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1Copyright © 2014, Innolution, LLC. All Rights Reserved.
Agile IS Risk Management
April, 2014
by Ken Rubin
2
Author
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Background of Ken Rubin
Trainer/Coach
Trained more than
20,000 people in
Agile/Scrum, SW
dev and PM
Provide Agile/
Scrum coaching to
developers and
executives
Experience
My first Scrum project was
in 2000 for bioinformatics
Former Managing
Director
Executive
3Copyright © 2014, Innolution, LLC. All Rights Reserved.
Agenda
Overview
Risk Management
Assumptions
Agile Principle-
based Risk
Management
Uncertain Events
Traditional Risk
Management
Maximize
Expected
Monetary Value
Using Agile to
Avoid Some
Uncertain
Situations
4Copyright © 2014, Innolution, LLC. All Rights Reserved.
Overview
5
Our goal today is to discuss…
Copyright © 2014, Innolution, LLC. All Rights Reserved.
How applying core agile principles make the
development process robust and at times antifragile to
the disorder of uncertain events, allowing us to avoid
harm and reap the benefits of uncertainty, without the
need for heavyweight risk management processes
6
What are we interested in?
Copyright © 2014, Innolution, LLC. All Rights Reserved.
When appropriate, applying simple traditional risk
management techniques in a parsimonious
(simplest possible) way
Applying agile principles to avoid the self-creation
of inherently risky or uncertain situations
Applying agile principles to avoid the harm (be
robust) and reap the benefits (be antifragile) from
uncertainty in our environment
7
Many words for the same concept
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Risk
Randomness
Volatility
Variability
Uncertainty
8
For our purposes we will treat
them the same
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Boils down to a lack of
knowledge regarding
uncertain events
9Copyright © 2014, Innolution, LLC. All Rights Reserved.
Uncertain Events
10
Example uncertain events
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Earthquake disables California data center housing
the development servers
Vendor fails to deliver a component when promised
Application fails to scale to 10m current users
Changing requirements
Building the wrong product
Knowledgeable people leaving company
11Copyright © 2014, Innolution, LLC. All Rights Reserved.
Typical mental model of uncertain
events
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
12Copyright © 2014, Innolution, LLC. All Rights Reserved.
Maximize Expected
Monetary Value
13
We strive to…
Copyright © 2014, Innolution, LLC. All Rights Reserved.
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
Goal is to maximize
the “economic
benefit” in the
presence of
uncertainty
14
Fragile, Robust, Antifragile
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Fragile
Harmed by
disorder
Robust
Resilient to
disorder
Antifragile
Benefits from
disorder
AgileWaterfall
15
Goal is NOT to eliminate
uncertainty, risk, or variability
Copyright © 2014, Innolution, LLC. All Rights Reserved.
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
Not trying to
eliminate all
uncertainty; taking
risks is central to
developing
innovative solutions
and creating value
Need to distinguish
between variability
that increases
economic value and
that which
decreases it
Focusing just on probabilities is
focusing on the item we are
often least able to predict
Working with our exposure is
typically the best way to
maximize the economic outcome
16
Asymmetric payoffs create
economic value or harm
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Positive asymmetric
payoff (antifragile)
anything that has more
upside than downside
from random events
(variability)
Negative asymmetric
payoff (fragile)
anything that has more
downside than upside
from random events
(variability)
17Copyright © 2014, Innolution, LLC. All Rights Reserved.
Risk Management
Assumptions
18Copyright © 2014, Innolution, LLC. All Rights Reserved.
Assumptions in traditional risk
management
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
That you know
about the events
That you can predict
the probabilities
That your actions can
change the probabilities
19
Operate in a complex domain
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Cynefin Framework, by David Snowden
20
Unknown unknowns
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These are the unknown
unknowns
Many uncertain events aren’t
predictable proactively
21
Some are inconsequential
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Don’t design a risk management system to
deal with these, and even if we did these
items would not be in our tables and charts
22
Others are Black Swans
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Large-scale unpredictable
(or very hard to predict)
events of massive consequences
23
Black Swan characteristics
Copyright © 2014, Innolution, LLC. All Rights Reserved.
