In this article I will explain how to improve product development flow and deliver value faster. I will describe how a few small changes in the way we are organized can make a significant difference in our value delivery potential. These insights are based on some widely held theories and – more importantly – practical experience gleamed from working with numerous companies, in an array of industries. I will also explain the place and importance of uncertainty in our working world and how a more Lean mindset can help us view this uncertainty as as opportunity to better understand – and exploit – our options.
The world is Full of Uncertainty
Before we think about delivering faster, we must make sure we are developing the right product. A useful map for navigating your way into the concepts and field of complexity is « The Stacey Matrix ». It is important to clarify our assumptions on where we are before choosing one approach. Agile has a proven record in complicated and complex zones. Lean is excellent for Complicated situations. And Lean Startup is probably the best approach to date in matters Chaotic. The temptation to oversimplify when we need to explain complicated or complex problems is understandable, even to some extent our attempts to describe things that are chaotic in nature. Unfortunately in adopting this mindset – this oversimplification – we devalue and reduce the likelihood that we can fully understand this inherent uncertainty, and the potential to use this to our advantage.
Imagine you’re a gambler, a professional gambler. Is uncertainty your enemy? You’re playing in your favorite casino. Are you ready? Then let’s play! Go on : http://www.roll-dice-online.com/
- select 2 dices of 6 sides :
- Let’s assuma we have a gain opportunity of 40€ if sum of drops is 7 or more. 0€ if 6 or lower.
- Cost of 10€ per roll and per dice.
- Even if amount is small same player can play as quick as he wants.
- The casino take 17% off of all gain for services.
Standard: you roll the two dices at same time:
Average gain: 23€. 19,9€ after casino charges, Average cost: 20€.
Return On Investment: 0,99 Loss of 1%(*)
(*) this is how casino makes money. What if you could use feedback loop ? i.e rolling one dice, look at the result and decide to roll or not to roll the second one. What would we intuit about our chance to gain 40€?
Average gain: 22€. 19€ after casino charges. Average cost 18€
Return On Investment: 1,036 Benefit of 3,6% ( 1€ )
Calculation at the end of the article.
- Even if the second strategy sounds more complex. It is still more valuable. Despite the immediate feeling of failure failed (here by getting an ace at fisrt roll) we should use it as learning to take decision.
- Small decision sometime give small benefits but this is still a value for the business if decisions are taken and executed with speed: An experimented gambler could play one game every 5 second i.e 720 games in one hour. His/her average gain could be up to 720€ per hours.
- Even if casino is of course based on uncertainity, Such a gambler has no risk of failure with so huge number of drops. A system able to take very fast small decision transform uncertainty into more predictible results. We could say it reduce uncertainty but it would be not acknoledging that uncertainty is the issue to solve not the one to underestimate.
Of course, taking many fast decisions will be a competitive advantage if those are in average good decisions. Here, gamblers are experts in both analysing feedback and executing the right corrective actions (i.e do not roll the second dice if an ace occurs at firt roll) when appropriate. This intense use of feedback and multiple fast decisions close to the floor plant is one of lean principles. All Agile teams I know also make sure to have maximize feedback prior considering a job as finished. It is why test skills are so important on side of coding building and architectural skills inside a single scrum team.
Centralized strategic decision, decentralized execution
This information flow – from ground to governance – is the second feedback loop and is exactly how firms should operate. Non aligned decisions are avoided by having a clear system of governance. The aim of governance is to only take strategic decisions that will inform all linked actions – execution details and policies are decided on the ground, with support from ‘enablers’ to bridge the gap and provide operational support. In his book about organizing for complexity Niels Pflaeging describe it by concentric circle . The market is at the periphery. At scale some centralization might be needed at the center. Of course the more direct the contact is between people at the center and those at the periphery, the better. Role of people at the center is to take right decision to help those who serves the market. They also always try to reduce cognitive distance between them and people close to the circumference. Finding the right balance is not easy: The famous motorbike manufacturer Harley Davidson® took a radical approach to delegate all « non strategic » decision to the factory floor and also to share all business information, including cost margins. Those figures used to be confidential in traditional enterprise but not in Freedom Inc. They also encouraged/required companies in their supply chain to do the same thing.
