From: The Project Management Conference, Greece 2017 July 11th "The Lean Shift... from On Time, On Scope, on Budget, to Maximum Value, Shortest Time, Minimum Risk " As project managers, we have often judged our success by whether we delivered what the customer said they wanted, within the time and the budget specified. Given that less than a third of all projects meet such criteria, we would have some justification for pride if we always achieved this! However, in increasingly complex and unpredictable business environments, are these the right criteria by which to judge project management success? The Agile and Lean movements point to a different approach, with a different set of measures to indicate success. Why are organisations increasingly turning to such approaches, and why would “on time, on scope on budget” be a less than perfect measure? Can it even make sense – as is often the case in agile projects – to start work before the requirements have even been finalised? This presentation examines the reasons for focusing on continuous delivery of value, rather than fixed requirements. It introduces the principles and practices of Kanban as a general approach to managing and monitoring continuous value-adding processes, and shows how the metrics inherent to kanban systems provide common ways to assess and compare projects, even if the projects use widely different processes.

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The Lean SHIFT
… from “On Time, On Scope, On Budget” to
“Maximum Value, Shortest Time, Minimum Risk”
Dr Andy Carmichael

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2017 July 11th 14.35 – 15.30 The Lean Shift... from On Time, On Scope, on Budget, to Maximum Value,
Shortest Time, Minimum Risk (12 ο ΕΤΗΣΙΟ ΣΥΝΕΔΡΙΟ ΓΙΑ ΤΟ PROJECT MANAGEMENT)
As project managers, we have often judged our success by whether we delivered what the customer said
they wanted, within the time and the budget specified. Given that less than a third of all projects meet such
criteria*, we would have some justification for pride if we always achieved this! However, in increasingly
complex and unpredictable business environments, are these the right criteria by which to judge project
management success? The Agile and Lean movements point to a different approach, with a different set of
measures to indicate success. Why are organisations increasingly turning to such approaches, and why would
“on time, on scope on budget” be a less than perfect measure? Can it even make sense – as is often the case in
agile projects – to start work before the requirements have even been finalised?
This presentation examines the reasons for focusing on continuous delivery of value, rather than fixed
requirements. It introduces the principles and practices of Kanban as a general approach to managing and
monitoring continuous value-adding processes, and shows how the metrics inherent to kanban systems provide
common ways to assess and compare projects, even if the projects use widely different processes. Drawing on
Toyota’s approach to lean manufacturing – where “kanbans” were first used to control when to create items, in
the right quantity, at the right time – the Kanban Method focuses on “knowledge work” (such as software
product development), with similar aims to limit work in progress and tailor work processes to respond rapidly
to the customers’ needs and purposes. While managing cost is essential, the reason for carrying out projects
is to realise value. With projects in competitive business contexts, value can only be assessed when
customers receive and react to the products. This in turn indicates that short delivery cycles,
and minimum lead times for smaller items delivered within these cycles, is the key to
responding to market feedback, and maximising the value returned.
* According to Standish Group reports between 2011 and 2015.

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@andycarmich
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I teach Kanban!

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Some themes:
• Project paradigm versus value-flow paradigm
• Why shift to Value, Time and Risk
• What is Kanban?
• How kanban systems scale?
• What’s the problem with “irrefutable demand”?
• Managing systems for flow rather than utilisation
• The primacy of time in investment decision-making:
• Focus on reducing “Lead Time” to reduce risk
• Understand “cost of delay” as an economic basis for rational work
management
• Portfolio management is investment management

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• Project paradigm is our default
thinking throughout business…
• Define scope and time horizon (constraints)
• Estimate schedule, budget and risk
• Manage slack to ensure on-time-on-scope-
on-budget
“In complex domains (e.g. multiple overlapping products in
competitive markets), a project-centric model of the world is
profoundly unhelpful!”
Because this defines
a different problem
to the real one!

