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Enterprise Services Planning - Scaling the Benefits of Kanban

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Key note from Lean Kanban Southern Europe in Madrid, April 2015. Defines Enterprise Services Planning as a service-oriented approach to improving professional services and evolving to a level of business performance that is "fit for purpose". Your business is an ecosystem of interdependent services which can be improved through the use of Kanban: Learn to see services; Kanban each service; Implement feedback loops to enable evolutionary change and continually improving service delivery.

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Enterprise Services Planning - Scaling the Benefits of Kanban

  1. 1. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Anticipating demand across an ecosystem of shared services Enterprise Services Planning Scaling the benefits of Kanban Presenter David J. Anderson Madrid LeanKanban Southern Europe 21 April 2015 Improving customer satisfaction one service at a time
  2. 2. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. What is a professional services business? Education Finance Government Military Insurance Medical Design Media Advertising Sales Marketing Human Resources Legal Internet Technology … Professional Service organizations build intangible goods
  3. 3. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. What is a professional services business? An ecosystem of professionals providing interdependent services, often with complex dependencies.
  4. 4. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. A Managers Dilemma Managers are expected to make decisions and predict outcomes accurately. Their management training did not prepare them for the complexity of professional services environments! Why are their daily decisions as well as long-term strategic plans plagued with uncertainty?
  5. 5. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. The challenge of professional services businesses A constantly changing external environment has a ripple effect across their entire business ecosystem Priorities change and required capability & service levels rise in response to competition, disruptive market innovation & changes in customer tastes
  6. 6. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. The challenge of professional services businesses Lack of alignment between Strategy and Capability leads to a high risk, unpredictable result. Risks are not adequately hedged, performance is volatile & untrustworthy. As a result managers cannot act & decide with confidence
  7. 7. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Vicious cycle of professional services work We don’t understand risks so we say “Yes” to almost everything We don’t have enough capacity to do all our work We ask for more people Dependencies between services is complex & work blocks, people are briefly idle We don’t want people to be idle so we ask for more work Lead times get longer because of so much multitasking & complex dependency delay Everything Takes Longer Eventually things crash badly when we run out of money (or physical space) to keep funding this expansion. The result is a dip into chaos and unpredictable outcome such as merger, divestiture, reorg, closure of business units and exit from line of business
  8. 8. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. What should we start next? Will it be delivered when we need it? Do we have capacity to do everything we need to do?
  9. 9. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. How will dependencies affect our ability to deliver? How many activities should we have running in parallel? If we delay starting something, will the capacity be available when we need it?
  10. 10. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. How do you create an achievable plan? We plan for an organization that can react to changing events. A business that can dynamically coordinate capabilities, dependencies, and workload A business that is risk managed, robust, and resilient
  11. 11. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning *Kanban is a way to organize and manage work. It improves service delivery speed & predictability through a combination of limiting work-in-progress & deferred commitment It uses visual management and Lean techniques such as limiting the amount of work in progress, and probabilistic forecasting. Kanban helps to balance demand with capacity. Balancing demand and capacity = improved flow. Improved flow = Improved predictability. Enterprise Services Planning (ESP) is an enterprise-wide management solution that leverages Kanban* to improve each service within your business.
  12. 12. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning The goal of Enterprise Services Planning The goal of Enterprise Services Planning is to achieve flow across the organization. ESP encourages improved service delivery, better customer satisfaction and a business that is "fit for purpose”.
  13. 13. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Definition of Enterprise Services Planning
  14. 14. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning 3 Organizational Steps Foster a culture focused on continual fit-for-purpose service delivery Seeing Services “Kanban” each service Feedback Loop System Identify interdependent services in your organization Use the STATIK method to create a Kanban system for each service Implement a set of responsive feedback loops
  15. 15. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning Step 1: Seeing Services Examples: HR provides services throughout the organization, but they also need services from IT Marketing provides services to product development but they need services from Sales and from IT IT provides services to Customer Support. There is an interdependency between Customer Support, QA, and IT Engineering. Different feature teams or product teams may have dependencies on each other Many groups are dependent upon specialist individuals
  16. 16. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning Step 2: Kanban the Services Use STATIK (Systems Thinking Approach to Introducing Kanban) for each identified service 1. Identify a service 2. Understand what makes the service “fit for purpose” 3. Understand sources of dissatisfaction regarding current delivery 4. Analyze sources of and nature of demand 5. Analyze current delivery capability 6. Model the service delivery workflow 7. Identify & define classes of service 8. Design the kanban system 9. Socialize design & negotiate implementation
  17. 17. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning Step 3: Responsive Feedback Loops Strategy Review Risk Review Monthly Service Delivery Review WeeklyQuarterly Standup Meeting Daily Operations Review Monthly Replenishment/ Commitment Meeting Weekly Delivery Planning Meeting Per delivery cadence change change change change change change change change change info info info info info info info info info change info
  18. 18. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning 6 Planning Activities ESP activities 1. schedule and sequence work 2. forecast delivery dates and expected outcomes 3. allocate capacity 4. manage dependencies 5. understand and manage risk 6. ensure sufficient liquidity to react to unfolding events ESP is about balancing demand with capacity to deliver, keeping in mind the dependencies and risks
  19. 19. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning Achieve “Fitness for Purpose” + These must be balanced to deliver what your customers need and expect: to be “fit for purpose” Product component (capability/brand/non- functional elements) Service delivery component demand /customer expectations/ customer satisfaction)
  20. 20. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning Fit for purpose one service at a time Produce superior customer service and be robust & resilient – even in a rapidly changing external environment. Using ESP, run an effective, risk managed business. Align enterprise strategy with capability.
