Strategies for Portfolio Management              Agile 2012             Grapevine, TX           August 14, 2012           ...
Book Giveaway         At end of presentation I will give away         two copies of the Essential Scrum Book         One t...
Portfolio Planning Strategies        Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Rights Res...
Discussion Questions –  Scheduling/Prioritization Variables  When prioritizing your  portfolio, what are the  principal va...
Order Portfolio to MaximizePortfolio-Wide Lifecycle Profits            Copyright © 2007 - 2012, Innolution LLC. All Rights...
Discussion Question –Cost of DelayIf you delay shipping your current project/product one month, what would be the costof t...
Cost of Delay ExampleWhich project should we do first?                                Project A                           ...
Cost of Delay is the TimeDimensionCost of delay is not the only factor toconsider when prioritizing items in theportfolioI...
Discussion Question –Accuracy Versus PrecisionScenario:  Organization does nine-month                                     ...
T-shirt Size Estimating         Size                            Rough Cost RangeExtra Small (XS)                     $10k ...
Applying the Economic Filter               Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved.   21Discussion Qu...
Simple Economic Filter—BenefitShould Far Exceed Cost           Copyright © 2007 - 2012, Innolution LLC. All Rights Reserve...
Discussion Question –Arrival RateWhat happens to a restaurant if a tourbus of hungry seniors unexpectedlyarrives at dinner...
Annual Strategic PlanningScenario:  Typically occurs in fiscal Q3  All projects for next fiscal year are  simultaneously d...
t       Embr ace Emergen         O pportunities              Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved....
Deal with Emergent OpportunitiesQuickly Emergent opportunities arrive continuously and randomly They are perishable—their ...
Discussion Questions –Project SizesHow does project size affect overall portfolioperformance?What happens if you get behin...
Multiple Releases                          Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Righ...
Evaluating Return on Semi Annual    Release Strategy  Feature Value:     All features = $300K/month                       ...
Id le Work Not               I dle Workers                   Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved....
Focus on Idle Work Not IdleWorkers     Watch the Baton Not the Runners†                                                   ...
Discussion Question –WIP LimitWhy should a good restaurateur not seatpaying customers at an available table if30% of the s...
In Agile Portfolio Management, theUnit of Capacity is the TeamWe favor long-lived teams that as a unit have aknown capacit...
Discussion Questions – Team AvailabilityDo you start a project before the full team isavailable to work on it?If so, what ...
Marginal            Economics             Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved.   49Discussion Que...
Marginal Economics          Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved.   51Summary          Copyright ©...
Based on Chapter 16 of the BookEssential Scrum, by Kenny Rubin                              Copyright © 2007 - 2012, Innol...
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Rubin agile 2012_strategies_for_porfolio_management.pdf

  1. 1. Strategies for Portfolio Management Agile 2012 Grapevine, TX August 14, 2012 by Kenny Rubin Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 1 Background of Kenny RubinAuthor Trainer/Coach Experience Trained more than Former Managing 18,000 people in Director Agile/Scrum, SW dev and PM Provide Agile/ My first Scrum project was Scrum coaching to in 2000 for bioinformatics developers and executives Executive Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Rights Reserved. 2
  2. 2. Book Giveaway At end of presentation I will give away two copies of the Essential Scrum Book One to the person with the best tweet of session-relevant content One to the most prolific tweeter of session-relevant content Must include: @krubinagile and #agile2012 in each tweet Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 3Portfolio Planning Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Rights Reserved. 4
  3. 3. Portfolio Planning Strategies Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Rights Reserved. 5 O ptimize for s Lif ecycle Profit Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 6
  4. 4. Discussion Questions – Scheduling/Prioritization Variables When prioritizing your portfolio, what are the principal variables that you use? How do you compare variables to make economically sensible tradeoffs? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 7 Focus on Lifecycle Profits WasteReasonablemeasure of Cycle timebusinessperformance Variability Lifecycle profits EfficiencyProvides commonunit for comparing Customer Sateffects of keyvariables … Source: Donald Reinertsen Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 8
