it portfolio as waste - dave nicolette

Dave NicoletteEmail [email protected] @davenicoletteWeb www.davenicolette.net/agile/

The IT Portfolio as a Form of Waste

Copyright (c) 2010 Dave NicoletteThe IT Portfolio as a Form of Waste

A Definition of Lean Thinking

A way of thinking that enables organizations to“specify value, line up valuecreating actions in the best sequence, conduct these activities withoutinterruption whenever someone requests them, andperform them more and more effectively.”

Womack & Jones


Lean Values

specify value Customer defines “value”

line up valuecreating Map the Value Streamactions in the best sequence

conduct these activities Maintain continuous flowwithout interruption

whenever someone Customer pullrequests them

perform them more Practice continuousand more effectively improvement


Premise

The existence of an IT portfolio separatefrom the overarching enterprise portfoliolimits the organization's ability toimplement and benefit from a lean model.


When There are Two Portfolios...

specify value Who defines value?

line up valuecreating Where is the value stream? actions in the best Which value stream?sequence

conduct these activities How is flow affected by thewithout interruption interaction between 2 orgs?

whenever someone Where is the “handle” for arequests them customer to pull value?

perform them more Is everyone aiming for theand more effectively same target?


But wait...

...who says multiple organizations within an enterprise can't operate from the same overarching plan?


In theory, they can, but...

"In theory, theory and practice are the same. In practice, they are not."

Lawrence Peter “Yogi” Berra, philosopher


Conway's Law

“...organizations which design systems ... are constrained to produce designs which are copies of the communication structures of these organizations.”

Melvin Conway, 1968


A Story

Once upon a time, a company needed to open a port on a router...


To calculate the laminar (nonturbulent) flow of liquid through a straight length of pipe:

FR = (Pi (R^4) (P Po))/(8 N L)

where

FR is the volumetric flow rate of the liquid (e.g., gal/sec),Pi = 3.14159..., R is the radius of the pipe or tube, Po is the fluid pressure at one end of L, P is the fluid pressure at the other end of L, N is the fluid's viscosity, L is the length of the pipe or tube.

The above ignores friction. For laminar flow, friction f is

Source

Pump

Outflow

f = 64

R

For turbulent flow, the friction calculation is worse.

Conventional IT Planning


Conventional Results

Source

Pump

Hmm...I wonder why the work isn't flowing.


What's In The Pipe?

Rough internal surface creating high frictionOrganizational structural impediments & controls

Corrosion buildupOld habits of mind and entrenched procedures

TurbulenceLack of trust & transparency leading to formal checks & rework


How Can Separate Planning Lead to Waste?Structure

SeparationDuplication

LogisticsAlignmentResource allocation

ProcessSolution deliveryIT operations & support

CultureValuesPriorities

Financial planning & trackingAnnual budget cycleRelated costs tracked separatelySeparate cost areas mixed together

Technical challengesBuilding the right thingBuilding the thing right


The Three M's

無駄 muda = nonuseful(activity not directed toward value delivery)

In Lean Manufacturing● overproduction● waiting● transportation● inventory● wasted motion● overprocessing● defects & rework

In IT work● unnecessary features● gold plating● delays● handoffs● afterthefact QC● interim work artifacts● meetings


The Three M's

斑 mura = unevenness, inconsistency

In Lean Manufacturing● uneven flow● delay● inconsistent output

In IT work● stopping & starting● multitasking, context switching● service requests, handoffs


The Three M's

無理 muri = unreasonable

In Lean Manufacturing● overburden (e.g., overloaded forklift)● unreasonableness● absurdity

In IT work● Iron Triangle madness● Routine expectation of overtime● Belief in magic (planning & tracking)


How Does a Separate Portfolio Lead to Waste?

Redundant strategic planning activities muda – overproduction, duplication, rework

Align enterprise and IT portfolios, track alignment, and keep them aligned

muda – motion, rework

Promotes artificial division between “technical” and “business” personnel & operations

mura – supplier/consumer relationship prevents seamless collaboration

muda – waiting, motion, transportation, overproduction, defects, rework


Muda in IT Portfolio Management

The purpose of IT porfolio management (ITPM) is to balance:● risk● technology● payback period● capital allocation● distribution

Fourpronged approach to ITPM:● IT portfolio management (which projects)● IT investment management● IT performance management● IT due diligence

From “IT Portfolio Management: A Banker's Perspective on IT,”Bert Kersten & Chris Verhoef, Cutter IT Journal, Vol. 16, No. 4, pp. 2733.


Formalizing the Muda

Of CIOs polled, “41% of their companies do not have central oversight of the IT budget, which is critical to ITPM.”ITPM Maturity Model is proposed. It is all about “alignment” between the IT organization and the rest of the enterprise. Separate organizations are assumed.

From “Best Practices in IT Portfolio Management,” Mark Jeffrey, MIT Sloan Management Review, Spring 2004.