  21. 21. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Key Performance Indicators drive continuous evolution in service delivery
  22. 22. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. What makes a pizza delivery service “fit for purpose” ? Fitness criteria are metrics that measure things customers value when selecting a service again & again  Delivery time  Quality • Functional (order accuracy) • Non-functional (hot & tasty)  Predictability • Product consistency • Delivery predictability  Safety • conformance to regulatory requirements
  23. 23. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Select Key Performance Indicators Carefully! KPIs should be fitness criteria metrics! KPIs should assess service delivery capability and indicate fitness for purpose indicating your likelihood of surviving and thriving by adequately satisfying your customers? KPIs should be recognizable by your customers as something meaningful!
  24. 24. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Fitness Criteria drive evolutionary change Evolving Process Roll forward Roll back Initial Service Delivery Process Future process is emergent Evaluate Fitness Evaluate Fitness Evaluate Fitness Evaluate Fitness Evalua Fitnes We are never “done” with change. We evolve to “fit for purpose”
  25. 25. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Other Useful Metrics Some other metrics are useful  Those which guide improvements  Those which indicate general health Is your metric evaluating and guiding a specific change to improve fitness of your business such as an initiative to improve vendor response times? Or, is it a general business health indicator such as liquidity? If not a fitness criteria, an improvement driver or a general health indicator, then it is a metric that you almost certainly don’t need! It should be removed!
  26. 26. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Kanban Cadences
  27. 27. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. 10 Feedback Loops, 7 Meetings with a regular cadence Strategy Review Risk Review Monthly Service Delivery Review WeeklyQuarterly Standup Meeting Daily Operations Review Monthly Replenishment/ Commitment Meeting Weekly Delivery Planning Meeting Per delivery cadence
  28. 28. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Strategy Review A quarterly meeting to review and assess our  current markets, segments & lines of business  strategic goals & position  go-to-market strategies  KPIs  capabilities  alignment of strategy & capability Attended by senior executives and representatives from strategic planning, sales, marketing, portfolio management, risk management, service delivery, & customer care with input from front line staff
  29. 29. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Risk Review Risk Review helps us anticipate service delivery predictability Harvest blocker tickets and cluster them based on cause. Each cluster represents a known risk affecting tail of the lead time distribution Assess the frequency & impact to prioritize risk reduction & mitigation activities
  30. 30. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Strategy Review Risk Review Monthly Service Delivery Review WeeklyQuarterly Standup Meeting Daily Operations Review Monthly Replenishment/ Commitment Meeting Weekly Delivery Planning Meeting Per delivery cadence 2 Feedback Loops 3 Meetings for Improved Service Delivery
  31. 31. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Standup Meeting Daily Disciplined conduct and acts of leadership lead to improvement opportunities Problem solving & improvement discussions are taken outside the meeting
  32. 32. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Service Delivery Review Weekly A focused discussion about system capability Usually in private (often 1-1) between a more senior manager and individual(s) responsible for the system operation Review against fitness criteria metrics, e.g. current capability versus lead time SLA with 60 day, 85% on-time target Discuss shortfalls against (customer) expectations Analyze for assignable/special cause versus chance/common cause Discuss options for risk mitigation & reduction or system design changes to improve observed capability against expectations
  33. 33. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Operations Review Monthly Disciplined review of demand and capability for each kanban system Provides system of systems view and understanding Improvements suggested by attendees
  34. 34. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Organizational Improvements Emerge
  35. 35. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Forecasting
  36. 36. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Lead Time & Weibull Distributions Lead time histograms observed to be Weibull distributions typically with shape parameter 1.0 < k < 2.0 This example is a Weibull distribution with a scale parameter equal to 65 and shape parameter equal to 1.4 Outliers with known special causes at 87 & 105 are omitted from the “best fit” curve
  37. 37. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. ChangeRequests SLA (customer expectation or fitness criteria) 60 days Use Lead Time Distribution to Evaluate Service Delivery Effectiveness 22-150 day spread of variation 85% on-time 15% late Due Date Performance (DDP) Predictability
  38. 38. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Forecasting methods ESP relies on two types of forecasting approaches  Reference class forecasting  Monte Carlo simulation Reference class forecasting requires an assumption of an equilibrium – the near future will reflect the continuing conditions of the recent past  We sample data from a period in the recent past and use it to forecast future behavior  The sample period is determined by evaluating the volatility in kanban system liquidity
  39. 39. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Little’s Law provides simple but effective medium to long term forecasts Delivery Rate (from the kanban system) System Lead Time WIP = Little’s Law uses the mean lead time Mean is strongly affected by the tail on the lead time distribution ChangeRequests Mean TailMedian Mode Control the shape of the distribution by managing flow and avoid extending tail of the distribution
  40. 40. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Pull transactions measure kanban liquidity Done Pool of Ideas F E I Engin- eering Ready Deploy- ment Ready G D 2 ∞ No Pull Ongoing Development Testing Done Verification Acceptance 3 3 Work flows through a kanban system when we have well matched work order or items of WIP with suitable staff to add valuable new knowledge and progress work to completion. For work to flow freely in a kanban system, we must have work available to pull and suitably matched workers available to pull it. Hence, the act of pulling is the indicator that an item of work was matched to available workers and flow happened.