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
If you could predict one, the
probability would be
estimated to be so low as to
make it dismissible (they are
rare events)
The consequences
if one occurs can
be catastrophic
There is likely nothing you
can do to change the
probability of occurrence
before the first occurrence
Most of the time
you will never see
them coming
You need to focus
here, but you likely
can’t or won’t
24Copyright © 2014, Innolution, LLC. All Rights Reserved.
Exercise – Identifying Black Swans
Identify Black Swans that you have seen
affect software development efforts
25
Dealing with Black Swans
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Leverage Agile principles to be robust or antifragile
to things we can’t predict or the very improbable
Focus our efforts on modifying our exposure the
Black Swans instead of trying to quantify their
statistical properties
26
We know some events will happen, but
we can’t predict or change probabilities
Copyright © 2014, Innolution, LLC. All Rights Reserved.
We can predict earthquakes
will happen in California
We can’t predict the occurrence of a specific
earthquake of a given magnitude, or change the
probability of it happening
We can describe the consequences to our
business via a disruption in our California-based
data center if we are affected by an earthquake
27
Adjust your exposure
Copyright © 2014, Innolution, LLC. All Rights Reserved.
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
When you can’t change
the probability of
occurrence…
That change your
exposure to the event
You take actions…
28
More sophisticated process does
NOT solve this problem
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Mistaken belief that we need better computation in
order to more accurately predict the event and
figure out the probabilities
More effective approach is to modify your exposure
and learn to get out of trouble fast
29Copyright © 2014, Innolution, LLC. All Rights Reserved.
Traditional Risk
Management
30
Traditional risk management
Identification
Qualitative
Analysis
Quantitative
Analysis
Plan
Control
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31
Traditional risk management in
Agile?
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Yes, it’s a matter of degree!
Domains where human lives are at risk will likely
employ a more heavyweight risk management
process
Most other domains can get along with very simple
traditional risk management techniques and rely on
effective application of agile principles as an a
primary means of dealing with uncertainty
32
Example of simple risk
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Vendor might fail to deliver a component on a promised date
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
We can easily
identify the
uncertain event
We can derive a
probability that
isn’t too wrong
There are easily
identifiable
candidate actions
The consequences
are well understood
33
Candidate Action 1 – Manage the
dependency risk
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Affects prioritization of other items in the product backlog
This feature is
dependent on delivery
of the component
Manage risk via product backlog grooming
34
Candidate Action 2 – Create new
product backlog items
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Employ the parallel hedge strategy
Insert one or more
product backlog items
to develop the
component ourselves
Manage risk via product backlog grooming
35
Candidate Action 3 – Not shown in
our backlog
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Send one or more of our employees to vendor to help expedite
Risk Prob Exposure Mitigation
Vendor fails to
deliver
Component X
50% $1m/month Send Barbara to vendor
to help expedite
Manage risk via lightweight traditional techniques
36
Candidate Action 4 – Also not
shown in our backlog
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Pay expedited charge to move to head of queue
Risk Prob Exposure Mitigation
Vendor fails to
deliver
Component X
50% $1m/month Pay more money to get
head of queue privileges
Manage risk via lightweight traditional techniques
37
Traditional risk management
summary
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Like anything else in Agile, we would
embrace the minimum (barely sufficient)
amount of process that would be sufficient
for dealing with the risks in our particular
environment
38Copyright © 2014, Innolution, LLC. All Rights Reserved.
Using Agile to
Avoid Some
Uncertain
Situations
39
Some uncertain events can be
avoided altogether
If you don’t go into
space, you don’t have
to worry about the
risk that your
spaceship could run
out of fuel
If you don’t write fixed
price subcontracts,
you can avoid the
risks of fixed price
contracts!
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Avoid the self-creation of inherently risky
or uncertain situations
Fixed
FixedFixed
Contract
40Copyright © 2014, Innolution, LLC. All Rights Reserved.
Effort saved not having to
“manage” uncertain events
“Uncertain”
event
Probability
of
occurrence
Consequence
(payoff / exposure
function)
Impact of
occurrence
sum of all
has a
has
Cost Candidate
action
Effectiveness
has
has
changes
changes
1..*
Can influence
1..*
1..*
Expected
monetary value
used to compute
used to compute
Think of the effort
saved if we end up
injecting less
uncertain events into
our environment
41Copyright © 2014, Innolution, LLC. All Rights Reserved.