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• Project paradigm is our default
thinking throughout business…
• Define scope and time horizon (constraints)
• Estimate schedule, budget and risk
• Manage slack to ensure on-time-on-scope-
on-budget
“In complex domains (e.g. multiple overlapping products in
competitive markets), a project-centric model of the world is
profoundly unhelpful!”
• Value-flow paradigm
• Manage investments to maximise probability of value realisation
• Manage risk on the value side as well as cost
• Time is of the essence

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• Project paradigm is our default
thinking throughout business…
• Define scope and time horizon (constraints)
• Estimate schedule, budget and risk
• Manage slack to ensure on-time-on-scope-
on-budget
“In complex domains (e.g. multiple overlapping products in
competitive markets), a project-centric model of the world is
profoundly unhelpful!”
• Value-flow paradigm
• Manage investments to maximise probability of value realisation
• Manage risk on the value side as well as cost
• Time is of the essence
https://en.wikipedia.org/wiki/Cynefin_framework#/media/File:Cynefin_as_
of_1st_June_2014.pn

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What is Kanban?
Principles, General Practices, How to Start, How to Scale.

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… of change management:
1. Start with what you do now
2. Agree to pursue improvement through
evolutionary change
3. Encourage acts of leadership at every level
Don’t start by changing your
process, nor by re-
organising…
Start by seeing your work
differently

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… of service delivery:
1. Focus on the customers’ needs and
expectations
2. Manage the work; not the workers
3. Evolve policies to improve customer
outcomes
Don’t start by changing
other people‘s work…
Start from customers’ needs
and how your service can be
fit for purpose

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1. See your work as a flow of value to your customer
2. Start from where you are
3. Visualize your work, your process and your policies
4. Adopt validated changes that improve things

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1. Visualize
2. Limit work in progress
3. Manage flow
4. Make policies explicit
5. Feedback loops
6. Improve and evolve

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Feature
Selected
2 - 5
Pool of
Ideas
User Story
Identified
30
User Story
Preparation
In
Progres
s
Ready
User Story
Development
In
Progres
s
Ready
(Done)
Feature
Acceptance
8
In
Progres
s
Ready
Deploy
- ment
5
Delivered
Feature
Preparation
3 - 10
In
Progres
s
Ready
Discarded
Epic
511
Epic
606
Epic
287
Epic
329
Epic
439
Epic
562
Epic
478
Epic
431
Story
602-01
Epic
335
Epic
302
Epic
602
Epic
512
Story
602-04
Story
602-02
Story
602-06
Story
602-03
Story
602-05
Story
302-03
Story
302-01
Story
302-07
Story
302-02
Story
302-08
Story
302-06
Story
335-09
Story
335-10
Story
335-04
Story
335-08
Story
335-03
Story
335-01
Story
512-04
Story
512-07
Story
512-02
Story
512-05
Story
512-03
Story
512-06
Story
335-06
Story
335-05
Story
335-02
Story
512-01
Story
335-07
Story
302-09
Story
303-05
Story
302-04
Epic
221
Epic
662
Epic
651
Epic
589
Epic
444
Epic
609
Epic
577
Epic
362
Epic
468
Epic
401
Epic
582
Epic
521
Epic
339
Epic
276
Epic
694
Epic
213
Epic
274
Epic
287
Epic
388
Epic
419
Epic
386
Epic
294
1
5
1
5
Policy
Business case
showing value, cost
of delay, size
estimate and design
outline.
Policy
Selection at
Replenishment
meeting chaired
by Product
Director.
Policy
As per
“Definition of
Done” (see…)
Policy
Small, well-
understood,
testable,
agreed with PD
& Team
Policy
Risk assessed per
Continuous
Deploy-ment policy
(see…
Lead Time

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1. See your organization as a network of
interdependent services
2. Scale out sequentially, service by service
3. Design each service independently from
first principles
4. Use feedback loops through the
management system to achieve balance
and improve service delivery to
customers

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The 3 Dimensions
of Scaling Kanban
Chains: expand the
scope (before / after)
Portfolio
Product
Service
Personal
Products - Goals
Strategic Direction
Features - Value
Product Management
Stories - Delivery
Day to day Leadership
Tasks - Focus
Individual Professionalism
WEEKS/
DAYS
DAYS/
HOURS
MONTHS/
WEEKS
YEARS/
QUARTERS
Hierarchies: related work
items with different sizes,
timescales and levels of
decision-making (scale-free
Kanban)
Networks: management
of interdependent services
at the same level

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Value, Time and Risk
What else matters?

