This Requires Mindset Shift: “Fund Value Stream, not Projects”

Agile teams and team of Agile Teams (Agile Release Train (ART)) sit on a Value Stream.

Per SAFe: “Value Streams represent the series of steps that an organization uses to build Solutions that provide a continuous flow of value to a Customer. SAFe value streams are used to define and realize Portfolio-level business objectives and organize Agile Release Trains (ARTs) to deliver value more rapidly.”

Funding Value Stream means funding the ART that sits on it. ART delivers continuous business value…work never ends…there is that sense of infinity and permanency. Resources do not disband. Contrast that to funding projects: work starts and stops…resources might be let go…there is the sense that everything is finite. No sense of continuous delivery of business value.

Funding projects also means constant cost variance watch (monthly variance analysis). When cost overrun happens, there is re-calibration of funding and resources…this might cause potential delays to the project… and there might be cost associated to these delays.

Funding Value Stream in contrast does not have the aforementioned cost of delay. The ART keeps working and spitting out business values. The ART capacity is already bought and paid for. Business Owners and Product Managers steer the ART with prioritized business values.

“Funding Value Stream, not projects” requires mindset shift. Specially Project [and Program] Managers moving to Lean-Agile. It is hard but not impossible.

“How do we measure value delivered then?”, you might ask.

Of course, metrics used for funded value stream — for measuring value delivered — is different from metrics used for funded projects. Again, mindset shift required even to metrics.

Most Project Managers use Earned Value Management (EVM) to measure value delivered. The basic premise of earned value management (EVM) is that the value of a piece of work is equal to the amount of funds budgeted to complete it.

When you search the internet for ‘Agile EVM’, what they are basing this on is funded projects being done in Agile fashion. An oxymoron way of looking at things! The team is ‘agile’ but the funding model is waterfall…funding based on a ‘Big Up-Front Design (BUFD)…BUFD is the antithesis of the Lean-Agile mindset wherein variability is assumed and options kept open.

When we fund Value Stream, there is no ‘funds budgeted for the project’ to base on to calculate the EVM — after all, the basic idea is to continuously deliver business values in increments…ad infinitum… via the ART that sits on a funded Value Stream. Fund is budgeted to the Value Stream (and subsequently, ART) not to projects.

So, we have a fixed capacity and a funding of $X. The business knows this much.

How would the business owner know the Actual Business Value?

Let’s look at it in a non-monetary valuation…It will not be in dollar terms. It will be gauged from 0 to 10… 10 being the highest…and it is unit-less. And the business owner assigns the Planned Business Value and the Actual Business Value.

When we do PI (Program Increment) Planning, business objectives are set and the business owners assign Planned Business value to each of the business objectives on day-2 of PI-planning. When we are about to complete the PI, there is a program event called ‘Inspect and Adapt’ (I&A). One of the things that happens during I&A is this: business owner assigns the Actual Business Value to the Business Objectives. This is after seeing the system Demo. Actual Business Value is based on the evaluation of the demo-ed working systems. However, the Actual Business Value is also affected by the market. Agile teams may deliver the value as planned…but can be rendered as less valued due to market’s condition.

Now, lets look at it in a monetary valuation. We can sample our cost per story point over a period of time, say 6 months. lets say that the $ burn rate per month of the capacity is $1,000,000…and that capacity  completes, accepts, and releases to production worth 1,000 story points per month. Assume this is a constant rate over 6 months. The cost per story point then is $1,000,000 divided by 1000 points = $1,000 per point. You can use this $/point to gauge in dollar terms the value delivered. For example: Let’s say a set of stories for a business was delivered in a year…and the aggregated story points is, say,  2,000 points. The value delivered in $ terms  = 2,000 points x $1,000 / points = $2,000,000. The business will reflect back on this figure. Note that as the ART becomes a high-performing ART, their throughput will get better (more points delivered over time) but their funding remains the same…which translates to lower $/point.

You can also use this historical $/point when gauging the order of magnitude (OOM) of an idea…no deep details. If the OOM is, say using T-Shirt sizing, Large…and Large means 100 points…and we have a historical $/point of say $1,000 per point…then the OOM for that idea is 100 points  x $1,000 per point = $100,000…that is how big the ‘breadbox is’ at an idea level.

With high uncertainty/variability situations like Software Development, it is best not to fund projects…instead, fund the value stream which in turn funds the ART. If the fixed capacity is funded via funding of the Value Stream, then there is no more need for monthly cost variance analysis, starting and stopping work and letting go of resources! Once the fixed capacity is bought and paid for, all that needs to be done by the business owners, product managers, product owners, Agile teams, team of Agile teams, and System team is to keep a continuous flow of prioritized business values in small batch sizes through the CDP — the Continuous Delivery Pipeline — ad infinitum!

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