Exercise – Uncertain events
avoidable by Agile
What are some known risks or uncertainties
that we can avoid just by applying Agile
development?
42Copyright © 2014, Innolution, LLC. All Rights Reserved.
Agile Principle-
based Risk
Management
43
Agile principles
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Described in detail in Chapter 3
of my book
44Copyright © 2014, Innolution, LLC. All Rights Reserved.
Variability and
Uncertainty
45Copyright © 2014, Innolution, LLC. All Rights Reserved.
All before any is “risk generating”
All-Before-Any:
assumes all” of one
activity can be
completed before
any of the next
activity begins
46
Agile is iterative & incremental
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Get things wrong before we get them right
Build some of it before you build all of it
Reduces forecasting errors
Offers opportunity for continuous deployment
47
Agile is an empirical process
model
Copyright © 2014, Innolution, LLC. All Rights Reserved.
48
Address all forms of uncertainty
simultaneously
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Means Uncertainty
EndsUncertainty
High Low
Low
Defined Empirical
Means Uncertainty
EndsUncertainty
High Low
Low
49Copyright © 2014, Innolution, LLC. All Rights Reserved.
Prediction and
Adaptation
50
Risk of trying to get it right
upfront
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51
Keep options open
(last responsible moment)
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52
Exercise – Architecture A vs. B
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First day of a new product development effort.
There are two architectural choices: A or B. Each
appears to have viable characteristics. Which one
should we select?
53
Rapidly intermingle exploration
and exploitation
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Knowledge
acquisition
Predicting
Exploration Exploitation
always a
tension
between
requiresinvolves
in the
presence of
UncertaintyUncertainty
in the
presence of
increases
Level of
certainty
does not
increase
Adaptive
processes
Predictive
processes
heavily focus
on early
interleave
small-scale
54
Real options
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The right but not the obligation to do
something
Options have value
Options expire
Never commit early to an option unless you
know why
55
The risk of trying to eliminate
change
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56
Reduce risk by flattening the cost
of change curve
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57
Managing change risk during a
traditional development project
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58
Managing change risk using Scrum
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59
Upfront work should be helpful
without being excessive
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60Copyright © 2014, Innolution, LLC. All Rights Reserved.
Validated Learning
61
Assumptions = accrued risk
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Assumption is a guess or belief that is assumed
true, real, or certain
Not-yet-validated assumptions represent significant
accrued risk during development
Don’t let important assumptions live long without
validation
62
Reduce risk by going fast through
the loop
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63
Organize flow of work for fast
feedback
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64
Fast feedback is antifragile
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Agile benefits from the uncertainty (unpredictable
things we learn) in fast, frequent feedback
Learn fast you are going down the wrong path you
can truncate the path
Exploit newly acquired knowledge to realize an
emergent opportunity
Asymmetric payoff by limiting downside harm and
providing much greater upside potential
65Copyright © 2014, Innolution, LLC. All Rights Reserved.
Work in Process
(WIP)
66
Use economically sensible batch
sizes
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Reduced cycle time
Reduced flow variability
Accelerated feedback
Lower risk of failure
Reduced overhead
Increased motivation & urgency
Reduced cost and schedule growth
67
Inventory (WIP) represents a flow
risk
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Manufacturing inventory
is both physically and
financially visible
Product-development inventory
are knowledge assets that
aren’t visible in the same way
as physical parts
68
Risk is idle work, not idle workers
Watch the Baton Not the Runners
Copyright © 2014, Innolution, LLC. All Rights Reserved.
69Copyright © 2014, Innolution, LLC. All Rights Reserved.
Progress
70
Adapt to real-time information and
replan
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Using Agile, progress is measured by
validating working assets (e.g., features)
71
Reduce risk by focusing on value-
centric delivery
Copyright © 2014, Innolution, LLC. All Rights Reserved.
72
More frequent checkpoints reduce
risk
Copyright © 2014, Innolution, LLC. All Rights Reserved.
73Copyright © 2014, Innolution, LLC. All Rights Reserved.
Planning Risks
74
Belief that loading planning on the
front-end reduces risk
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Better the planning the better the understanding
and therefore the better the execution
Give appearance of orderly, accountable, and
predictable approach
Developing a product rarely goes as planned
Beliefs don’t match uncertainty in product
development
75
Scope is the risk-reducing degree
of freedom
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Scope can be binary
Scope can be shades of grey
Allows us to bound the downside on the asymmetric
payoff function
76
Communicate uncertainty with
range answers to questions
Copyright © 2014, Innolution, LLC. All Rights Reserved.