VP of program management at DHL Americas said (in 2003) DHL Americas currently has 20 percent more projects in its portfolio than it can support. "We won’t probably start half of those," he says.Separate organizations are assumed.

From “Portfolio Management Done Right,” Todd Datz, CIO Magazine, May 1, 2003.


How Does a Separate Annual IT Budget Lead to Waste?

Loss of focus on value muda – motion: IT must play budgetary games instead

of focusing on enterprise strategic goals; fixed budget imposes both a floor and a ceiling on spending, with neither based on real progress.

Emphasis on “estimation”muda – motion, transportation: Tracking performance to

budget leads to an emphasis on “estimation,” a nonvalueadd activity.

Limits responsiveness to changemuda – motion, rework: Promotes central control with long

approval processes for any changes.

Valu

e to

the

busi

ness

Risklow high

high

Funding Priority Fund Selectively(difficult to execute)

Fund Selectively(low priority) Do Not Fund

IT Planning Separate from Business Planning

Based on “Best Practices in IT Portfolio Management,” Mark Jeffrey, MIT Sloan Management Review, Spring 2004.

The IT Portfolio as a Form of Waste Copyright (c) 2010 Dave Nicolette

Mar

ket d

iffer

entia

ting

Mission Criticallow high

high

Partner Differentiating

Who cares? Parity

Comprehensive Business Strategic Planning

Based on Niel Nickolaisen's Simple Little Model, available atwww.incrementor.com/agilenyc/media/.../niel_nickolaisen_102108.pdf


Mar

ket d

iffer

entia

ting


high

Maybe do internally, maybe find a partner

Create & differentiate

Who cares?Mimic, simplify, keep up with Joneses




Mar

ket d

iffer

entia

ting


high

Shouldn't be anything new for us

Unique might be good

Who cares? Unique is probably bad




Impo

rtan

ce

Urgencylow high

high

Lower priority, but don't forget about it(it will become urgent)

Better do this first

Who cares? Must do this, but don't overinvest in it

A Similar Business Planning Model




Conflicting purposes: Targetsetting, forecasting, resource alloc.

muda – motion, overproduction, defects, rework: The attempt tomanage three different issues with the same numbers leadsto several forms of waste.

mura – Constant numbercrunching and requests for new estimates pulls people into meetings and interrupts continuous flow.

muri – Using the budget numbers inappropriately results in burdening people with useless work (“absurdity”), whilestill requiring them to perform their regular work.



Conflicting purposes: Targetsetting, forecasting, resource alloc.

Targets must be ambitious, forecasts realistic; they cannot bethe same number.

Mixing targets, forecasts, and resource allocation creates gaming.

Bjarte Bogsnes, Implementing Beyond Budgeting


BorealisThe budget was used for: We achieved the same through:

Highlevel financial & tax planning Quarterly rolling financial forecasts

Targetsetting Targets on the balanced scorecard

Controlling fixed costs Trend reportingCost targets where and when

neededActivity approach

Prioritizing & allocating investment Small projects – trend reportingand project resources Medium projects – varying hurdle

ratesMajor strategic projects – case by

case, budget was never a tool

Delegation of authority Existing mandates


StatoilHydro

Traditional budgeting:Same number, conflicting purposes

target

forecast

resourceallocation

target

forecast

resourceallocation

● frontloaded● ambitious● relative if possible

● actionbased● expected outcome – early warning● financial & nonfinancial● limited detail

● no preallocation● projects – decision gates & criteria● operations – relative KPIs● monitoring

Based on Implementing Beyond Budgeting, Bjarte Bogsnes


How Does the Internal IT Services Model Lead to Waste?

Increasing coordination / alignment overhead

muda – motion, transportation, overproduction, waiting, inventory, defects, rework:

As IT assets become more and more tightly integratedwith business operations, the cost of coordinating activitiesbetween business and IT groups becomes untenable.



Colleagues in lines of business are not “customers” of IT

mura – Customers cannot get results at the time they needresults (“pull”). They must wait for project approval andscheduling.



Dissatisfaction with quality of service leads to “shadow IT”muda – defects, rework, duplication: Redundant staffmuri – Additional burden on business unitsmura – Integration of departmental solutions with central

enterprise IT assets is uncoordinated with IT planning.

Dissatisfaction with turnaround time leads to shelved initiativesLost value: Opportunity cost of initiatives that are never

undertaken



“Requirements” are never well aligned with business needsmuda – motion, transportation, defects, rework, duplication:

All communication & collaboration crosses administrativeboundaries.

muri – Additional burden on all personnel to coordinatetheir understanding of requirements

mura – Uneven rate of delivery of features.


Real Options

The Three Rules of Real Options1. Options have value.2. Options expire.3. Never commit early unless you know why.

After Chris Matts & Olav Maassen, “Real Options Underlie Agile Practices,” InfoQ, June 8, 2007: http://www.infoq.com/articles/realoptionsenhanceagility


How Does Mixing Technical Infrastructure Support and Business Application Support Lead to Waste?

