5 6 7 8 9 10
Dependencies
Geographical Dispersion
Team Maturity
Domain Knowledge
Team Size
Mission Critical 97

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

99. Uncertainty Assessment1 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.

100. 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

101. 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

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