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Key Note - Devlin 2013 - No crystal ball gazing - The Pragmatism of The Kanban Method


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The Kanban Method is based in the philosophy of pragmatism. Kanban encourages you to use facts and actual data to make decisions and plans. This approach improves risk management and business outcomes

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Key Note - Devlin 2013 - No crystal ball gazing - The Pragmatism of The Kanban Method

  1. 1. No Crystal Ball Gazing Risk Management & Delivery with Kanban Using qualitative risk assessment & probabilistic forecasting for better business results Devlin Linkoping, March 2013, @djaa_dja
  2. 2. Understanding Kanban Systems, @djaa_dja
  3. 3. Kanban are virtual! Backlog Engineering Ready 5 Development Test Ready Testing UAT 3 5 3 ∞ Ongoing Done Change Requests Deployment Ready ∞ B Pull These are the virtual kanban F J G C F Pull Boards are not required to do F F Kanban! F I F The board D a visualization of the is F * The first system used database workflow process, the work-intriggers to signal pull. There was no progress and the kanban PTCs board! Pull I, @djaa_dja
  4. 4. Commitment is deferred Backlog Pool of Ideas Engineering Ready 5 Development Test Ready Testing UAT 3 5 3 ∞ Ongoing Done Items in the backlog remain optional……………………….. optional and unprioritized Pull F F F F F F F D G E Wish to avoid discard after commitment I Commitment point, @djaa_dja We are committing to getting started. We are certain we want to take delivery. Deployment Ready ∞
  5. 5. Specific delivery commitment may be deferred even later DeployEnginPool of Ideas eering Ready 5 Development Test Ready Testing UAT 3 5 3 ∞ Ongoing Done ment Ready ∞ Change Requests Pull F F F F F F F D G E PTCs We are now committing to a specific deployment and delivery date Discarded *This may happen earlier if I circumstances demand it I, @djaa_dja 2nd Commitment point*
  6. 6. Replenishment Cadence Pool of Ideas Engineering Ready 5 Replenishment Change Requests Pull F F F F F F F Development Test Ready Testing UAT 3 5 3 ∞ Ongoing Done Frequent replenishment is more agile. On-demand replenishment is D most agile! G PTCs Discarded I, @djaa_dja E The frequency of system replenishment should reflect arrival rate of new information and the transaction & coordination I costs of holding a meeting Deployment Ready ∞
  7. 7. Delivery Cadence Pool of Ideas Change Requests Pull F F F F F F F Engineering Ready Development Test Ready Testing UAT 3 5 3 ∞ Ongoing Done Frequent deployment is more agile. 5 Deployment buffer size can On-demand deployment reduce as frequency of D deliveryagile! most increases G PTCs Discarded I, @djaa_dja is E The frequency of delivery should reflect the transaction & coordination costs of deployment plus costs & toleranceI of customer to take delivery Deployment Ready ∞ Delivery
  8. 8. Defining Kanban System Lead Time Pool of Ideas Engineering Ready The clock starts ticking when Test UAT we Ready customers Development accept theTesting 5 ∞ 3 order, not when it3is placed! Ongoing 5 Change Requests Pull F F F F F F F D G Done Until then customer orders are merely available options Lead time ends when the item reaches the first ∞ queue. E System Lead Time PTCs I Discarded I, @djaa_dja Deployment Ready ∞ This provides the correct result for Little’s Law and visualization on a Cumulative Flow Diagram
  9. 9. Little’s Law & Cumulative Flow Delivery Rate Pool of Ideas = Lead Time Avg. Lead Time WIP, @djaa_dja WIP Ready To Deploy Avg. Delivery Rate
  10. 10. Defining Customer Lead Time Pool of Ideas Engineering Ready Development Test Ready Testing UAT 3 5 3 ∞ Ongoing 5 Change Requests Done The clock still starts ticking when we accept the customers order, not when it is placed! Deployment Ready ∞ Pull F F F F F F F D G E Customer Lead Time PTCs Discarded I, @djaa_dja The frequency of delivery cadence will affect customer I lead time in addition to system capability Done ∞
  11. 11. Flow the Efficiency Flow efficiency measures Pool Enginpercentage of total lead time of spent actually adding value eering is Development Ideas Ready (or knowledge) versus waiting 3 Ongoing 2 Done Testing 3 Verification Acceptance Deployment Ready ∞ Until then customer orders are merely available options Flow efficiency = Work Time Multitasking means time spent E in working columns is often waiting time PB GY DE Waiting Working MN AB Waiting Working Waiting Lead Time * Zsolt Fabok, Lean Agile Scotland, Sep 2012, Lean Kanban France, Oct 2012, @djaa_dja x 100% Lead Time Flow efficiencies of 2% have been F reported*. 5% -> 15% D normal, P1 is > 40% is good! G I Done