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Value
Lead
Time
The new iron triangle?
• Fit for purpose quality (non-negotiable)
• Maximum value (visible only in retrospect)
• Minimum lead time (the immediate imperative)
Quality

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Quality

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• Protecting loss of profits
• Increased turnover
• Increased learning
• Reduced risk
• Cost saving
• New market option
• Cover competitors’ moves
• Staff retention
• Process improvement
• etc…
How would you put
a monetary value
on each of these?
Value

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Source: David J Anderson http://www.slideshare.net/ScrumTrek/david-anderson-
enterprise-service-planning-kanban
• Protecting loss of profits
• Increased turnover
• Increased learning
• Reduced risk
• Cost saving
• New market option
• Cover competitors’ moves
• Staff retention
• Process improvement
• etc…

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• Focus on reducing “Lead
Time” to reduce risk and
improve feedback
• Understand “cost of delay”
as an economic basis for
rational work scheduling

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• Cadence versus
deadline
• Effect of artificial
deadlines
• Discovering the
real deadlines
(where Cost of
Delay changes
abruptly)
From Alexei Zheglov @az1 -
https://twitter.com/az1/status/862052219226664961

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Value flow from a new development
with no delay, 10-week, and 20-weeks delay

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Delay Cost & Urgency/CoD Profile

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• How urgent is it to
start this item?
• Pay attention to the
“last responsible
moment” for starting
a work item (say, 85%
probability point)

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• The likelihood of event X occurring
• The effect of event X occurring – f(X)
• The number of times you get to make similar
decisions
• Optimising at subsystem level is dramatically less
effective
• Entrepreneurial organisation
• The right level of exposure to risk (survivable risk)
• Avoidance of deadly risk (non-survivable risk)

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• Project A:
• 25% probability of $1M LOSS
• 50% probability of $1M PROFIT
• 25% probability of $8M PROFIT
• Project B:
• 25% probability of $1M PROFIT
• 50% probability of $2M PROFIT
• 25% probability of $2M PROFIT
Larry Maccherone: Probabilistic Decision Making
(Maccherone, 2015)
Which project is
better…
… for your company?
…for your career?
-($1Mx0.25)
+($1Mx0.5)
+($8Mx0.25)
= $2.25M
+($1Mx0.25)
+($2Mx0.5)
+($2Mx0.25)
= $1.75M

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• Project A:
• 25% probability of $1M LOSS
• 50% probability of $1M PROFIT
• 25% probability of $8M PROFIT
• Project B:
• 25% probability of $1M PROFIT
• 50% probability of $2M PROFIT
• 25% probability of $2M PROFIT
Larry Maccherone: Probabilistic Decision Making
(Maccherone, 2015)
If you only get 1 project:
Project B better 75% of the
time
If you get ∞ projects:
Project A better 100% of
the time
How many projects do you
need for Project B to be
better more often than
not?
Guess…

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Larry Maccherone: Probabilistic Decision Making
(Maccherone, 2015)

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• Yield / ROI (% average annual rate of
return for initial investment)
• Duration (weighted average of the times
until those cash flows are received)
• Risk (the potential that anticipated
cashflows will not be realised)
• Options
• Hedging
• Payback functions
• It’s not about ranking!
• Complexity (wicked problems)
• There are no good answers
• The path will be created with every
step
• The art of learning how to play
• Emergent practice