77
Teams with T-Shaped skills
Copyright © 2014, Innolution, LLC. All Rights Reserved.
Can offset random
increases in demand by
quickly compensating
with changes in capacity
Example of negative
covariance or counter
balancing (one random
variable counterbalances
the other)
78
Visual AGILExicon®
Copyright © 2014, Innolution, LLC. All Rights Reserved.
79
www.essentialscrum.com
Copyright © 2014, Innolution, LLC. All Rights Reserved.
80Copyright © 2014, Innolution, LLC. All Rights Reserved.
Contact Info for Ken Rubin
Email: krubin@innolution.com
Website: www.innolution.com
Phone: (303) 827-3333
LinkedIn: www.linkedin.com/in/kennethrubin
Twitter: www.twitter.com/krubinagile
Facebook: www.facebook.com/InnolutionLLC
Google+ plus.google.com/+KennyRubin1/
Essential Scrum: A Practical
Guide to the Most Popular
Agile Process
www.essentialscrum.com
Comparative Agility Website www.comparativeagility.com

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Agile IS Risk Management -- Dump the Heavyweight Process and Embrace the Principles

  • 1. 1Copyright © 2014, Innolution, LLC. All Rights Reserved. Agile IS Risk Management April, 2014 by Ken Rubin
  • 2. 2 Author Copyright © 2014, Innolution, LLC. All Rights Reserved. Background of Ken Rubin Trainer/Coach Trained more than 20,000 people in Agile/Scrum, SW dev and PM Provide Agile/ Scrum coaching to developers and executives Experience My first Scrum project was in 2000 for bioinformatics Former Managing Director Executive
  • 3. 3Copyright © 2014, Innolution, LLC. All Rights Reserved. Agenda Overview Risk Management Assumptions Agile Principle- based Risk Management Uncertain Events Traditional Risk Management Maximize Expected Monetary Value Using Agile to Avoid Some Uncertain Situations
  • 4. 4Copyright © 2014, Innolution, LLC. All Rights Reserved. Overview
  • 5. 5 Our goal today is to discuss… Copyright © 2014, Innolution, LLC. All Rights Reserved. How applying core agile principles make the development process robust and at times antifragile to the disorder of uncertain events, allowing us to avoid harm and reap the benefits of uncertainty, without the need for heavyweight risk management processes
  • 6. 6 What are we interested in? Copyright © 2014, Innolution, LLC. All Rights Reserved. When appropriate, applying simple traditional risk management techniques in a parsimonious (simplest possible) way Applying agile principles to avoid the self-creation of inherently risky or uncertain situations Applying agile principles to avoid the harm (be robust) and reap the benefits (be antifragile) from uncertainty in our environment
  • 7. 7 Many words for the same concept Copyright © 2014, Innolution, LLC. All Rights Reserved. Risk Randomness Volatility Variability Uncertainty
  • 8. 8 For our purposes we will treat them the same Copyright © 2014, Innolution, LLC. All Rights Reserved. Boils down to a lack of knowledge regarding uncertain events
  • 9. 9Copyright © 2014, Innolution, LLC. All Rights Reserved. Uncertain Events
  • 10. 10 Example uncertain events Copyright © 2014, Innolution, LLC. All Rights Reserved. Earthquake disables California data center housing the development servers Vendor fails to deliver a component when promised Application fails to scale to 10m current users Changing requirements Building the wrong product Knowledgeable people leaving company
  • 11. 11Copyright © 2014, Innolution, LLC. All Rights Reserved. Typical mental model of uncertain events “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute
  • 12. 12Copyright © 2014, Innolution, LLC. All Rights Reserved. Maximize Expected Monetary Value
  • 13. 13 We strive to… Copyright © 2014, Innolution, LLC. All Rights Reserved. “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute Goal is to maximize the “economic benefit” in the presence of uncertainty
  • 14. 14 Fragile, Robust, Antifragile Copyright © 2014, Innolution, LLC. All Rights Reserved. Fragile Harmed by disorder Robust Resilient to disorder Antifragile Benefits from disorder AgileWaterfall
  • 15. 15 Goal is NOT to eliminate uncertainty, risk, or variability Copyright © 2014, Innolution, LLC. All Rights Reserved. “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute Not trying to eliminate all uncertainty; taking risks is central to developing innovative solutions and creating value Need to distinguish between variability that increases economic value and that which decreases it Focusing just on probabilities is focusing on the item we are often least able to predict Working with our exposure is typically the best way to maximize the economic outcome