  12. 12. Observe Lead Time Distribution as an enabler of a Probabilistic Approach to Management Lead Time Distribution 3.5 3 CRs & Bugs 2.5 2 1.5 1 0.5 1 4 7 0 3 6 8 14 14 13 12 12 11 10 99 92 85 78 71 64 57 50 43 36 29 22 8 15 1 0 Days This is multi-modal data! Mean of 31 days The workexpectation of SLA is of two types: Change Requests (new 105 and Production features);days with 98 % Defects SLA expectation of 44 days with 85% on-time, @djaa_dja on-time
  13. 13. Mean 5 days Change Requests Production Defects Filter Lead Time data by Type of Work (and Class of Service) to get Single Mode Distributions 98% at 25 days 85% at 10 days, @djaa_dja 98% at 150 days Mean 50 days 85% at 60 days
  14. 14. Allocate Capacity to Types of Work Pool of Ideas Engineering Ready Ongoing 2 Change Requests Development 4 3 Done Testing 3 Verification Acceptance Consistent capacity allocation E some consistency to should bring more consistency to MN delivery rate of work of each D AB type F Lead Time PB DE Productio n Defects I Deployment Ready 3 G P1 GY, @djaa_dja Separate understanding of Separate understanding of Lead Lead Time for each type of Time for each type of work work Lead Time ∞ Done
  15. 15. impact The Optimal Time to Start 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 Ideal Start incurring the cost of delay When we need it Here With a 6 in 7 chance of on-time delivery, we can always expedite to insure on-time delivery 85th percentile Commitment point, @djaa_dja
  16. 16. Metrics for Kanban Systems Cumulative flow integrates demand, WIP, approx. avg. lead time and delivery rate capabilities Lead time histograms show us actual lead time capability Flow efficiency, value versus failure demand (rework), initial quality, and impact of blocking issues are also useful, @djaa_dja
  17. 17. Scaling Up (Probabilistic Forecasting), @djaa_dja
  18. 18. Scaling Up - Planning a big project Device Management Ike II Cumulative Flow 2008 30 -M ar 23 -M ar 5x 9M ar 2M ar eb 24 -F eb 2006 17 -F 10 -F Slope in middle 3.5x - 5x slope at ends 16 -M ar 240 220 200 180 160 140 120 100 80 60 40 20 0 eb Features Required (local average) delivery rate During the middle 60% of the project schedule we Time need Throughput (velocity) to average 220 features Inventory Started Designed Coded Complete per month, @djaa_dja
  19. 19. Little’s Law Determines staffing level Calculated based on known lead time capability & required PlandeliveryChanging the WIP limit without based onrate currently observed maintaining the staffing level capability and current working ratio assume process practices. Do not represents a change to the way of working. It is a change to improvements. the process and will produce a Delivery Rateto reduce undesirable‘common change in the observed If changing WIP cause’ capability new effects (e.g. multitasking), get of the system Lead Time sample data (perform a spike) to observe the new capability From observed capability Target Treat as a fixed to variable achieve plan =, @djaa_dja WIP
  20. 20. Using Little’s Law Determines staffing level Calculated based on known lead time capability & required At this point perhaps just a little delivery rate black magic and experience may be required. If our current working WIP = 22 practices/process exhibited an Rounding 22 up to 25 would average WIP of 1 item per person then 55/week 25 people organized infor 5 teams we require conveniently provide 5 with to complete 5 items each teams of 5 peoplea WIP limit of the 0.4 weeks project on-time = From observed capability Target to achieve plan, @djaa_dja Treat as a fixed variable
  21. 21. 2-tiered board Kanban System within a Kanban System 1 lane per team, @djaa_dja
  22. 22. WIP in this area should be 25 items* *photo taken early in the project before it was fully staffed/loaded Lead time Median lead time target is 2 days Alert managers if beyond 5 days, @djaa_dja
  23. 23. Risks & Qualitative Assessment, @djaa_dja
  24. 24. A Lean approach to alignment with business risks uses Qualitative Assessment But how do we determine the risks in We need a work item that we must manage? a fast, cheap, accurate, consensus forming approach to risk assessment. We need Lean Risk Assessment! The answer is to use a set of qualitative methods to assess different dimensions of risk such as urgency, @djaa_dja