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Chains
Hierarchies
Slides: slideshare
• Project paradigm is weak for complex
domains
• Shift to Value, Time and Risk
• Kanban focuses on flow of value to
customers
• Kanban starts from what you are doing
now
• Kanban scales service by service
• Quality, Value, Time
• Fitness for purpose
• Multiple dimensions of value
• Lead Time, Cost of Delay
• Portfolio management is investment
management

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Questions and
Discussion
Next steps…

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Anderson, David J. 2010. Kanban: Successful Evolutionary Change for Your
Technology Business. United States: Blue Hole Press.
Anderson, David J. 2012. "Thoughts on the value of liquidity as a metric."
November 27. http://www.djaa.com/thoughts-value-liquidity-metric
Anderson, David J. 2015. Enterprise services planning scaling the benefits of
Kanban. http://2015.agileworld.de/system/files/vortrag/15-06-
29%20EnterpriseServicesPlanning_david%20 anderson_0.pdf
Anderson, David J., and Andy Carmichael. 2016. Essential Kanban Condensed.
United States: Lean Kanban University. http://leankanban.com/guide
Brodzinski, P. 2015. Portfolio Kanban Board. [Blog] Software Project
Management: Lean, Agile and Kanban. Available at:
http://brodzinski.com/2015/04/portfolio-kanban-board.html
Brougham, Greg. 2015. The Cynefin Mini-Book: An Introduction to Complexity
and the Cynefin Framework. United States: C4Media for InfoQ.
Kanban (development) - Wikipedia. (2017, June 21). Kanban (development) -
Wikipedia. Wikipedia. Retrieved July 7, 2017, from
https://en.wikipedia.org/wiki/Kanban_(development)
Maccherone, Larry. 2015. "Probabilistic Decision Making." November 6.
http://www.slideshare.net/.../larry-maccherone-probabilistic-decision-making
Magennis, T. (2011, October 25). Forecasting and Simulating Software
Development Projects. FocusedObjective.com.
Maccherone, L. (2014). The Impact of Lean and Agile Quantified. Retrieved July
7, 2017, from http://www.infoq.com/presentations/agile-quantify
Matts, Chris. 2013. "Introducing staff liquidity (1 of n)."
https://theitriskmanager.wordpress.com/ 2013/11/24/introducing-staff-
liquidity-1-of-n/
Matts, C. 2015. Weighted lead time. https://theitriskmanager.
wordpress.com/2015/07/22/weighted-lead-time/
Modig, Niklas and Pär Åhlström. 2012. This Is Lean: Resolving the Efficiency
Paradox. 1st ed. Stockholm: Rheologica Publishing.
Morris , Ben, Simon Notley, Katharine Boddington, and Tim Reesa. 2001.
“External Factors Affecting Motorway Capacity”, 6th International Symposium
on Highway Capacity and Quality of Service, pp 69–7. Stockholm, Sweden June
28 – July 1.
Reinertsen, Donald G. 2009. The principles of product development flow:
second generation lean product development. Redondo Beach, CA: Celeritas
Publishing.
Stoop, Edwin, 2016. A sketch of the Cynefin framework, a decision-making tool
used in management consultancy, Sketching Maniacs,
https://commons.wikimedia.org/wiki/File:Cynefin_framework_by_Edwin_Stoo
p.jpg
Taleb, N. N. (2012, December 12). Understanding Is A Poor Substitute For
Convexity (Antifragility). Edge.org. Retrieved July 7, 2017, from
https://www.edge.org/conversation/nassim_nicholas_taleb-understanding-is-
a-poor-substitute-for-convexity-antifragility
Taleb, N. N. (2013, June 6). Antifragile. Penguin
Books Limited.
Slides: slideshare

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Physical book available
from Amazon and other
booksellers. PDF can be
downloaded from
leankanban.com/guide
Template can be
downloaded from
goo.gl/Ho5nz8!
Slides: goo.gl/k399tT