  41. 41. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Can you tell which of these systems is more liquid?
  42. 42. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. System volatility can be measured as the derivative of pull transaction rate We can compare volatility across systems and over-time within a system by observing the derivative of the rate of pull transactions. The derivative is robust to different sizes of system
  43. 43. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Analysis of Derivative of Pulls By understanding the bounds of volatility for a reference data set, we can monitor whether current conditions continue to reflect the recent past
  44. 44. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Liquidity is a General Health Indicator Metric Our measure of liquidity, as pull transaction volume and the spread of its derivative, meets the criteria* for a useful metric… Simple Self-generating Relevant Leading Indicator Observed Capability Liquidity is a global system measure. Driving it up should not cause local optimization or undesired consequences! * Reinertsen, Managing the Design Factory 1997
  45. 45. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Risk Profiling
  46. 46. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Qualitative Taxonomies 2 -> 6 categories Cheap Fast Accurate Consensus Managed Risk Heterogeneous Expensive Time Consuming Fake Precision? May still be High Risk Homogenous Cheap Fast High Risk A middle-ground in effective Risk Management
  47. 47. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Market Payoff Taxonomy Front-loaded – Most of the value is realized early in the lifespan of the product with a long residual tail Payoff Function Shape Bell curve – Most of the value is realized in the middle of the lifespan with slow initial uptake and a somewhat symmetrical tail off Back-loaded – Initial take-up is slow with value realized close to a natural end-date in the product lifespan
  48. 48. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Visualize Risks to provide Scheduling Information TS Market Risk CR Spoil Diff Lifecycle Cost of Delay Tech Risk Delay Impact New Mid Cow Expedite FD Std Intangible ELE Maj. Cap. Disc Unknown Soln Known but not us Done it before Commodity Risk profile for a work item or project Outside: Commit Early Inside: Commit Late Items with the same shape carry the same risks. They cannot be prioritized or sequenced. From a group of items with the same risk profile pick whichever ones you like. It is also wise to hedge risk by allocating capacity in the system for items of different risk profiles.
  49. 49. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Custom Profile Contains Narrative
  50. 50. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Visualizing Risk
  51. 51. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Visualize & Hedge Risks on the Board Done F E I Engin- eering Ready Deploy- ment Ready G D GY PB MN 2 ∞ P1 AB Ongoing Development Testing Done Verification Acceptance 3 3 Expedite 1 3 Fixed Date Standard Intangible 2 3 DE Use the rows on the board and the color of the tickets to visualize the two primary business risks from the risk profile. Other risks can be displayed on the tickets …
  52. 52. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Visualize risks on tickets for service requests Title Checkboxes… risk 1 risk 2 risk 3 risk 4 req complete Color of the ticket Typically used to indicated technical or skillset risks H Decorators (Shape & Color) (Letter) SLA or Target Date Business risk visualization highlighted in green Sometimes used to highlight technical dependencies Sometimes used to visualize legacy process artifacts such as “priority” Start dd/mm/yyyy dd/mm/yyyyDue End Other Dates Age (days elapsed) Sometimes used to record local cycle time per work state
  53. 53. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Scheduling
  54. 54. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. When should we start something? impact When we need it 85th percentile Ideal Start Here Commitment point timeJan 10 Nov 11 If we start too early, we forgo the option and opportunity to do something else that may provide value. If we start too late we risk incurring the cost of delay If we pull the work into our kanban system on Nov 11 we have a 6 out of 7 chance of on-time delivery
  55. 55. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. We can study sensitivity to different start dates impact When we need it 50th percentile Later Start Here Commitment point timeJan 10 Nov 25 If we start as late as November 25 we only have a 50% chance of on- time delivery However, the cost of delay incurred if we deliver within 60 days is relatively small. We have an 85% chance of achieving delivery with acceptable cost of delay 85th percentile
  56. 56. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. What is the latest we could start? impact When we need it 0th percentile Very late start Commitment point timeJan 10 Dec 19 If we start as late as December 19 we have 0% chance of on-time delivery We have about a 10% chance of a total loss delivering the promotion beyond the expiry date of the opportunity 85th percentile total loss
  57. 57. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. To be certain of delivery without incurring any cost of delay is expensive impact When we need it 98th percentile Early Start Commitment point timeJan 10 Aug 11 If we are conservative and do not wish to carry any risk of late delivery or any risk of incurring an opportunity cost of delay, then we must start as early as August 13th. We must commit to our Spring Break 2015 promotion during Summer 2014!!!