  25. 25. Sketch market payoff function Room nights sold per day Cost of delay for an online Easter holiday marketing promotion is difference in integral between the two curves Estimated additional rooms sold Cost of delay Actual rooms sold time When we need it, @djaa_dja When it arrived
  26. 26. impact Cost of Delay based on Market Payoff Sketches Treat as a Standard Class item Total cost of delay time Cost of delay function for an online Easter holiday marketing campaign delayed by 1 month from mid-January (based on diff of 2 integrals on previous slide), @djaa_dja
  27. 27. impact impact Establish urgency by qualitative matching of cost of delay sketches time impact impact time time time Intangible – cost of delay may be significant but is not incurred until much later; important but not urgent impact time Fixed date – cost of delay goes up significantly after deadline; Start early enough & dynamically prioritize to insure on-time delivery Standard - cost of delay is shallow but accelerates before leveling out; provide a reasonable lead-time expectation impact impact time Expedite – critical and immediate cost of delay; can exceed kanban limits (bumps other work) time, @djaa_dja
  28. 28. impact Cost of Delay has a 2nd Dimension Working capital impact time Working capital impact time Extinction Level Event – a short delay will completely deplete the working capital of the business Major Capital – the cost of delay is such that a major initiative or project will be lost from next year’s portfolio or additional capital will need to be raised to fund it Discretionary Spending – departmental budgets may be cut as a result or our business misses its profit forecasts impact time Intangible – delay causes embarrassment, loss of political capital, affects brand equity, mindshare, customer confidence, etc ? time, @djaa_dja
  29. 29. Risk is a multi-dimensional problem So understanding cost of delay Yes, however, it isn’t always relevant! Cost of enables us to know what to pull delay attaches to a deliverable item. What if next? that item is large? Whole projects, minimum marketable features (MMFs) or minimum viable products (MVPs) consist of many smaller items. We need to understand the risks in those smaller items too, if we are to know how to schedule work, replenish our system and make pull decisions wisely, @djaa_dja
  30. 30. Market Risk of Change Profits Market Share etc Start Late Differentiators Spoilers Regulatory Changes Cost Reducers Scheduling Potentia l Value Highly likely to change Market Risk Build (as rapidly as possible) Table Stakes Buy (COTS) Rent (SaaS), @djaa_dja Highly unlikely to change Start Early
  31. 31. Product Lifecycle Risk High Not well understood High demand for innovation & experimentation Low Major Growth Market Investment Growth Potentia l Product Risk Innovative/New Cash Cow Low, @djaa_dja Well understood Low demand for innovation Low High
  32. 32. Shelf-Life Risk Short (days, weeks, months) Known Expiry Date, Seasonal (fixed window of opportunity) Medium (months, quarters, 1-2 years) Long (years, decades), @djaa_dja Fashion Craze Fad
  33. 33. Shelf-Life Risk Many High High Schedule Risk (days, weeks, months) Innovation Number of Options Short Known Expiry Date, Seasonal (fixed window of opportunity) Medium (months, quarters, 1-2 years) Long (years, decades) Few Low Low, @djaa_dja Fashion Craze Fad
  34. 34. Shelf-Life Risk Schedule Risk Low High High Many (months, quarters, 1-2 years) Number of Options (window of opportunity) Medium Fashion Craze Fad Innovation Known Expiry Date, Seasonal Differentiator (days, weeks, months) Spoiler/Follower Short Low Low Few Long (years, decades), @djaa_dja Low If we are market leading our innovations are less time critical
  35. 35. Risk is a multi-dimensional contextual problem These are just useful examples! We must develop a set of We can easily envisage other risk dimensions risk such as technical risk, vendor dependencycontext for taxonomies that work in risk, organizational maturity risk and so forth. a specific business. It may be necessary to run a workshop with stakeholders to explore and expose the real business risks requiring management, @djaa_dja
  36. 36. (Just a taste of) Risk Management with Kanban, @djaa_dja
