At this year’s Global Scrum Gathering in Orlando, SolutionsIQ President John Rudd and I presented on the topic of Agile portfolio management. During our presentation, Andreas Schliep (long time Certified Scrum Trainer, Agilist, and hilariously dry-witted guy based in Germany) tweeted,
“Brent Barton and John Rudd gave the term business agility a useful meaning. Think portfolio.”
What is Business Agility?
Prior to the presentation, Andreas told me how concerned he was with the term “business agility” because it lacks meaning and can water down a company’s ability to derive the real benefits from being “Agile”. Luckily for Andreas and many people attending our session who were uncertain about what exactly business agility is, thinking about it from a portfolio perspective provided a pragmatic way for business to support a modern organization. Now I’d like to share here what we shared to participants that day.
Simply put, business agility means leveraging iterative delivery capability and actively managing organizational investments. The bottom line is that, if we do not align our portfolio practices to leverage what Agile has to offer, we miss out on opportunities to maximize returns and adjust plans.
The rest of this blog is dedicated to “thinking portfolio” and one of its most important components: Return on Team.
What is Return on Team?
Return on Team aligns today’s needs for planning and budgeting. It is a better and simpler way to manage a portfolio. In many ways, small (<10 people), dedicated, persistent, cross-functional, empowered, self-organizing teams are at the core of Agile. This structure is best for knowledge workers who solve today’s complex problems like software solutions. Rather than dissolving teams (in particular high-performance teams) and incurring the unnecessary overhead of reintegrating individuals, we can think of these teams as assets. Further, establish these dedicated and persistent teams as enduring corporate assets. Then like tracking return on an asset, we plan and track Return on Team.
Consider an airplane. Notice that in the previous sentence, I said “an airplane” indicating that it is a concise unit by itself. But you could, as engineers may, consider the entire vessel a collection of many integrated parts that operate in concert to produce the value that airline customers seek (i.e., flying from point A to point B). It seems ridiculous to think about a single airplane as a bunch of constituent parts–and yet this is precisely how we think about individual team members on a team. The team is an airplane: the individual parts (team members) collaborate and coordinate to deliver the value that end-users seek, whether that’s software or something else. When you have a high-performing team, the last thing you want is to break them up just when they’ve achieved velocity–probably for the same reason you wouldn’t dismantle an airplane midflight. But just like you can move an airplane from one hangar to another (even when it isn’t carrying passengers), you can reassign a team from one initiative to another one. Your teams are enduring corporate assets, like a fleet of airplanes. Once they’ve hit their stride and produced consistent value quickly, you can actually plan and track accordingly. That is the combined power of Return on Team and active (Agile) portfolio management.
The team is an airplane: the individual parts (team members) collaborate and coordinate to deliver the value that end-users seek.
Return on Team allows planners to match supply (team capacity) to demand in a data-driven manner. This simplifies the process by an order of magnitude and prevents us from accidentally pulling people off one team only to re-form another and incur transition costs. Also, we have better data as a result. When a system does not change, history is the best indicator of future performance. By keeping teams persistent, we can use historical data to plan more realistically.
How Do You Measure Return on Team?
There are two ways to measure Return on Team: trend and performance against plan. Since persistent and dedicated teams focus on a common delivery stream, relative contribution to a corporate endeavor is easy to measure. Also, teams tend to get better at estimating over time. Costs are more stable, so they can be calculated simply. For example: one team costs $25,000 per week. Thus, if a piece of work is budgeted at $300,000, the team has 12 weeks to finish the work before the budget is exhausted. If it is a stable team, we can use previous trends to calibrate likelihood of a good outcome very early. Regardless how an organization calculates benefits (and expected benefits), the denominator of the basic benefit/cost ratio is very simple and maps into team’s work without friction. The result is greater predictability and thus reduced risk, with the ability to move away from investments that are not showing benefit.
Finally, most of the work teams do is based on investments much longer term than a year, except when the organization is in search of new potential long term investments. Thus, in order to support short term business commitments against long-term investments, we need to become good at developing short-term initiatives (often about a quarter in length) so we can course correct without as much gnashing of teeth. These short term-initiatives can be estimated in comparable team units which we call a team iteration. Now, we have units of supply that we can match to demand with short-term outcomes derived from long-term commitments. From this, we can base our decisions from the perspective of Return on Team.
In review, persistent and dedicated teams, as corporate enduring assets, delivering increments of customer value every iteration cycle with a predictability that portfolio managers can use to plan short-term initiatives that drive toward long-term investments–that is the ultimate goal of business agility. The Agile business can plan with a greater level of confidence and predictability and reduced level of risk.
To learn more about Return on Team and business agility, check out Brent’s webinar “Agile Portfolio Management: Adapting to Changing Priorities”!