The Other Side of Variability: Economics

After you have read my earlier posts…I hope that by now, you are already familiar with SAFe Principle #3 … and that is, ‘Assume variability. Preserve options’… just in case you forgot it 🙂 !

Well let me tell you that ‘variability’ does not stop there; there is another side of ‘variability’.

It has something to do with economics and funding…read on.

My investment advisor, when I invest in my 401k, advices me, all the time, to invest on a stable, historically predictable and large fund — a securities instrument with a mix of various stocks from various companies — instead of me investing on a specific stock.

An out of tune singer in a large choir is less likely to be obvious than a sole singer that sings out of tune.

You get my drift. It is about variability pooling.

In the investment scenario, the combined stocks (in a large fund) has less relative variation than any of its component stocks or a specific stock for that matter.

Likewise goes to the ‘choir’ scenario: the combined singers (in a large choir) has less relative variation than any of its member singers or a solo singer for that matter.

This leads us to funding. Why fund individual projects when you can fund the capacity of Agile teams and team of Agile teams (ART) that sit on a Value Stream that delivers value? Why not fund the Value Stream instead of projects?

Think about it. SAFe Principle #1: ‘Take an economic view’. If everything must be ignored, then the only thing that must not be ignored is cost of delay! Funding projects increases cost of delay. When the variance between actual and planned estimate is noticeably huge, then it’s a source of cost of delay. When cost overrun happens, project accounting and re-budgeting increases cost of delay and impacts culture. Result: 1) wait for new budget approval; increases cost of delay, 2) costly variance analysis; blame game; threatens transparency, 3) resource scramble and reassignment.

Variability is heightened on projects.

Instead, fund Value Streams, not projects!

Funding Value Streams mitigates the aforementioned project-funded-related variations. It also provides for full control of spend, with: 1) no costly and delay-inducing project cost variance analysis, 2) no resource re-assignments, 3) no blame game for project overruns.

Fund Value Streams, not projects! Think about ‘variability pooling’… using the earlier investment example as anchor: invest on a stable, historically predictable and large fund, not on an specific stock.

Always take an economic view … hence it is SAFe’s Principle #1 !