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The ROI of Agile Methods
The difficulty in innovating
Innovation is a structured process that
demands research, experimentation,
mobilization and iteration. Companies must
decide which technological trends it wants to
follow, according to its perception of the
market to fully complete this cycle.
Human beings have difficulty in processing
large volumes of information and prefer to
repeat decisions or to work with limited
options (Ariely, 2008) and perhaps that is
why we feel more comfortable working with
fixed structures, annual planning and
processes, instead of monitoring and
adapting our strategies as disruptions arise.
Fixed Structures, either functional,
projected or matrix (PMI, 2013), do not take
into account that changing a business model
requires grouping profiles of multiple
departments, modifying the form of
organization for producing new days for
customers.
Annual planning, whether strategies,
budgets or project roadmaps, is generally
oriented around the objectives outlined in the
previous year, lacking flexibility to react to
market changes.
Task-oriented processes have been
dominant since the days of Taylor and Fayol
and require seeking ways of enabling
business survival.
While remaining in the current modus
operandi, the observation of client
experience, competitors and alternative
solutions become secondary causing
discrepancy in the company.
Agile methods
Considering that a human being is incapable
of foreseeing all the possible scenario
changes that will occur in the following year,
agile methods are focused on customer
engagement, interactive development, self-
organized teams and adaptation to changes
(Agile Manifesto, 2009).
This type of work involves interactive and
incremental scopes, delivering results that
bring the largest business value. The
projects focus on objectives, allow planning
modifications, as many as necessary, until
the desired result is achieved. Broader
definitions and short-term, focused planning
are used, after which an ascertainable
delivery is expected.
Agile Methods Gains
The first gain obtained with agile methods is
the construction of temporary organizations.
Breaking the structural barrier and
monitoring multidisciplinary teams is
equating conventional companies to product
and startup companies. This cultural change
requires the capacity to defy the fixed
structures to mobilize people and resources,
no longer grouping by skill, but by the
operations that have to be fulfilled.
The second gain is related to cyclical
planning. Annual plans are based on
estimates, with premises and restrictions
identified during planning. It is well known
that most of the premises are not met
throughout the year, either because of
market changes, employee turnover, lack of
financial resources, etc. More
comprehensive planning, executed in short
cycles, allows better adaptation to direction
changes in the face of internal and external
fluctuations.
The third gain is the transformation of
estimate culture into a results-oriented
culture. Substituting estimates for results
requires the understanding that time is an
inaccurate measurement. Using proportional
scales, such as the Fibonacci sequence to
estimate work increases accuracy and
reduces planning time, allowing the
company to more easily adapt to changes.
What is the ROI of Agile Methods?
The ROI (return on investment) measures
the effectiveness of an investment through
the relationship between the return and the
amount invested over time. According to
Rico, it is necessary to consider the ratio of
agile method projects versus traditional ones
and to observe costs, deadlines,
productivity, quality and client satisfaction.
The study references gains between 38-
100% for deadlines, 25-80% for productivity,
83% for client satisfaction and 74% for team
moral.
Measuring ROI of agile methods is not trivial.
In open scope projects, fixed time and cost
(Rodrigues, 2016), ability to prioritize
business value and make continuous
deliveries are differentials that make project
self-financing possible. Above all, it must
reflect on how to react to technological
disruptions. For a contemporary company, it
is imperative to keep products and services
up-to-date in the face of competitors and
new technologies. An unused opportunity or
a delayed entrance into a new market will
only be noticed in the P&L, when losses are
irreversible.
Instead of making accounts to measure the
return on invested amounts, it is better to
follow market share and look for potential
disruptions that can boost or remodel the
market of operation and most importantly,
keep flexible structures, agile work models
and focus on results.
Eli Rodrigues
Digital Experience Manager
everis
References
• Agile Manifesto website. Manifesto ágil. 2009.
• ARIELY, Dan. Previsivelmente irracional. Editora Campus, 2008.
• BASTOS, Ercília. O que é a curva de aprendizagem?. Portal Gestão, 2015.