Balance Demand against throughput. Cost of delay and visual management
What Theory of constraint say is simple:
- identify the constraint
- Exploit the constraint
- Subordinate the constraint
- Elevate the constraint
- Do not let the Inertia become the constraint ( Aka Goto step1)
The book This is Lean describe 4 quadrant:
Flow has been studied for long on highway. a simple approach is called the Greenshield’s Model.
Greenshield made the assumption that, under uninterrupted flow conditions, speed and density are linearly related. This relationship is expressed mathematically and graphically below.
This makes as a result
Mary Poppendick show that batch size has also a tremedous impact on the Flow, smal bacth are less sensitive to load.
Only limitation is the transaction cost, which are fixed cost. In Lean this is called SMED ( Single Minute exchange of Die by analogy to changing die in car parts manufacturing going from days to few minutes in Toyota Produc System). Optimum value is where transaction cost is about the same amount than the waiting cost.
The graph below show how it affects the flow. Here transaction cost is about 1/4 of smaller batches.
When operating over 80% we mainly pay tax, indeed jobs spend far more time in queue than running.
At 80% of load, Big batch cost about 60% more.
Even surprising, I had the chance to see that many times and this is used in all computer congestion algorythm.
All good Agile teams practice this by defining work items that bring value to a customer ideally sized about 1/10 to 1/3 of their fixed iterations duration.
Reduce Work In Process, Deliver Often
We are not used to limit the work in process. Instead we love being busy occupied. Instead we should really take care about developing a Discipline Of Delivery.
- Our business assumption are not always easy to validate. I will not detail here since Lean Startup would be a far better answer.
- Due to Cultural and historical biased we tend to over-centralize decision even multiply number of layers. This is the main management roadblock and slow down the full system.
- Do not start something else before you have reached the quality the end customer will need on the previous items. This is done by making sure there is an agreement on what to do , how much ( Acceptance criteria ) and how well ( Definition of done).
- Make daily things visible so that you will see bottleneck(s). There are many ways to do visual management but using a physical wall is my favorite.
- Spend 15 minute a day describing on that board what’s happened since last day, what ‘ next and what could be done to be faster on the highest cost of delay priority.
- Make sure you set/collect measurements such as cumulative flow diagrams and have dedicated time at regular intervals to look at how to improve the process/change the WIP limit..
Cognitive distance Cognitive distance is used to describe how two individuals are different, at the knowledge level, but also in the way they perceive and interpret external phenomena, that is to say somehow in their modes of reasoning. Nooteboom (2000, p. 73) defines the concept: « a difference in cognitive function. This Can Be a Difference in domain, range, or mapping. « The more individuals have different functions or « mental models », the more the cognitive distance between them is important.
References Stacey complexity graphs http://www.gp-training.net/training/communication_skills/consultation/equipoise/complexity/stacey.htm
Introduction to product flow development by Yuval Yeret: http://fr.slideshare.net/yyeret/introduction-to-product-development-flow?qid=53b5a67d-24ac-4e49-9044-bcca7416097f&v=default&b=&from_search=2
Queuing theory simulation: by Tero Parviainen http://ss15-teropa.divshot.io/
More Than a Motorcycle: The Leadership Journey at Harley-Davidson (Harvard Business School Press. By Rich Teerlink, former CEO and chairman of Harley-Davidson Motor Company and coauthor, with Lee Ozley, of 2000) http://freedomincbook.com/2010/09/03/strategybusiness-presents-freedom-inc/
|2 dices per drop||stop if first dice is 1|
|Fisrt Dice||average gain per game||average spent per game||average gain per game||average spent per game|
|casino of course take part of the gain : here 17 %|
|ROI after taxes:||0,997||ROI after taxes:||1,036|