  • 16. 16 Asymmetric payoffs create economic value or harm Copyright © 2014, Innolution, LLC. All Rights Reserved. Positive asymmetric payoff (antifragile) anything that has more upside than downside from random events (variability) Negative asymmetric payoff (fragile) anything that has more downside than upside from random events (variability)
  • 17. 17Copyright © 2014, Innolution, LLC. All Rights Reserved. Risk Management Assumptions
  • 18. 18Copyright © 2014, Innolution, LLC. All Rights Reserved. Assumptions in traditional risk management “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute That you know about the events That you can predict the probabilities That your actions can change the probabilities
  • 19. 19 Operate in a complex domain Copyright © 2014, Innolution, LLC. All Rights Reserved. Cynefin Framework, by David Snowden
  • 20. 20 Unknown unknowns Copyright © 2014, Innolution, LLC. All Rights Reserved. These are the unknown unknowns Many uncertain events aren’t predictable proactively
  • 21. 21 Some are inconsequential Copyright © 2014, Innolution, LLC. All Rights Reserved. Don’t design a risk management system to deal with these, and even if we did these items would not be in our tables and charts
  • 22. 22 Others are Black Swans Copyright © 2014, Innolution, LLC. All Rights Reserved. Large-scale unpredictable (or very hard to predict) events of massive consequences
  • 23. 23 Black Swan characteristics Copyright © 2014, Innolution, LLC. All Rights Reserved. “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute If you could predict one, the probability would be estimated to be so low as to make it dismissible (they are rare events) The consequences if one occurs can be catastrophic There is likely nothing you can do to change the probability of occurrence before the first occurrence Most of the time you will never see them coming You need to focus here, but you likely can’t or won’t
  • 24. 24Copyright © 2014, Innolution, LLC. All Rights Reserved. Exercise – Identifying Black Swans Identify Black Swans that you have seen affect software development efforts
  • 25. 25 Dealing with Black Swans Copyright © 2014, Innolution, LLC. All Rights Reserved. Leverage Agile principles to be robust or antifragile to things we can’t predict or the very improbable Focus our efforts on modifying our exposure the Black Swans instead of trying to quantify their statistical properties
  • 26. 26 We know some events will happen, but we can’t predict or change probabilities Copyright © 2014, Innolution, LLC. All Rights Reserved. We can predict earthquakes will happen in California We can’t predict the occurrence of a specific earthquake of a given magnitude, or change the probability of it happening We can describe the consequences to our business via a disruption in our California-based data center if we are affected by an earthquake
  • 27. 27 Adjust your exposure Copyright © 2014, Innolution, LLC. All Rights Reserved. “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute When you can’t change the probability of occurrence… That change your exposure to the event You take actions…
  • 28. 28 More sophisticated process does NOT solve this problem Copyright © 2014, Innolution, LLC. All Rights Reserved. Mistaken belief that we need better computation in order to more accurately predict the event and figure out the probabilities More effective approach is to modify your exposure and learn to get out of trouble fast
  • 29. 29Copyright © 2014, Innolution, LLC. All Rights Reserved. Traditional Risk Management
  • 31. 31 Traditional risk management in Agile? Copyright © 2014, Innolution, LLC. All Rights Reserved. Yes, it’s a matter of degree! Domains where human lives are at risk will likely employ a more heavyweight risk management process Most other domains can get along with very simple traditional risk management techniques and rely on effective application of agile principles as an a primary means of dealing with uncertainty
  • 32. 32 Example of simple risk Copyright © 2014, Innolution, LLC. All Rights Reserved. Vendor might fail to deliver a component on a promised date “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute We can easily identify the uncertain event We can derive a probability that isn’t too wrong There are easily identifiable candidate actions The consequences are well understood