• COOPER, Sean. Whatever happened to Netscape?. Engadget, 2014.
• GROSSMAN, Rhys. The industries that are being disrupted the most by digital. HBR, 2016.
• HARTMANS, Avery. 15 fascinating facts you probably didn’t know about Amazon. Business
Insider, 2017.
• HUNG, Dennis. 5 major tech companies that failed and why. Innovation enterprise, 2017.
• MERIGO, Carlos. Como a Netflix destruiu a Blockbuster. B9, 2011.
• MULLINS, Jenna. This is how Facebook has changed over the past 12 years. ENews, 2016.
• THANGAVELU, Poonkulali. Companies that went bankrupt from innovation lag. Investopedia.
2001.
• SATELL, Greg. A look back at why blockbuster really failed and why it didn’t have to. Forbes,
2014.
• LOOMER, Jon. Detailed history of Facebook changes 2004-12. Jon Loomer, 2012.
• McALONE, Nathan. Netflix’s website in 1999 looked nothing like it does today. Business
Insider, 2016.
• MUI, Chunka. How Kodak failed. Forbes, 2012.
• ORIBE, Claudemir. PDCA: origem, conceitos e variantes dessa ideia de 70 anos. Qualypro,
2009.
• SILVERTHORNE, Sean. How technological disruption changes everything. HBS, 2001.
• PMI, Um guia do conhecimento em gerenciamento de Projetos. Guia PMBOK® 5ª ed. Project
Management Institute, 2013.
• RICO, David. What is the ROI of Agile vs. Traditional Methods?. Davidfrico.com.
• RICO, David. What is the return of investment of agile methods?. Research Gate, 2017.
• RODRIGUES, Eli. Posso derivar story points em horas?. Gestão de Projetos na prática, 2017.
• RODRIGUES, Eli. Como a conformidade social pode afetar os negócios. Gestão de Projetos
na prática, 2016.
• Rodrigues, Eli. Escopo variável, tempo e custos fixos. Gestão de Projetos na prática, 2016.
• Vocoli. 10 companies that failed to innovate and what happened to them. Vocoli, 2014.

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The ROI of Agile Methods

  • 1. The ROI of Agile Methods The difficulty in innovating Innovation is a structured process that demands research, experimentation, mobilization and iteration. Companies must decide which technological trends it wants to follow, according to its perception of the market to fully complete this cycle. Human beings have difficulty in processing large volumes of information and prefer to repeat decisions or to work with limited options (Ariely, 2008) and perhaps that is why we feel more comfortable working with fixed structures, annual planning and processes, instead of monitoring and adapting our strategies as disruptions arise. Fixed Structures, either functional, projected or matrix (PMI, 2013), do not take into account that changing a business model requires grouping profiles of multiple departments, modifying the form of organization for producing new days for customers. Annual planning, whether strategies, budgets or project roadmaps, is generally oriented around the objectives outlined in the previous year, lacking flexibility to react to market changes. Task-oriented processes have been dominant since the days of Taylor and Fayol and require seeking ways of enabling business survival. While remaining in the current modus operandi, the observation of client experience, competitors and alternative solutions become secondary causing discrepancy in the company. Agile methods Considering that a human being is incapable of foreseeing all the possible scenario
  • 2. changes that will occur in the following year, agile methods are focused on customer engagement, interactive development, self- organized teams and adaptation to changes (Agile Manifesto, 2009). This type of work involves interactive and incremental scopes, delivering results that bring the largest business value. The projects focus on objectives, allow planning modifications, as many as necessary, until the desired result is achieved. Broader definitions and short-term, focused planning are used, after which an ascertainable delivery is expected. Agile Methods Gains The first gain obtained with agile methods is the construction of temporary organizations. Breaking the structural barrier and monitoring multidisciplinary teams is equating conventional companies to product and startup companies. This cultural change requires the capacity to defy the fixed structures to mobilize people and resources, no longer grouping