  58. 58. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Window of opportunity impact When we need it Earliest Start timeJan 10 Aug 11 Latest viable start Dec 19 Optimal Start Nov 11 On August 11st the item becomes available for selection at Kanban system replenishment. The ideal time to start is November 11th. After December 19th our option to deliver this item expires and we would discard it from our pool.
  59. 59. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Tools
  60. 60. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. We need tools!  Existing Kanban software products largely seek to replicate the function of a physical board  They don’t facilitate decision making during regular meetings  Enterprise Services Planning is easy to understand but laborious to implement • No one built a Gantt chart manually!  A new breed of tools will emerge offering ESP support
  61. 61. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Tools will facilitate decision making  ESP software tools will facilitate the decision making to run the enterprise  Assist with risk assessment & hedging  Assist with capacity planning  Provide forecasts  Make recommendations based on known risk management policies  Facilitate regular cadence meetings such as Replenishment, SDR, & Ops Review
  62. 62. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Manufacturing Kanban to MRP  1947 Kanban in manufacturing – Taiichi Ohno • Term “kanban” not adopted until 1964  1964 Manufacturing Requirements Planning – Joseph Orlicky • Book published in 1975  Kanban to MRP 17 years
  63. 63. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Knowledge Work Kanban to ESP  2004 Kanban in knowledge work (IT services) introduction at Microsoft, Dragos Dumitriu & David J. Anderson • Book published in 2010  2015 Enterprise Services Planning • A new class of software tools which implement the Modern Management Framework • Book published ????  Kanban to ESP 11 years?
  64. 64. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. ESP – Anticipating Demand, Allocating Capacity Demand Observed Capability Demand Demand Observed Capability Observed Capability Looking downstream, you want the system to help you anticipate and manage dependenciesLooking upstream, you want the system to help you anticipate and manage demand Combine the two, and across the organization you smooth flow end-to-end and help keep demand in balance with overall system capability
  65. 65. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Enterprise Services Planning “The Future of Kanban”  “Fit for Purpose” service delivery • Fitness criteria metrics & classes of service  Anticipate Demand • Comprehend WIP limits, staffing levels and required liquidity levels  Shape Demand • Allocate capacity to hedge risk • Bifurcate demand with risk policies  Scheduling, Sequencing & Selection • Intelligent recommendation engine utilizing risk profiles & risk management policies  Intelligent Human Capital Development • Skills acquisition linked to system liquidity • Determine real ROI for skills & experience investment
  66. 66. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Thank you!
  67. 67. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. About David Anderson is an innovator in management of 21st Century businesses that employ creative people who “think for a living” . He leads a training, consulting, publishing and event planning business dedicated to developing, promoting and implementing new management thinking & methods… He has 30+ years experience in the high technology industry starting with computer games in the early 1980’s. He has led software organizations delivering superior productivity and quality using innovative methods at large companies such as Sprint and Motorola. David defined Enterprise Services Planning and originated Kanban Method an adaptive approach to improved service delivery. His latest book, published in June 2012, is, Lessons in Agile Management – On the Road to Kanban. David is Chairman of Lean Kanban Inc., a business operating globally, dedicated to providing quality training & events to bring Kanban and Enterprise Services Planning to businesses who employ those who must “think for a living.”
  68. 68. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc. Labor pool liquidity is a concept adapted from the work of Chris Matts. Kanban system liquidity is a concept developed in collaboration with Raymond Keating, CME Group Lead time & pull transaction data courtesy of CME Group Risk profile courtesy of BazaarVoice Acknowledgements
  69. 69. dja@leankanban.com @djaa_dja Copyright Lean Kanban Inc.

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