Measuring Agile’s Economic Impact to Your Organization

1. Measuring Agile’s Economic Impact to Your Organization Damon Poole Founder and CTO, AccuRev

2. Introduction to Today’s Speaker • Damon Poole, Founder and CTO, AccuRev Damon has 20 years of methodology and process improvement experience, running the gamut from small teams to 10,000-person global development shops. Damon is a Certified Scrum Master and writes frequently on the topic of Agile development with an emphasis on Multi-stage Continuous Integration. His "Do It Yourself Agile" blog is at damonpoole.blogspot.com; twitter: @damonpoole

3. A Few Companies We’re Helping to Go Agile

4. Today’s Key Take-away Agile Enables Organizations to Focus on Serving the Market Efficiently

5. Overview • ROI Overview • The I in ROI: Investment (Cost) • Calculating cost the Agile way • Agile techniques • Rethinking who your customer is • The R in ROI: Return (Value) • Increasing Return by reducing waste • Maximizing value • Reducing cycle time • Summary

6. Return on Investment Return Value ROI = Investment Software

7. Features are Like Scratch Tickets • Predicting return is hard • Cost is easy to measure

8. Measuring Cost

9. Traditional Planning Release Date Requirements Cost Plan Based on pro-rating the fully-loaded cost of all resources in the plan

10. Agile Planning Backlog Cost = Iterations X Velocity X Cost per point Stories Release Date Assumes Cross Functional Team

11. Agile Planning Components • User Stories • Story Points • Cross-functional team • Backlog • Iteration length • Velocity

12. Requirements • 3.4 Customer Identification • 3.4.1 A web “cookie” shall be used to uniquely identify visitors • 3.4.2 Each customer shall be associated with a cookie • 3.4.3 Cookies shall be stored in an RDBMS • 3.5 Sale presentation • 3.5.1 Each item for sale shall have a button marked “buy” next to the item • 3.5.2 Selecting the “buy” action shall trigger an order placement action • 3.6 Fulfillment • 3.6.1 By default, all orders shall use the on-file default shipping information • 3.6.2 If available, all orders will use the customer’s default payment method • 3.6.3 It shall be possible for the customer to cancel any order for up to 4 hours after they place that order.

13. User Stories • “As a user I want to order what I am browsing with a single click.” • As a <user role> I want to <achieve some goal>

14. Story Points • The relative level of effort of a User Story • Takes into consideration all aspects of implementation: development, test, end-user documentation • Simple to calculate the cost per story point

17. Cross Functional Product Owner Developer(s) All needed skills Self-organizing Doc Writer Scrum Master Tester(s) Manager

18. Backlog Based Prioritization $$$ $

19. Agile Cadence Backlog Iteration length:2 weeks Velocity: 20pts 20pts 2 weeks • Backlog is broken into “iterations” • Iterations have a consistent length, such as 2 weeks • The number of “points” per iteration is the “velocity” 40pts 4 weeks 60pts 6 weeks 80pts 8 weeks 100pts 10 weeks 120pts 12 weeks 140pts 14 weeks 160pts 16 weeks

20. Cost Per Story Point for a Team Iteration length 2 weeks Annual Cost $814,307.99 Iterations per year 26 = $1,423.62 per point Iteration Velocity 22 pts Annual Velocity 572 pts

21. Simple Cost Calculation Backlog $31K $62K $93K $124K $155K $186K $217K $248K

22. Re-Framing ROI

23. Cost and Efficiency vs ROI • Efficiency of individual process steps can be measured • ‘Return’ becomes “% of requirements implemented” • Cost becomes a proxy for ROI • Increasing Return requires • a customer and business focus • methods for gauging business value

24. Who is “The Customer?” Market/Customers Software Development

25. Who is “The Customer?” Market/Customers Business Unit Software Development

26. Who is “The Customer?” Market/Customers Your offering

27. Increasing Revenueby Reducing Waste

28. Cost of Delay of a Feature “Market”emerges No more value You decideto do it The user can use it

29. Cost of Delay of a Feature DeliveryDelay You decideto do it The user can use it

30. The Cost of Delay

31. Cost of Delivery Delay

32. Cost of Delivery Delay

33. All cost, no value received • Cost savings all lost • Efficiency gains all lost Cancelled-or- “Shelved” Specify Design Plan Code Integrate Write tests Test > 60% of delivered features not worth the cost of development Doc • Waste • Lower morale • Missed opportunities • Distrust

34. Additional Lost Revenue • Decision delay • Missing first to market advantages

35. Maximizing Value

36. Measuring Relative Value • Frequency of use by the end user • Value to the customer • Percentage of customers that have a specific need

37. Methods for Estimating Value • Luke Hohmann’s Innovation Games • “Buy a Feature” and other games • Use “Planning Poker” for value with key business stakeholders • Assign percentage of revenue to stories given the expected revenue in a product plan or contract • A combination of the above

38. Backlog Based Prioritization $$$ $

39. Categorizing Value High Split Do Value Avoid ? Low High Low Cost

40. Splitting Stories -or- Panning for Gold

41. 10 Lanes: $110M $11M per lane 10 Lanes: $50M $5Mper lane Money for another investment: $60M

42. Splitting Work Along Technical Lines Surveyor wants to create a question Front end Middle layer Back end,infrastructure

43. Splitting Work By Value Surveyor wants to add a true /false question Surveyor wants to add a freeform question Surveyor wants to create a multiple choice question Front end Middle layer Back end,infrastructure

44. Shorter Cycle Times vs Value Facebook Second Life RSS feeds Photo SMS 1 month iterations Specify Design Plan Code Integrate Write tests Test Doc Facebook Second Life RSS feeds $$ $ $$ Specify Facebook $$ Facebook RSS feeds $$ $$ Facebook RSS feeds Photo SMS $$ $$ $$$ Aug Sep Jan Feb Mar Apr May Jun Jul

45. Bringing it All Together

46. Market/Customers Product Mgmt Strategy Cancelled Shelved Unused Results old Todo new Customer Value $$$ Tangible Value Revenue Bank Account People Knowledge

47. Continuous Flow Agile Teams Master Backlog Int Agile WorkFlow User Stories Int Int Short Cycle Time Chief Product Owner Customers

48. Continuous Flow Int Int Int Product Management $ Customers

49. Key Take-Aways • Maximizing Return on Investment is the ultimate goal • Maximizing ROI is another way of saying “maximizing market efficiency” • The cost of delay generally reduces the gains of minimizing the cost and maximizing the efficiency of development • Reducing cycle time and increasing velocity are better proxies than minimizing cost and maximizing efficiency • Agile has many techniques for reducing cycle time and increasing velocity • Blending of “the business” and “development” is key • Agile enables organizations to focus on serving the market efficiently

50. Q & A Time… Agile Software Product Development Partner www.synerzip.com 1-800-383-8170 or +1-781-861-8700 sales@accurev.com www.accurev.com blog.accurev.com Hemant Elhence hemant@synerzip.com 469.322.0349