Infrastructure improvements must be justified on the basis of ROImuda – motion: Effort expended on meaningless justificationmuri – Cost center activities have no ROI by definition (“absurdity”)mura – Uneven rate of infrastructure maintenance & upgrades.


How Does Mixing Technical Infrastructure Support and Business Application Support Lead to Waste?

Incompatible working cultures & professional prioritiesmuri – recruitment, retention, & performance assessments match

neither the deep technical specialist nor the business solutionspecialist.


Computers Used to Be Mysterious to Business People


Not Any More


Org Structure Evolution I: Ad Hoc

LOB 1

LOB 2

LOB 3

LOB 4

The Business The IT Department


Org Structure Evolution II: Separate with Alignment

LOB 1

LOB 2

LOB 3

LOB 4


App Teamfor LOB 1

App Teamfor LOB 2

App Teamfor LOB 3

App Teamfor LOB 4

Ent

erpr

ise

Arc

hite

ctur

ean

d In

frast

ruct

ure

Sup

port


Org Structure Evolution III: Unified Strategic Planning, Separate Organizations

LOB 1

LOB 2

LOB 3

LOB 4


App Teamfor LOB 1

App Teamfor LOB 2

App Teamfor LOB 3

App Teamfor LOB 4

Ent

erpr

ise

Arc

hite

ctur

ean

d In

frast

ruct

ure

Sup

port

Pla

nnin

g


Org Structure Evolution IV: All Business Functions Together, Enterprise IT Centrally Managed

LOB 1

LOB 2

LOB 3

LOB 4


App Teamfor LOB 1

App Teamfor LOB 2

App Teamfor LOB 3

App Teamfor LOB 4

Ent

erpr

ise

Arc

hite

ctur

ean

d In

frast

ruct

ure

Sup

port

Pla

nnin

g


Enabler: Standards

XML – Industrystandard schema for common business documents & transactions

TCP/IP, HTTP, SOAP, WebServices, REST

SQL

Reference architectures for common categories of applications and rightsized technical infrastructures


Enabler: Service-Oriented Architecture

Standard (within the company) interface between business apps & IT infrastructure

Enables central governance, economies of scale, shared IT assets

Enables business flexibility & control, singlepiece pull of application features

... but hasn't worked well to date.


Why Has SOA Not Taken Off (Yet)?

My hypothesis...

Separate strategic planning for business & IT ... infrastructure initiatives usually proposed by IT & “sold” upstream, not derived from strategic capabilities planning.

SOA buildout has typically been conceived as a very large scale initiative spanning several years and multiple annual budget requests.

Enterprise Architects tend to be perfectionists. They design SOA infrastructures that represent their vision of the perfect environment, rather than taking requirements from the application teams that need the infrastructure.

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What Can Help SOA Work?

My view...

Unify strategic planning. When enterprise capabilities planning calls for SOA support, that need will become apparent through enterprise strategic planning.

Take an incremental approach to the buildout. Assess results at periodic decision gates based on clear criteria. When it is time to stop, stop.

Let the capabilities of the SOA environment be driven directly by the needs of the applications that are to be deployed on it. Don't let Perfect get in the way of Good Enough.

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More Enablers

Virtualization technologies

Cloud services


Credits

Shrugging man: http://solong925.web.officelive.com/images/shrugging%20man.jpg

Formula for calculating the laminar flow rate of a liquid through a straight length of pipe: From “Ask Dr. Math” at http://mathforum.org/library/drmath/view/56326.html

Water drop image: http://falconsscience.files.wordpress.com/2008/12/water_drop.png

Confused man: http://nittygriddy.com/wpcontent/uploads/2010/03/confusedman.jpg

Rusty pipe: http://watersecretsblog.com/archives/rpipe.jpg

Handsaw: http://www.windandsolarnow.com/images/handsaw.jpg

Executive in a meeting: http://www.themag.org/businessmeeting.jpg


Credits

Michelangelo book: http://elitechoice.org/2008/10/11/themostbeautifulbookformichelangeloadmirers/

Couple looking up: http://farm4.static.flickr.com/3151/2698013284_aa6c77de25.jpg

Armed people looking up: http://www.austinchronicle.com/binary/eea0/arts_review21.jpg

Storyteller: http://www.memeticians.com/2008/02/06/storyteller.jpg

IBM 701 photo: http://www.palosverdes.com/lasthurrah/ibm701.html

Photo of Tom Miller of Saginaw Future: http://www.mlive.com/businessreview/tricities/index.ssf/2008/06/personal_technology_transforms.html

Cloud: http://www.clker.com/clipart2808.html

it portfolio as waste - dave nicolette

Documents

separate portfolio lead

planning lead

specifyvalue whodefinesvalue

conventional results

andkeepthemaligned mudamotion

opena port

conways law

r forturbulentflow