  37. 37. How much risk do you want to take? Given our current capabilities, our desired strategic position and goWe only have capacity to do so much work. How we allocate that capacity across different risk to-market strategies, how much risk dimensions will determine how aggressive we do you want to take? are being from a risk management perspective. The more aggressive we are in allocating capacity to riskier work items the less likely it is that the outcome will match our expectations, @djaa_dja
  38. 38. Hedge Delivery Risk by allocating capacity in the kanban system DeployEngineering Ready 2 Expedite Development Ongoing 3 Testing 3 Done Verification Acceptance 1 P1 AB Fixed Date 2 E D MN PB Standard 3 F G GY Intangible 3 I, @djaa_dja DE ment Ready ∞ Done
  39. 39. Aligning with Strategic Position or Go-to-Market Strategy DeployEngineering Ready Cost Reducer s 3 2 3 Testing 3 Ongoing Done Verification Acceptance niche! Enabling early delivery for narrower P1 markets but potentially including value AB DA generating differentiating features E D MN PB Spoilers 1 F GY Differenti ators Done The concept of a minimum viable ∞ product (MVP) will contain the table Market segmentation can be used to narrow the stakes for at least given market necessary table stakes for any 1 market niche G 2 Table Stakes Development ment Ready 1, @djaa_dja I DE
  40. 40. Trade off growing market reach against growing share & profit within Deploya niche EnginCapacity allocated to Table Stakes will ment eering determine how fast new niches can be Ready Development Testing Ready Cost Reducer s 3 developed. 3 It is important to define a MVP in ∞ Allocate more to Table Stakes to speed market terms of table stakes and reach/breadth. differentiators required to enter a G specific market segment Allocate more to differentiators to grow P1 2 Table Stakes 3 Ongoing Done Verification Acceptance market share or AB profit margins DA 2 E Allocate D more to spoilers to defend market share MN PB Spoilers 1 F GY Differenti ators Done 1, @djaa_dja I DE
  41. 41. An underlying philosophy of pragmatism, @djaa_dja
  42. 42. Some simple rules to improve delivery forecasting 1. Limit WIP 2. Observe what really happens in your Assume that the past is own environment a strong predictor of the future 3. Measure current system capability as In low flow distribution, environmental lead timeefficiency systems,throughput conditions (system rate and flow factors) outweigh technical efficiency performance factors by up to 20 times in 4. Forecast Probabilistically determining the outcome. If the environment isn’t changing neither should results., @djaa_dja
  43. 43. Prediction based on qualitative risk assessment Stop Crystal Ball Gazing! Do not speculate! Do not ‚estimate‛ the size, weight, complexity of an item. Instead qualitatively assess the risks inherent in a work item, @djaa_dja
  44. 44. Some simple rules to improve risk management 1. Establish a list of risks that are applicable in your business domain 2. Create a qualitative taxonomy of 2 to 6 categories for each dimension of Cost of delay, shelf-life, product adoption risk lifecycle, market risk of change 3. Work with things that can be All can be established as (soft*) facts. Risks established by consensus as (soft) associated with different classifications within facts.risk dimensions are understood and the these Do not speculate about the dynamics future! of how they might affect an outcome are business 4. Use meaningful predictablelanguage * Where hard facts cannot be established by measurement or market research, a strong consensus opinion is achieved, @djaa_dja
  45. 45. Prediction based on qualitative risk assessment For example, if we load our entire capacity with fixed delivery date demand then it is highly likely that some items will be delivered late and we will incur a (significant) cost of delay, @djaa_dja
  46. 46. Allocate capacity to hedge risks 5. Our key strategy to manage risk is to allocate capacity in accordance with our capability, risk tolerance and business risks under management 6. Set kanban limits across risk categories 7. Allow the kanban to signal what type of risk item to pull next, @djaa_dja
  47. 47. Defer Commitment. Banish Backlogs 8. Defer Commitment to manage uncertainty When developing options upstream of the commitment point, classify the item for each 9. The Lean concept of ‚Last dimension of risk under management. at the Responsible Moment‛ is A good mixpoint of commitment –withinpoint of options, providing choices the each risk category is required. The more risks of replenishment under10. ‚Backlog‛ more options will be management the implies committed. required. The greater the min-max upstream Uncommitted items are options. kanban limits will need to be Develop a ‚pool of ideas‛, @djaa_dja