  5. 5. Order Portfolio to MaximizePortfolio-Wide Lifecycle Profits Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 9 y Cost of Dela Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 10
  6. 6. Discussion Question –Cost of DelayIf you delay shipping your current project/product one month, what would be the costof that delay (in lifecycle profits)? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 11Issues with Cost of DelayRarely quantified (<15% of the time)Helps us decide if we should trade moneyfor cycle timeHelps us decide if we should trade cycletime for variability Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 12
  7. 7. Cost of Delay ExampleWhich project should we do first? Project A Project BReturn on Investment 20% 15%Cost of Delay (1 month) $5,000 $75,000 Why? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 13Cost of Delay Profiles Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 14
  8. 8. Cost of Delay is the TimeDimensionCost of delay is not the only factor toconsider when prioritizing items in theportfolioIt is the time dimension that must beconsidered because it affects all otherprioritization variables such as cost,benefit, knowledge, and risk Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 15 Estimate fort Accuracy No Precision Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 16
  9. 9. Discussion Question –Accuracy Versus PrecisionScenario: Organization does nine-month π = 3.1 release cycles 100 candidate applications for each π = 3.1415926535897 release cycle 932384626433832 Marketing asks IT to produce LOEs 795028841971693 (level of effort estimates) for all applications IT spends considerable time trying to make each LOE very precise Oh yeah, the organization will only include 50 projects in next releaseWhat are your thoughts on this scenario? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 17Effort Versus Accuracy WhenEstimating Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 18
  10. 10. T-shirt Size Estimating Size Rough Cost RangeExtra Small (XS) $10k to $25kSmall (S) $25k to $50kMedium (M) $50k to $125kLarge (L) $125k to $350kExtra Large (XL) >$350k (an example) Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 19 Economic Filtering Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 20
  11. 11. Applying the Economic Filter Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 21Discussion Question –Economic FilteringScenario A company is trying to decide if a development effort should be approved They are debating whether it will cost $70k or $75k. Apparently at $70k it would be approved, at $75k it would notWhat is your assessment of this situation? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 22
  12. 12. Simple Economic Filter—BenefitShould Far Exceed Cost Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 23 Ma nage Project Arrival Rate Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 24
  13. 13. Discussion Question –Arrival RateWhat happens to a restaurant if a tourbus of hungry seniors unexpectedlyarrives at dinner time? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 25Want To Balance Portfolio Inflowand Outflow Rates Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 26
  14. 14. Annual Strategic PlanningScenario: Typically occurs in fiscal Q3 All projects for next fiscal year are simultaneously dropped into the portfolioWhat are the issues with this approach?What would you do to address theproblem? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 27Introduce Smaller Products/Projects More FrequentlyTraditional approach violates theprinciples of: Keeping planning options open until the last responsible moment Using economically sensible bath sizesAddressed by: Introducing smaller products to the portfolio on a more frequent basis Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 28
  15. 15. t Embr ace Emergen O pportunities Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 29Discussion Questions –Emergent OpportunitiesHow quickly are you able to exploit anemergent opportunity?How disruptive are such opportunities toyour portfolio-management process? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 30
  16. 16. Deal with Emergent OpportunitiesQuickly Emergent opportunities arrive continuously and randomly They are perishable—their values decay over time (frequently exponentially) Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 31 Sm aller More s e Fre quent Releas Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 32
  17. 17. Discussion Questions –Project SizesHow does project size affect overall portfolioperformance?What happens if you get behind the large farmvehicle on a single lane country road?How do the lifecycle profits of a productcompare between one large release andmultiple, smaller releases? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 33Single Release Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Rights Reserved. 34
