Achieving Flow Across Your Organization with Enterprise Services Planning (ESP

dja@leankanban.com @lki_dja Copyright Lean Kanban Inc.
Scaling the
Benefits of
Kanban
Presenter
David J. Anderson
Moscow
Lean Kanban Russia
2 October 2015

Enterprise Services Planning

You are part of a professional services business!
An ecosystem of
professionals
providing
interdependent
services, often with
complex
dependencies.
Professional
Service
organizations
build intangible
goods

The challenge of professional services businesses
A constantly changing
external environment
has a ripple effect
across your entire
business ecosystem
Priorities change and
required capability & service
levels rise in response to
competition, disruptive
market innovation &
changes in customer tastes

The challenge of professional services businesses
Lack of alignment between
Strategy and Capability is
risky, & results in
unpredictable, unsatisfactory
outcomes
Risks are not
adequately hedged,
performance is volatile
& untrustworthy. As a
result managers
cannot act & decide
with confidence

A Managers Dilemma
Managers are expected to make decisions
and predict outcomes accurately.
Their management training did not prepare
them for the complexity of professional
services environments!
Why are their daily decisions as well as long-term
strategic plans plagued with uncertainty?

What should
we start next?
Will it be
delivered when
we need it?
Do we have
capacity to do
everything we
need to do?

How will
dependencies
affect our ability
to deliver?
How many
activities should
we have running
in parallel?
If we delay starting something,
will the capacity be available
when we need it?

Demand
Observed
Capability
Demand
Demand
Observed
Capability
Observed
Capability
ESP – Anticipating Demand, Allocating Capacity
Looking downstream, you
want the system to help
you anticipate and
manage dependencies

Demand
Observed
Capability
Demand
Demand
Observed
Capability
Observed
Capability
Looking upstream, you want the
system to help you anticipate and
manage demand

Demand
Observed
Capability
Demand
Demand
Observed
Capability
Observed
Capability
Combine the two, and
across the organization
you smooth flow end-
to-end and help keep
demand in balance with
overall system capability

*Kanban is a way to organize and manage work. It improves
service delivery speed & predictability through a combination of
limiting work-in-progress & deferred commitment
It uses visual management and Lean techniques such as limiting
the amount of work in progress, and probabilistic forecasting.
Kanban helps to balance demand with capability.
Balancing demand and capability = improved flow.
Improved flow = Improved predictability.
Enterprise Services Planning (ESP) is an enterprise-wide
management solution that leverages Kanban*
to improve each service within your business.

The goal of Enterprise Services Planning
The goal of
is to achieve flow
across the organization.
ESP encourages
improved service delivery,
better customer satisfaction
and a business that is
"fit for purpose”.

Manufacturing
1947 – Kanban
1964 & 1975 – MRP
Professional Services
2004 – Kanban
2015 – ESP
ESP is “MRP for professional
services”. ESP is for managing
capacity & scheduling intangible
work

But first…

Kanban 2.0

Proto-Kanban
(Emerging, Shallow, Low Maturity implementations)

Aggregated Personal Kanban
Backlog
F
E
Team
Member
G
D
Next Done
3
In-progress
3
Joe
Peter
Steven
Joann
per person∞ ∞per person
At this level, we are still
focused on organizing &
managing people rather
than enabling people to self-
organize around the work &
managing its flow

O
P
R
N
M
L
J
Per Person WIP Limit
Done
F
E
I
Pending
G
D
GY
PB DE
MN
AB
Dev/Build/
Test/Deploy
Dev
Ready
GY
GY
PB
PB
MN
MN
DE
DE
AB
AB
K
Bench
Specify
∞∞ ∞
Unbounded
Queue
Delayed
WIP
At this level, we are focused
on managing work and
enabling people to self-
organize around it but we
aren’t limiting WIP in the
system as a whole. Hence,
service delivery will not be
predictable

Aggregated Team Kanban
Done
Pool
of
Ideas
F
E
I
Next
Deploy-
ment
Ready
G
D
GY
PB
DE MN
5 ∞
P1
AB
Ongoing
Development Testing
Done Ongoing Done
3 3
I am a buffer!
The clue is in my name – “…
Ready”
I am buffering non-instant
availability or activity with a
cyclical cadence
Infinite limits on done columns
means that there really isn’t a
kanban pull system present.
This style of proto-kanban
controls multi-tasking but
doesn’t limit workflow WIP
∞ ∞
Also known as “infinite done
queues”

Kanban Systems

Q
P
O
M
L
K
J
I
Kanban can be represented with slots
Ideas
D
Engin-
eering
Ready
G
Ongoing
Development
Testing
Done
Test
Ready
F
B
CPull
Pull
*
UAT
Deploy-
ment
Ready
An empty slot signals
pull
Pull
Pull
Pull
I
Physical slot is a kanban
The tickets on the board are not
the kanban. Believing the tickets
are the kanban is a common
misconception
This board and the next two all look
different but they all visualize the same
identical kanban system