  48. 48. Abandon Prioritization. Banish Priority 11. Prioritization is waste! Prioritization is an exercise to schedule variable for real business Priority is a proxya sequence of items at a risk information. specific point in time. Only at the Do not point ofbehind a proxy. Enable better mask risk commitment can a proper assessment be made making by governance and better decision of what to exposing the business risks under management on pull next. Filter options based throughout the workflow kanban signals. Select from filtered subset, @djaa_dja
  49. 49. Abandon Formulas & Calculations 12. Do not try to give relative weight to risk categories or calculate a risk number using a Without a formula calculating a priority should be impossible! formula Embrace the idea that formulas and proxy Weightings and formulas mask variables such as ‚priority‛ have no place in real sound risk management decisionmay lead us risk information and making to unbalanced, misallocated Transparently expose business risks throughout capacity the system risk management and poor decisions, @djaa_dja
  50. 50. Visualize Risks on the Ticket Decorators Title Typically used to indicated technical or skillset risks H Checkboxes… risk 1 risk 2 risk 3 risk 4 SLA or Target Date, @djaa_dja Letter req complete Color of the ticket Business risk visualizatio n highlighted in green
  51. 51. Visualize Risks on the Board Engineering Ready 2 Expedite Development Ongoing 3 Testing 3 Done Verification Acceptance 1 P1 AB Fixed Date 2 E D MN PB Standard 3 F G GY Intangible 3 I, @djaa_dja DE Deployment Ready ∞ Done
  52. 52. Conclusions, @djaa_dja
  53. 53. Focus on Sources of Delay In low flow efficiency systems, focusing on sources of delay – queues, blocking issues, rework, provides high leverage improvement in observed Lead time performance capability is strongly biased to environmental factors, not technical capabilities, @djaa_dja
  54. 54. Forecast Probabilistically Use observed capability data! Abandon Cartesian Accept that the future is likely to decomposition and speculative strongly reflect past performance. Use historical data todeterministically attempts to forecast probabilistically estimate size, complexity or level of effort, @djaa_dja
  55. 55. Qualitative Approaches are Lean Qualitative approaches to risk assessment are fast, cheap and drive Stop speculating about consensus business value and ROI. There is no crystal ball gazing! Riskrisks Instead assess real analysis is not speculative! and design kanban systems to manage them!, @djaa_dja
  56. 56. Kanban enables more predictable delivery and better risk management Kanban systems address variability in, and focus attention on improving, Exploit predictability in flow! delivery with qualitative risk management. Kanban enables predictable delivery Stop Crystal Ball Gazing!, @djaa_dja
  57. 57. Thank you!, @djaa_dja
  58. 58. About David Anderson is a thought leader in managing effective software teams. He leads a consulting, training and publishing and event planning business dedicated to developing, promoting and implementing sustainable evolutionary approaches for management of knowledge workers. He has 30 years experience in the high technology industry starting with computer games in the early 1980’s. He has led software teams delivering superior productivity and quality using innovative agile methods at large companies such as Sprint and Motorola. David is the pioneer of the Kanban Method an agile and evolutionary approach to change. His latest book is published in June 2012, Lessons in Agile Management – On the Road to Kanban. David is a founder of the Lean Kanban University, a business dedicated to assuring quality of training in Lean and Kanban for knowledge workers throughout the world., @djaa_dja
  59. 59. Acknowledgements Donald Reinertsen directly influenced the adoption of virtual kanban systems and the assessment of cost of delay & shelf-life as criteria for scheduling work into a kanban system. Daniel Vacanti helped with a deeper understanding of Little’s Law and the long term planning approach. Troy Magennis has been inspiring with his work on probabilistic planning, risk management and Monte Carlo simulation. I borrowed the term ‚Stop Crystal Ball Gazing‛ from Chris Matts., @djaa_dja
  60. 60. David J Anderson & Associates, Inc., @djaa_dja
  61. 61. Appendix, @djaa_dja
  62. 62., @djaa_dja Fixed Date Intangible Standard Expedite Example Distributions
  63. 63., @djaa_dja