  18. 18. Multiple Releases Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Rights Reserved. 35 Evaluating Return on Single Release Strategy Feature Value: All features = $300K/month Annual Release Return on Investment 1/2 features = $200k/month 1/3 features = $150k/month $4,000,000 Features begin earning money 1 month after release $3,000,000 Each month of development costs $100K $2,000,000 Each release costs $100K $1,000,000 $0Single Release 1 4 7 10 13 16 19 2212 months ($1,000,000) total cost: $1.3 M total 2 year return: $3.6 M ($2,000,000) net 2 year return: $2.3 M Months Cash Investment: $1.3 M Internal Rate of Return: 9.1% Example based on prior work by Jeff Patton Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 36
  19. 19. Evaluating Return on Semi Annual Release Strategy Feature Value: All features = $300K/month Semi-Annual Release Return on Investment 1/2 features = $200k/month 1/3 features = $150k/month $4,000,000 Features begin earning money 1 month after release $3,000,000 Each month of development costs $100K $2,000,000 Each release costs $100K $1,000,000 $0Semi Annual Release 1 4 7 10 13 16 19 226 month increments ($1,000,000) total cost: $1.4 M total 2 year return: $4.8 M ($2,000,000) net 2 year return: $3.4 M Months Cash Investment: $.7 M Internal Rate of Return: 15.7% Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 37 Evaluating Return on Quarterly Release Strategy Feature Value: All features = $300K/month Quarterly Release Return on Investment 1/2 features = $200k/month 1/3 features = $150k/month $4,000,000 Features begin earning money 1 month after release $3,000,000 Each month of development costs $100K $2,000,000 Each release costs $100K $1,000,000 $0Quarterly Release ($1,000,000) 1 4 7 10 13 16 19 223 month increments total cost: $1.6 M ($2,000,000) total 2 year return: $5.25 M net 2 year return: $3.65 M Months Cash Investment: $0.45 M Internal Rate of Return: 19.5% Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 38
  20. 20. Id le Work Not I dle Workers Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 39 Discussion Question – Addressing Available Capacity Scenario 100% We have started working on items in our portfolio, but we have some team Capacity members who are not yet at 100% capacityShould we start moreprojects from theportfolio to get them to100% capacity? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 40
  21. 21. Focus on Idle Work Not IdleWorkers Watch the Baton Not the Runners† †Source: Larman & Vodde Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 41 Establish WIP Limit Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 42
  22. 22. Discussion Question –WIP LimitWhy should a good restaurateur not seatpaying customers at an available table if30% of the servers called in sick thatevening? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 43What is a WIP Limit?A work-in-process (WIP) limit would statehow many projects we are willing to haveactive at the same timeGoal is to match WIP with availablecapacity Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 44
  23. 23. In Agile Portfolio Management, theUnit of Capacity is the TeamWe favor long-lived teams that as a unit have aknown capacity to deliver valueDetermine capacity in terms of teams Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 45 Complete, s Engaged Team Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 46
  24. 24. Discussion Questions – Team AvailabilityDo you start a project before the full team isavailable to work on it?If so, what are the consequences? Team A Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 47 Wait Until Complete Team is Available Don’t start a new project with a partial team Wait until you have at least one full team Preferably wait until you have all necessary teams Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 48
  25. 25. Marginal Economics Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 49Discussion Question –Would You Keep Spending?If you spend the first dollar ondeveloping a product, is there anycircumstance under which you wouldterminate development? Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 50
  26. 26. Marginal Economics Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 51Summary Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 52
  27. 27. Based on Chapter 16 of the BookEssential Scrum, by Kenny Rubin Copyright © 2007 - 2012, Innolution LLC. All Rights Reserved. 53Contact Info for Kenny RubinEmail: krubin@innolution.comWebsite: www.innolution.comPhone: (303) 827-3333LinkedIn: www.linkedin.com/in/kennethrubinTwitter: www.twitter.com/krubinagileEssential Scrum: A Practical www.essentialscrum.comGuide to the Most PopularAgile ProcessComparative Agility Website www.comparativeagility.com Copyright © 2007-2012, Innolution, LLC or Mountain Goat Software, Inc. All Rights Reserved. 54

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