  • 33. 33 Candidate Action 1 – Manage the dependency risk Copyright © 2014, Innolution, LLC. All Rights Reserved. Affects prioritization of other items in the product backlog This feature is dependent on delivery of the component Manage risk via product backlog grooming
  • 34. 34 Candidate Action 2 – Create new product backlog items Copyright © 2014, Innolution, LLC. All Rights Reserved. Employ the parallel hedge strategy Insert one or more product backlog items to develop the component ourselves Manage risk via product backlog grooming
  • 35. 35 Candidate Action 3 – Not shown in our backlog Copyright © 2014, Innolution, LLC. All Rights Reserved. Send one or more of our employees to vendor to help expedite Risk Prob Exposure Mitigation Vendor fails to deliver Component X 50% $1m/month Send Barbara to vendor to help expedite Manage risk via lightweight traditional techniques
  • 36. 36 Candidate Action 4 – Also not shown in our backlog Copyright © 2014, Innolution, LLC. All Rights Reserved. Pay expedited charge to move to head of queue Risk Prob Exposure Mitigation Vendor fails to deliver Component X 50% $1m/month Pay more money to get head of queue privileges Manage risk via lightweight traditional techniques
  • 37. 37 Traditional risk management summary Copyright © 2014, Innolution, LLC. All Rights Reserved. Like anything else in Agile, we would embrace the minimum (barely sufficient) amount of process that would be sufficient for dealing with the risks in our particular environment
  • 38. 38Copyright © 2014, Innolution, LLC. All Rights Reserved. Using Agile to Avoid Some Uncertain Situations
  • 39. 39 Some uncertain events can be avoided altogether If you don’t go into space, you don’t have to worry about the risk that your spaceship could run out of fuel If you don’t write fixed price subcontracts, you can avoid the risks of fixed price contracts! Copyright © 2014, Innolution, LLC. All Rights Reserved. Avoid the self-creation of inherently risky or uncertain situations Fixed FixedFixed Contract
  • 40. 40Copyright © 2014, Innolution, LLC. All Rights Reserved. Effort saved not having to “manage” uncertain events “Uncertain” event Probability of occurrence Consequence (payoff / exposure function) Impact of occurrence sum of all has a has Cost Candidate action Effectiveness has has changes changes 1..* Can influence 1..* 1..* Expected monetary value used to compute used to compute Think of the effort saved if we end up injecting less uncertain events into our environment
  • 41. 41Copyright © 2014, Innolution, LLC. All Rights Reserved. Exercise – Uncertain events avoidable by Agile What are some known risks or uncertainties that we can avoid just by applying Agile development?
  • 42. 42Copyright © 2014, Innolution, LLC. All Rights Reserved. Agile Principle- based Risk Management
  • 43. 43 Agile principles Copyright © 2014, Innolution, LLC. All Rights Reserved. Described in detail in Chapter 3 of my book
  • 44. 44Copyright © 2014, Innolution, LLC. All Rights Reserved. Variability and Uncertainty
  • 45. 45Copyright © 2014, Innolution, LLC. All Rights Reserved. All before any is “risk generating” All-Before-Any: assumes all” of one activity can be completed before any of the next activity begins
  • 46. 46 Agile is iterative & incremental Copyright © 2014, Innolution, LLC. All Rights Reserved. Get things wrong before we get them right Build some of it before you build all of it Reduces forecasting errors Offers opportunity for continuous deployment
  • 47. 47 Agile is an empirical process model Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 48. 48 Address all forms of uncertainty simultaneously Copyright © 2014, Innolution, LLC. All Rights Reserved. Means Uncertainty EndsUncertainty High Low Low Defined Empirical Means Uncertainty EndsUncertainty High Low Low
  • 49. 49Copyright © 2014, Innolution, LLC. All Rights Reserved. Prediction and Adaptation
  • 50. 50 Risk of trying to get it right upfront Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 51. 51 Keep options open (last responsible moment) Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 52. 52 Exercise – Architecture A vs. B Copyright © 2014, Innolution, LLC. All Rights Reserved. First day of a new product development effort. There are two architectural choices: A or B. Each appears to have viable characteristics. Which one should we select?