F
F
O
M
N
K
J
I
Using movable tokens as kanban is more flexible
Ideas
D
I
Dev
Ready
G
Development Testing
Test
Ready
F B
C
UAT
Release
Ready
In-progress
Legend
Done
Blocked - issue
Blocked - defect
Physical token such as a
magnet is a kanban
Colors are used to
denote state
Moving done items
down below a line is an
optional enhancement
seen in some
implementations
Override on kanban
limit introduces
additional “blocked –
issue” kanban
People working on
blocked item “A”
have been
redirected to
work on item “I”
Using physical slots in the previous
example has been shown to create
inertia to modification & improvement
Using movable tokens allows for
WIP limits to be easily modified and
provides a natural signal token
mechanism

F
F
FF
F
F J
I
Declaring a kanban quantity is even simpler
Ideas
D
I
Engin-
eering
Ready
G
5
Ongoing
Development Testing
Done
3 3
Test
Ready
5
F
B
CPull
Pull
These are the virtual kanban
*
These are the virtual kanbanThese are the virtual kanban
These WIP limits serve the
function of the magnets or slots
This board has even less maintenance
overhead than the magnet board
UAT
Deploy-
ment
Ready
∞ ∞
A “virtual kanban” pull signal is
created by subtracting the column
number from tickets currently in
the column

Commitment is deferred
E
D
Commitment point
F
F
FF
F
F F
G
Pull
Wish to avoid aborting after commitment
Ideas
Dev
Ready
5
Ongoing
Development Testing
Done
3 3
Test
Ready
5
UAT
Release
Ready
∞ ∞
We are committing to getting
started. We are certain we want
to take delivery.
Ideas remain optional and
(ideally) unprioritized

Discovery Kanban

Discovery Kanban Prepares Options
Ready
for
Engin-
eering
F
I
Comm-
itted
D
4 Ongoing
Development
Done
3
J
K
12
Testing
Verification
3
L
Commitment point
4 -
Requi-
rements
Analysis
2412 -
Risk
Analysis
4824 -
Pool
of
Ideas
∞
Min & Max limits
ensure sufficient
options are always
available
Committed WorkOptions
Discarded
O
Reject
P Q
$$$ spent acquiring options
$$$ spent converting options
Embedded Options
Done

Roles

Kanban Roles Are Emerging
Ready
for
Engin-
eering
F
I
Comm-
itted
D
4 Ongoing
Development
Done
3
J
K
12
Testing
Verification
3
L
Commitment point
4 -
Requi-
rements
Analysis
2412 -
Risk
Analysis
4824 -
Pool
of
Ideas
∞
Service Delivery ManagerService Request Manager
Discarded
O
Reject
P Q
Marshals Options Manages Flow
Done

Revised Definition of the
Kanban Method

The Evolutionary Change Principles
1. Start with what you do now
 Understanding current processes, as actually practiced
 Respecting existing roles, responsibilities & job titles
2. Gain agreement to pursue improvement through
evolutionary change
3. Encourage acts of leadership at all levels

The Service Delivery Principles
1. Understand and focus on your customers’ needs
and expectations
2. Manage the work, let people self-organize around it
3. Your organization is an ecosystem of interdependent
services steered by its policies, reflect regularly on
their effectives and improve them

General Practices
1. Visualize (with a kanban board 看板)
2. Limit work-in-progress (with kanban かんばん)
3. Manage flow
4. Make policies explicit
5. Implement feedback loops
6. Improve collaboratively, evolve experimentally
(using models & the scientific method)

The Kanban Lens
Learn to view what you do now as a set of services
(that can be improved):
 What to look for…
• Creative work is service-oriented
• Service delivery involves workflow
• Workflow involves a series of knowledge discovery
activities
 What to do…
• Map the knowledge discovery workflow
• Pay attention to how & why work arrives
• Track work flowing through the service

Strategy
Review
Risk
Review
Monthly
Service
Delivery
Review
Bi-WeeklyQuarterly
Kanban
Meeting
Daily
Operations
Review
Monthly
Replenishment/
Commitment
Meeting
Weekly
Delivery
Planning
Meeting
Per delivery cadence
change change
change
change
change
change
change change
change
info
info
info
info
info
info
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change info
Kanban Cadences

Specific Practices for Service Delivery
1. Visualize service delivery workflows
2. Implement virtual kanban systems
3. Manage flow within & across workflows
4. Make your decision framework, risk management
policies & boundaries of empowerment explicit
5. Implement the Kanban Cadences
6. Improve collaboratively, evolve experimentally
(using fitness criteria metrics, and model-driven improvements based upon an
understanding of risks, variability, constraints, sources of delay, queuing theory, real
option theory, transaction & coordination costs)

Are we doing Kanban or not?
It isn’t a question of evaluating practice usage but
rather a question of intent …
Do you intend to use visualization & kanban systems to drive
a focus on sustained fitness for purpose?
Do you view your organization as a network of services and
seek to improve the balance of capability against demand &
customer expectations?

