Hi! Agile Organizations, you need to revamp your funding process
Agile and DevOps are game changers for the organizations to achieve Business Agility but biggest challenge in this paradigm shift is the traditional funding model.
Business Agility is the capability to pivot when needed and to respond to fast-changing stakeholder demands even under VUCA (volatile, uncertain, chaotic, and ambiguous)conditions
What are few practices of traditional funding process which are contrary to Agile?
Yearly budgeting cycles?
Too much monitoring of time of team members
Bureaucratic, one-size-fits all funding approval process
What should be key characteristics of funding process for Agile organizations?
Product-centric funding keeping teams and knowledge intact.
Balance of business as usual and innovation for funding in each product.
Funding of highly speculative research work not subject to business case development
What are three fundamental problem when use traditional funding process for Agile teams?
One-size-fits-all model: You cannot fund a Digital App in the same way you are building a new facility
Project model: It actually disbands knowledgable, capable and productive teams every time
Sure-success model: Management must accept that success is not always guaranteed. Failure can be an option to learn.
What are few traits of evolved Agile funding model?
Avoid disrupting teams just because of funding issues
Fund products and not just projects that will have work past development
Incorporate funding of innovation
Focus investment decisions on customer outcomes rather than budget spent
What is McKinsey's Three Horizons Model?
Describes investments needed to consider to stay relevant in the changing
Basically a tool to do work now, work to do soon and work to do in future
Horizon 1 (Core) - Focus is improving performance to maximize value
Horizon 2 (Emerging) - Rising opportunities which will need considerable investment but will generate great profits in future
Horizon 3 (Future Growth) - Options for future growth such as R&D, pilot programs, minority stakes in new businesses.
How success would be measured in the three horizons for Agile and DevOps?
Horizon 1: Outcome achieved and customer retention in the current year.
Horizon 2: Validated learning and customer acquisition over one to three years.
Horizon 3: Market relevance and growth over three to five years.
Case Study: How a large retail organization moved from funding projects to products?
Organization was funding hundreds of projects.
CIO restructured organization and created 8 product teams. CIO also had alignment with CFO.
Each product team received funding based on number of team members and number of times they have to pivot or experiment.
Half yearly review of stakeholders along with Finance - how much has been spent, what has been delivered and how team is fairing against KPIs.
Case Study: How a large gaming organization transitioned from a traditional annual planning cycle to continuous planning cycle?
Earned trust with finance by telling them how traditional funding cycle is hurting company's goals.
Granted one year freeze to reuse funds.
Transformation or innovation fund which can be accessed on continuous basis
Annual planning but continuous refinement
function-less mindset: Leaders share the common goals and are outcome-focused.
Budget against the people on the persistent teams
Teams started to find true value instead of previous year's funding
Case Study: How a large US Bank was able to pivot to accommodate Payroll Protection Program PPP in response to COVID-19
A existing scrum team was funded based on the time-to-deliver and priority of features they are building.
During the COVID-19 crisis, the US federal government passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which authorized the creation of the PPP lending program to assist small business owners who were impacted by the closing of commerce within their states.
Since the bank already had a funded Scrum team focused on small business lending in place, the team was able to quickly pivot to processing PPP loans for their customers.
What are different approaches which organizations can try that investment and funding aspects support Agile, Lean, and DevOps practices
Portfolio Management: Conduct regular planning sessions to pivot on priorities. SAFe PI planning is one good way to follow.
Performance: Focus on measurements that are value (outcome) based, not (solely) cost management based and question measures that are focused on cost, activities, or deliverables. For e.g. Leading Indicators.
Finance and PMO: Finance champions, Product and Portfolio Management Office, show burn-down/burn-up charts instead traffic lights. Fund Teams using breakup of new stories vs bug fix
Governance: Next generation governance should be focused on "What" and Not "How". Focus on an effective model for supporting investments that primarily take the form of outcome-based teams
Risk Management: Annual (or longer) funding cycles allow risk to grow within a portfolio during the times between active funding allocation.
Culture: Increase trust and increase innovation
Automation: Enable automation with processes
Reference:
Evolving the Funding Process: Update Your Funding Process for Agile, Lean, and DevOps. Copyright 2020 by IT Revolution
The Business Agility Report RESPONDING TO DISRUPTION | 3RD EDITION, 2020
McKinsey Quarterly Enduring Ideas: The three horizons of growth