  • 53. 53 Rapidly intermingle exploration and exploitation Copyright © 2014, Innolution, LLC. All Rights Reserved. Knowledge acquisition Predicting Exploration Exploitation always a tension between requiresinvolves in the presence of UncertaintyUncertainty in the presence of increases Level of certainty does not increase Adaptive processes Predictive processes heavily focus on early interleave small-scale
  • 54. 54 Real options Copyright © 2014, Innolution, LLC. All Rights Reserved. The right but not the obligation to do something Options have value Options expire Never commit early to an option unless you know why
  • 55. 55 The risk of trying to eliminate change Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 56. 56 Reduce risk by flattening the cost of change curve Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 57. 57 Managing change risk during a traditional development project Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 58. 58 Managing change risk using Scrum Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 59. 59 Upfront work should be helpful without being excessive Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 60. 60Copyright © 2014, Innolution, LLC. All Rights Reserved. Validated Learning
  • 61. 61 Assumptions = accrued risk Copyright © 2014, Innolution, LLC. All Rights Reserved. Assumption is a guess or belief that is assumed true, real, or certain Not-yet-validated assumptions represent significant accrued risk during development Don’t let important assumptions live long without validation
  • 62. 62 Reduce risk by going fast through the loop Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 63. 63 Organize flow of work for fast feedback Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 64. 64 Fast feedback is antifragile Copyright © 2014, Innolution, LLC. All Rights Reserved. Agile benefits from the uncertainty (unpredictable things we learn) in fast, frequent feedback Learn fast you are going down the wrong path you can truncate the path Exploit newly acquired knowledge to realize an emergent opportunity Asymmetric payoff by limiting downside harm and providing much greater upside potential
  • 65. 65Copyright © 2014, Innolution, LLC. All Rights Reserved. Work in Process (WIP)
  • 66. 66 Use economically sensible batch sizes Copyright © 2014, Innolution, LLC. All Rights Reserved. Reduced cycle time Reduced flow variability Accelerated feedback Lower risk of failure Reduced overhead Increased motivation & urgency Reduced cost and schedule growth
  • 67. 67 Inventory (WIP) represents a flow risk Copyright © 2014, Innolution, LLC. All Rights Reserved. Manufacturing inventory is both physically and financially visible Product-development inventory are knowledge assets that aren’t visible in the same way as physical parts
  • 68. 68 Risk is idle work, not idle workers Watch the Baton Not the Runners Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 69. 69Copyright © 2014, Innolution, LLC. All Rights Reserved. Progress
  • 70. 70 Adapt to real-time information and replan Copyright © 2014, Innolution, LLC. All Rights Reserved. Using Agile, progress is measured by validating working assets (e.g., features)
  • 71. 71 Reduce risk by focusing on value- centric delivery Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 72. 72 More frequent checkpoints reduce risk Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 73. 73Copyright © 2014, Innolution, LLC. All Rights Reserved. Planning Risks
  • 74. 74 Belief that loading planning on the front-end reduces risk Copyright © 2014, Innolution, LLC. All Rights Reserved. Better the planning the better the understanding and therefore the better the execution Give appearance of orderly, accountable, and predictable approach Developing a product rarely goes as planned Beliefs don’t match uncertainty in product development
  • 75. 75 Scope is the risk-reducing degree of freedom Copyright © 2014, Innolution, LLC. All Rights Reserved. Scope can be binary Scope can be shades of grey Allows us to bound the downside on the asymmetric payoff function
  • 76. 76 Communicate uncertainty with range answers to questions Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 77. 77 Teams with T-Shaped skills Copyright © 2014, Innolution, LLC. All Rights Reserved. Can offset random increases in demand by quickly compensating with changes in capacity Example of negative covariance or counter balancing (one random variable counterbalances the other)
  • 78. 78 Visual AGILExicon® Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 79. 79 www.essentialscrum.com Copyright © 2014, Innolution, LLC. All Rights Reserved.
  • 80. 80Copyright © 2014, Innolution, LLC. All Rights Reserved. Contact Info for Ken Rubin Email: krubin@innolution.com Website: www.innolution.com Phone: (303) 827-3333 LinkedIn: www.linkedin.com/in/kennethrubin Twitter: www.twitter.com/krubinagile Facebook: www.facebook.com/InnolutionLLC Google+ plus.google.com/+KennyRubin1/ Essential Scrum: A Practical Guide to the Most Popular Agile Process www.essentialscrum.com Comparative Agility Website www.comparativeagility.com