Kanban Litmus Test
1. Have managers changed their behavior?
2. Has the customer interface changed?
3. Has the customer contract changed?
4. Has the service delivery business model changed?
If you can’t answer yes to at least 2 of these questions
it is unlikely you’ve switched to Kanban yet! You may
have the intent to adopt it through a series of
evolutionary steps initially adopting proto-Kanban

Revised STATIK
(Systems Thinking Approach to Introducing Kanban)
1. Understand what makes the service “fit for
purpose”
2. Understand sources of dissatisfaction
regarding current delivery
3. Analyze sources of and nature of demand
4. Analyze current delivery capability
5. Model the service delivery workflow
6. Identify & define classes of service
7. Design the kanban system
8. Socialize design & negotiate implementation
This process
tends to be
iterative
Identify Services. For each service…

Definition of

3 Organizational Steps
Foster a culture focused
on continual
fit-for-purpose service
delivery
Seeing Services
“Kanban” each service
Feedback Loop System
Identify interdependent services
in your organization
Use the STATIK method to create a
Kanban system for each service
Implement a set of responsive
feedback loops

Step 1: Seeing Services
Examples:
HR provides services throughout the organization, but they
also need services from IT
Marketing provides services to product development but they
need services from Sales and from IT
IT provides services to Customer Support. There is an
interdependency between Customer Support, QA, and IT
Engineering.
Different feature teams or product teams may have
dependencies on each other
Many groups are dependent upon specialist individuals

Step 2: Kanban the Services
Use STATIK (Systems Thinking Approach to
Implementing Kanban) for each identified service…
1. Understand what makes the service “fit for purpose”
2. Understand sources of dissatisfaction regarding current
delivery
3. Analyze sources of and nature of demand
4. Analyze current delivery capability
5. Model the service delivery workflow
6. Identify & define classes of service
7. Design the kanban system
8. Socialize design & negotiate implementation

Step 3: Responsive Feedback Loops
Strategy
Review
Risk
Review
Monthly
Service
Delivery
Review
Bi-WeeklyQuarterly
Kanban
Meeting
Daily
Operations
Review
Monthly
Replenishment/
Commitment
Meeting
Weekly
Delivery
Planning
Meeting
change change
change
change
change
change
change change
change
info
info
info
info
info
info
info
info
info
change info

Illustrates 4 Functions of Management in ESP
Strategy
Review
Risk
Review
Monthly
Service
Delivery
Review
Bi-WeeklyQuarterly
Kanban
Meeting
Daily
Operations
Review
Monthly
Replenishment/
Commitment
Meeting
Weekly
Delivery
Planning
Meeting
change change
change
change
change
change
change change
change
info
info
info
info
info
info
info
info
info
change info
Focus on Service Delivery
Driving improvement…
Higher level
management function

Achieve “Fitness for Purpose”
+
These must be balanced to deliver what your
customers need and expect: to be “fit for purpose”
Product component
(capability/brand/non-
functional elements)
Service delivery component
demand /customer expectations/
customer satisfaction)

6 Planning Activities
ESP activities
1. schedule and sequence work
2. forecast delivery dates and expected outcomes
3. allocate capacity
4. manage dependencies
5. understand and manage risk
6. ensure sufficient liquidity to react to unfolding events
ESP is about balancing demand with capacity to deliver,
keeping in mind the dependencies and risks

Fit for purpose one service at a time
Produce superior customer service and be robust & resilient
– even in a rapidly changing external environment.
Using ESP, run an effective,
risk managed business.
Align enterprise strategy with capability.

Risk Profiling

Visualize Risks to provide Scheduling Information
TS
Market Risk
CR
Spoil
Diff
Lifecycle
Cost of Delay
Tech Risk
Delay Impact
New
Mid
Cow
Expedite
FD
Std
Intangible
ELE
Maj. Cap.
Disc
Unknown Soln
Known but not us
Done it before
Commodity
Risk profile for
a work item or
project
Outside:
Commit Early
Inside:
Commit Late
Items with the same shape carry the
same risks. They cannot be prioritized or
sequenced. From a group of items with
the same risk profile pick whichever
ones you like.
It is also wise to hedge risk by
allocating capacity in the system for
items of different risk profiles.