by skill, but by the operations that have to be fulfilled. The second gain is related to cyclical planning. Annual plans are based on estimates, with premises and restrictions identified during planning. It is well known that most of the premises are not met throughout the year, either because of market changes, employee turnover, lack of financial resources, etc. More comprehensive planning, executed in short cycles, allows better adaptation to direction changes in the face of internal and external fluctuations. The third gain is the transformation of estimate culture into a results-oriented culture. Substituting estimates for results requires the understanding that time is an inaccurate measurement. Using proportional scales, such as the Fibonacci sequence to estimate work increases accuracy and reduces planning time, allowing the company to more easily adapt to changes. What is the ROI of Agile Methods? The ROI (return on investment) measures the effectiveness of an investment through the relationship between the return and the amount invested over time. According to Rico, it is necessary to consider the ratio of agile method projects versus traditional ones and to observe costs, deadlines, productivity, quality and client satisfaction. The study references gains between 38- 100% for deadlines, 25-80% for productivity, 83% for client satisfaction and 74% for team moral. Measuring ROI of agile methods is not trivial. In open scope projects, fixed time and cost (Rodrigues, 2016), ability to prioritize business value and make continuous deliveries are differentials that make project self-financing possible. Above all, it must reflect on how to react to technological disruptions. For a contemporary company, it is imperative to keep products and services up-to-date in the face of competitors and new technologies. An unused opportunity or
  • 3. a delayed entrance into a new market will only be noticed in the P&L, when losses are irreversible. Instead of making accounts to measure the return on invested amounts, it is better to follow market share and look for potential disruptions that can boost or remodel the market of operation and most importantly, keep flexible structures, agile work models and focus on results. Eli Rodrigues Digital Experience Manager everis References • Agile Manifesto website. Manifesto ágil. 2009. • ARIELY, Dan. Previsivelmente irracional. Editora Campus, 2008. • BASTOS, Ercília. O que é a curva de aprendizagem?. Portal Gestão, 2015. • COOPER, Sean. Whatever happened to Netscape?. Engadget, 2014. • GROSSMAN, Rhys. The industries that are being disrupted the most by digital. HBR, 2016. • HARTMANS, Avery. 15 fascinating facts you probably didn’t know about Amazon. Business Insider, 2017. • HUNG, Dennis. 5 major tech companies that failed and why. Innovation enterprise, 2017. • MERIGO, Carlos. Como a Netflix destruiu a Blockbuster. B9, 2011. • MULLINS, Jenna. This is how Facebook has changed over the past 12 years. ENews, 2016. • THANGAVELU, Poonkulali. Companies that went bankrupt from innovation lag. Investopedia. 2001. • SATELL, Greg. A look back at why blockbuster really failed and why it didn’t have to. Forbes, 2014. • LOOMER, Jon. Detailed history of Facebook changes 2004-12. Jon Loomer, 2012. • McALONE, Nathan. Netflix’s website in 1999 looked nothing like it does today. Business Insider, 2016. • MUI, Chunka. How Kodak failed. Forbes, 2012. • ORIBE, Claudemir. PDCA: origem, conceitos e variantes dessa ideia de 70 anos. Qualypro, 2009. • SILVERTHORNE, Sean. How technological disruption changes everything. HBS, 2001. • PMI, Um guia do conhecimento em gerenciamento de Projetos. Guia PMBOK® 5ª ed. Project Management Institute, 2013. • RICO, David. What is the ROI of Agile vs. Traditional Methods?. Davidfrico.com. • RICO, David. What is the return of investment of agile methods?. Research Gate, 2017. • RODRIGUES, Eli. Posso derivar story points em horas?. Gestão de Projetos na prática, 2017. • RODRIGUES, Eli. Como a conformidade social pode afetar os negócios. Gestão de Projetos na prática, 2016. • Rodrigues, Eli. Escopo variável, tempo e custos fixos. Gestão de Projetos na prática, 2016. • Vocoli. 10 companies that failed to innovate and what happened to them. Vocoli, 2014.