Agile on the beach 2014: Contracted to deliver outcomes

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Last week I had the pleasure of attending Agile on the Beach 2014 where I was presenting a talk on the business talk on the business track about the evolution of our approach to delivering for our clients and how that is changing our commercial contracts.

Transcript of Agile on the beach 2014: Contracted to deliver outcomes

  • 1. Contracted todeliver outcomesAgile on the Beach - September 2014

2. IntroductionKris Lander / @EnergizedKriswww.energizedwork.com / @energizedworkENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 3. Outcomes for this presentation An understanding of how and why Energized Works approach tocreating value for our clients has evolved over its history. An understanding of how Energized Work is trying to create a contractmodel that aligns with its current outcomes-based approach. An understanding of commercial contracts and typical contract modelsfor software procurement An understanding of the clash between an agile software delivery andtraditional software contract models An understanding of the most common agile contract model approachesENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 4. A teaser: What we do todayWe help companies design, manage and deliver programs of work whichrevolve around technology.We focus on aligning our engagements with the business strategy of ourclients to achieve positive outcomes.Realising outcomes forms the basis of our contractual obligation to our clientsand part of our payment is determined by measuring our impact on businessoutcomes.We are contracted to deliver outcomes. Lets explore how we got there.ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 5. A brief historyofEnergized Work2006 - 2009ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 6. History of EW: Agile WarriorsProblem: Repeatable, predictable deliveryEarly 2000s Professional software development wasnt much fun. At least for me. Began adoption of agile practices and methods. Learning andincreasingly competent in applying process and technical practices.2006: In the right place, at the right time with the right people. Step change in terms of speed, predictability and quality. Success of team led Simon and Gus to found Energized Work.ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 7. History of EW: Got ROI?Problem: Understanding the value delivered by teams2007: Project rescue Macro measures of value/effectiveness became focused on investedvs user growth. Adoption of Lean and ToC methods to focus on managing/measuringWIP, cycle time, queues, etc which made case for delivering more valueover time.2008: Governance / PMO Business and product strategy across portfolio lived outside of agiledelivery and carried unvalidated assumptions about market andcustomer needs which was a far bigger risk to ROI.ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 8. History of EW: Making hardchoicesProblem: Successful business strategy is more than just following the money.2009: Evaluation of IT strategy Assessment of IT delivery capability and existing trading platform Difficult to quantify return on investment in simple Big gap in terms of expressing value to board led to realisation that therewas a gap in our ability to express the value we were delivering(Irony: Financial industry has great tools for pricing information and risk management)ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 9. Our Agile JourneyPicking on a few of principles from the agile manifesto:Our highest priority is to satisfy the customer throughearly and continuous delivery of valuable software.Working software is the primary measure of progress.Continuous attention to technical excellence and good designenhances agility.(We had tended to do better with the terms on the left, as opposed to theterms on the right.)ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 10. Wed come along wayTechnical excellence to achieve early and continuous delivery of workingsoftware.More responsive and predictable: Just enough, just in time: small stories, short iterations and constrainingwork in process Reduced cycle time/lead times, shipping regularly.Disciplined techniques produced working, maintainable software: Test and deployment automation (CI/CD) BDD/TDDSelf organising teams have promoted collaboration, transparency andvisibility.ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 11. But we had some way to goMeasuring progress Being judged/focused on output (Velocity, Features, etc) as a proxy forproductivity.Good design Agile methods have never explicitly addressed design, be it userexperience design or technical design.Valuable work/software Value needs to be based on more than subjective judgments and ismore complicated than simple ROI (e.g. balancing multiple stakeholderneeds)See Simon Bakers paper No Bull. http://nobull.energizedwork.com/ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 12. Making a sale.ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 13. A Request for ProposalClient makes a request for proposal: Provides a brief: requirement spec (stories), wireframes, etc. Client RFP covers wide area of ground.Client wants the supplier to demonstrate that they can deliver everythingthey want within their budget.ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 14. RequirementsAs a user, I am able to login to the application using the email/passwordcredentials with which I registered with, so that I can access my accountdetails.We have 50 requirements like these.Performance requirements:The website must have an availability of 99.999%ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 15. How much and how long?The supplier knows that unless they have built something very similar before: estimation of cost and time is very difficult with sparse information performance requirements and dependencies are potential icebergs. they dont have a good understanding of what is more or less valuable to theclients customers and other stakeholdersSo the supplier makes other promises as an alternative to committing to theunknown: Early delivery of working software into production first week, every week. Short statements of work (investment cycle), start and stop when it suits you. Pay us for Time and Materials and take a leap of faith.But the client needs to know: How much and how long?!ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 16. Time to get on with itClient and supplier attempt to improve the existing requirements, clarify theunknowns and agree to cut down the scope in the hope that an agreement canbe reached.Time is against both parties. The client has deadlines and the suppliers cost ofsales is spiraling out of control.Luckily, the client and supplier have developed a good relationship. The supplierhas impressed with their expertise and insights and the client has been pragmaticand accommodating.It doesn't always work out that way.ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 17. Bounded by the contractThe supplier wants to iterate in partnership with the client to discover and deliverwhat is valuable, but they know its very risky to deviate from the featuresspecified in the contract.The client appreciates the focus on value the supplier brings, but they have to hittheir deadlines and cant go over budget.When things get tough will contract help or hinder?ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 18. ContractsENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 19. Contracts - DefinitionWhat is a contract?a written or spoken agreement, especially one concerning employment, sales, or tenancy,that is intended to be enforceable by law.an agreement with specific terms between two or more persons or entities in which there is apromise to do something in return for a valuable benefit known as consideration.The elements: Offer and acceptance (meeting of minds) Promise to perform (with commitments e.g. by date) Consideration (payment)ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 20. Contracts - The basic typesPerformance: But typical a definition of what is to be done.Pricing Models Fixed Price variants Cost Reimbursement variants Time (Labour) and materialsENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 21. Contract model FAILWhy it doesnt work: Traditional contracts, especially fixed price, fixed scopecreate many if the same problems as waterfall software development. Specification of what is to be done, by when and makes the assumptionthat we know everything. Risk for client isnt just getting what they want done, but what they need(ROI) Contract makes responding to change undesirable and expensive Fixed scope, fixed cost, fixed time (we know what happens to quality)ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com 22. Fixed Price, Fixed Scope for SoftwareWe asked a 100 agile practitioners name reasons that fixed price, fixed scopecontracts continue to be the most common form of contract for softwareprocurement. Easy to understand, I will get X for Y by date Prevailing belief that building software is like other construction industries. Easiest to align with traditional business planning and budgeting Constrained by policies of legal and procurement dept. Client believes definition of what is to be done, is what they need, and this canbe made transferrable & understandable in contract Client feels that they are safely offloading responsibility and risk to supplier Client gets to beat down supplier on price, supplier gets to claw back inchangesENERGIZED WORK / H