Custom Profile Contains Narrative

Forecasting

Lead Time & Weibull Distributions
Lead time histograms
observed to be Weibull
distributions typically
with shape parameter
1.0 < k < 2.0
This example is a Weibull
distribution with a scale parameter
equal to 65 and shape parameter
equal to 1.4
Outliers with known special causes
at 87 & 105 are omitted from
the “best fit” curve

ChangeRequests
SLA (customer expectation or fitness criteria)
60 days
Use Lead Time Distribution to Evaluate
Service Delivery Effectiveness
22-150 day
spread of variation
85%
on-time
15% late
Due Date
Performance
(DDP)
Predictability

Forecasting methods
ESP relies on two types of forecasting approaches
 Reference class forecasting
 Monte Carlo simulation
Reference class forecasting requires an assumption
of an equilibrium – the near future will reflect the
continuing conditions of the recent past
 We sample data from a period in the recent past and use it
to forecast future behavior
 The sample period is determined by evaluating the
volatility in kanban system liquidity

Little’s Law provides simple but effective medium
to long term forecasts
Delivery Rate
(from the kanban system)
System Lead Time
WIP
=
Little’s Law uses
the mean lead time
Mean is strongly
affected by the tail
on the lead time
distribution
ChangeRequests
Mean
TailMedian
Mode
Control the shape of the distribution by
managing flow and avoid extending tail of
the distribution

Scheduling

When should we start something?
impact
When we
need it
85th
percentile
Ideal Start
Here
Commitment point
timeJan
10
Nov
11
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
incurring the cost of delay
If we pull the work into our kanban
system on Nov 11 we have a 6 out
of 7 chance of on-time delivery

We can study sensitivity to different start dates
impact
When we
need it
50th percentile
Later Start
Here
Commitment point
timeJan
10
Nov
25
If we start as late as November 25
we only have a 50% chance of on-
time delivery
However, the cost of delay incurred
if we deliver within 60 days is
relatively small. We have an 85%
chance of achieving delivery with
acceptable cost of delay
85th percentile

What is the latest we could start?
impact
When we
need it
0th percentile
Very late
start
Commitment point
timeJan
10
Dec
19
If we start as late as December 19
we have 0% chance of on-time
delivery
We have about a 10% chance of a
total loss delivering the promotion
beyond the expiry date of the
opportunity
85th percentile
total loss

To be certain of delivery without incurring any
cost of delay is expensive
impact
When we
need it
98th
percentile
Early Start
Commitment point
timeJan
10
Aug
11
If we are conservative and do not
wish to carry any risk of late
delivery or any risk of incurring an
opportunity cost of delay, then we
must start as early as August 13th.
We must commit to our Spring
Break 2015 promotion during
Summer 2014!!!

Window of opportunity
impact
When we
need it
Earliest Start
timeJan
10
Aug
11
Latest
viable
start
Dec
19
Optimal Start
Nov
11
On August 11st the item becomes
available for selection at Kanban
system replenishment.
The ideal time to start is November
11th.
After December 19th our option to
deliver this item expires and we
would discard it from our pool.

Summary

Enterprise Services Planning Curriculum

“Making Better Use of Kanban at Scale”
 “Fit for Purpose” service delivery
• Fitness criteria metrics & classes of service
 Anticipate Demand
• Comprehend WIP limits, staffing levels and
required liquidity levels
 Shape Demand
• Allocate capacity to hedge risk
• Bifurcate demand with risk policies
 Scheduling, Sequencing & Selection
• Intelligent recommendation engine utilizing
risk profiles & risk management policies
 Intelligent Human Capital Development
• Skills acquisition linked to system liquidity
• Determine real ROI for skills & experience
investment

Thank you!

About
David Anderson is an innovator in
management of 21st Century
businesses that employ creative
people who “think for a living” . He
leads a training, consulting,
publishing and event planning
business dedicated to developing,
promoting and implementing new
management thinking & methods…
He has 30+ years experience in the high technology industry
starting with computer games in the early 1980’s. He has
led software organizations delivering superior productivity
and quality using innovative methods at large companies such
as Sprint and Motorola.
David defined Enterprise Services Planning and originated
Kanban Method an adaptive approach to improved service
delivery. His latest book, published in June 2012, is, Lessons
in Agile Management – On the Road to Kanban.
David is Chairman of Lean Kanban Inc., a business operating
globally, dedicated to providing quality training & events to
bring Kanban and Enterprise Services Planning to businesses
who employ those who must “think for a living.”

Upstream Kanban emerged in several locations in Paris, France and Belgium
circa 2010. Discovery Kanban is an evolution of Upstream Kanban pioneered by
Patrick Staeyert
Risk profile courtesy of BazaarVoice
The 2nd Edition of the Kanban Method definition owes much to the perseverance
of Andy Carmichael and contributions from Mike Burrows, Alexei Zheglov and
Klaus Leopold
Acknowledgements

Curriculum

ESP I – Enterprise Services

ESP II – Project & Capacity Planning

ESP III – Portfolio Management

Achieving Flow Across Your Organization with Enterprise Services Planning (ESP

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