Agile ROI: The Business Case for Agility. John Rudd, President and CFO

Transcription

1 Agile ROI: The Business Case for Agility John Rudd, President and CFO

2 John Rudd President and CFO of SolutionsIQ Formerly a partner in a boutique financial consulting & investment banking firm Led the firm s financial practice specializing in advisory services, mergers & acquisitions, and interim management. Filled multiple interim executive roles including CEO, president, CFO, and chief restructuring officer. Worked as CFO of a West Coast oil company and a commodity lender for ING. Received his B.S. in Economics from the University of Minnesota and his MBA from the University of Southern California.

3 A financial guy s intro to Agile Unsuccessful IT projects First impressions of Agile Positive results with Agile Is there a better way?

4 As financial professionals we seek to improve project and portfolio return by focusing on fundamental elements WIP + Risk + Project Investment = Project & Portfolio Return

5 As financial professionals, we have taken a rational response to under performing IT projects Fixed Scope Fixed Schedule Fixed Budget Monitoring

6 After years of perfecting process 30-40% of systems projects fail prior to completion 1 Half of all systems projects overrun their budgets and schedules by 200% or more 1 64% of features are rarely or never used 2 1 B.P. Lientz and K.P. Rea, Breakthrough Technology Project Management 2 Standish Group Study Report, 2002

7 So, why isn t our traditional approach working? Reduced performance Locked in waste Increased time to market Decreased likelihood of meeting the business or market needs Abdicated real project control And, minimized options

8 In fact, through the use of traditional project control methods we have WIP + Risk + Project Investment = Project & Portfolio Return

9 Why Agile? Squeeze cash out of work-in-process Drive risk out of the project Increase project and portfolio return

10 What is work-in-process? Work-in-process or in-process inventory consists of the unfinished products in a production process.

11 Traditional methods lockup capital

12 Large WIP - Ties up cash Allocation upfront Harder to get acceptable ROI on dollars invested Hampers organizational liquidity

13 Typical IT project Quarterly Cash Flow Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q Cumulative Cash Flow Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q

14 Large WIP - Creates waste Early stages require unproven assumptions and unneeded features Large cycle times leads to process waste Buffering

15 Much of the total spend is on waste 64% of features are rarely or never used Wasted Features Valued Features and Planning Value Waste Excess Planning & & Process Buffer 20% of features provide 80% of the value Standish Report, 2002

16 How feature chunks resolves this

17 Outcomes: Squeezing cash out of process Free up cash Invest capital elsewhere Reduce waste Lower Costs

18 Why Agile? Squeeze cash out of work-in-process Drive risk out of the project Increase project and portfolio return

19 Cost & Schedule Risks Examples: Lack of information Inaccurate estimates and schedules Unplanned change Project off target leading to total Loss/write-off

20 Benefit Realization Risks Examples: Market changes Changes in overall economy Features used Today Competitive response

21 Problems with Traditional Mitigation Mitigation Fixed Scope Fixed Schedule Fixed Budget Monitoring Problems Upfront comprehensive requirements Cost of change is high Limited flexibility Require hard dates for phases Buffering for unknowns High capital allocation Budget allocation up front Locks in waste Reports % not value

22 Traditional mitigation Big and Long Less accurate Less flexible Wasteful Increased probability of failure

23 Loss of Management Control What happened to monitoring? Information is suspect Measuring progress not value Mid-stream changes difficult When things go wrong Spend more, or Kill the project

24 Evaluate project more frequently Every 2-4 weeks Meaningful evaluation Measure delivered value Examine working product Prioritize actively Clean breaks Make the right decisions

25 Inject Market and Customer Feedback

26 This allows us to manage investment Fail fast or stop early Succeed early and double down Invest money from one and move to another

27 Expand Options Maintain scope Expand/Accelerate scope Reduce scope Reprioritize Shut project down

28 Feature chunks - Measure return Transparency to Manage on value Market and customer feedback Management Influence

29 Outcomes: Drive risk out of the project Enable rapid course correction Fail fast and stop early Succeed early and double down Real management control created options Management influence

30 Why Agile? Squeeze cash out of work-in-process Drive risk out of the project Increase project and portfolio return

31 We have made progress toward our fundamental goals WIP + Risk + Project Investment = Project and Portfolio Return

32 Portfolio Implications Characteristics Results Problems Larger projects Longer projects Serial approach Fewer projects Span annual budget cycles Value only at end of project Less diversification Reduced portfolio options Few real options or ability to change

33 The traditional portfolio approach Fewer Investments Limited control within period Can t offset costs with returns Can t measure portfolio return

34 An Agile portfolio approach Feature Chunks Quicker to Market Reallocate investment Increase/Delay/Stop

35 Maximize portfolio return through Increased diversification Ability to monitor and manage performance within the budget cycle Ability to redirect funds from losers to winners Optimize portfolio within the budget cycle

36 Reallocate funds to strong performers let s change the game

37 Actively Manage Portfolio Reevaluate priorities constantly Reshuffle portfolio continuously Start/Stop projects Recognize increments of value

38 Outcomes: Increase project and portfolio return Increase portfolio diversification which helps reduce risk Continually redirect from losers to winners Reclaim control of the portfolio management

39 Why Agile? Squeeze cash out of work-in-process Drive risk out of the project Increase project and portfolio return

40 Traditional vs. Agile Approach Big and Long Less Accurate Less Flexible Increases risk of failure Less management control Wasteful Small and short More predictable Iterate every 2-4 weeks Increases probability of success Active management control and influence Eliminate overhead and unnecessary features

41 Agile Benefits Free up capital Reduce unnecessary cost Recognize return earlier Zero in on current market and customer needs Increase project and portfolio return

42 How is this done? Break big projects into smaller chunks Evaluate projects more frequently Inject market and customer feedback Actively reprioritize project portfolio Reallocate funds to strong performers

43 Not unchartered territory Agile practices are not new since mid 90 s Collection of proven practices proven Scrum Extreme Programming (XP) No longer a grassroots movement: Wider adoption among Fortune 1000 companies 75-80% of IT organizations have some Agile practices* 15-25% have established a repeatable Agile process* Current State of Agile Methods Adoption, Gartner, December 2008

44 Why Now? Reduce risk inherent in large IT investments Improve organizational liquidity Get more from shrinking capital budgets Maintain flexibility to quickly take advantage of emerging market opportunities Provide a game changing impact to your organization during troubling times

45 Founded: 1979 Employees: 250+ Headquarters: Redmond, WA Full range of services from training and consulting to software development and talent acquisition Leading provider of Scrum Certification Training

46 Agile Services at Every Stage

47 Enterprise Agile Adoption Program

48 Question & Answer

49 Upcoming SolutionsIQ Webinars from VersionOne Apr 29 Building your Business Case for Agile Methods for calculating the value of implementing Agile within your organization May 13 Soon Soon Tracking Agile Progress: Is it working? Agile Portfolio Metrics: A Dashboard for Executives Strategies for Maximizing Agile Portfolio Value

50 Thank You Following this presentation, participants will receive an with links to a recording and copies of today s slides For more on SolutionsIQ: info@solutionsiq.com +1(800)