Tom Breur - Agile Business Intelligence - accounting for progress - keynote data vault conference 20111006

Agile BI: Accounting for progress

Tom Breur Data Vault Automation

Utrecht, 6 Oktober 2011

www.xlntconsulting.com 2

“Our highest priority is to satisfy the customer through early and continuous

delivery of valuable software”

Agile Manifesto, 2001 Kent Beck, Mike Beedle, Arie van Bennekum, Alistair Cockburn, Ward Cunningham,

Martin Fowler, James Grenning, Jim Highsmith, Andrew Hunt, Ron Jeffries, Jon Kern, Brian Marick, Robert C. Martin, Steve Mellor, Ken Schwaber, Jeff Sutherland, Dave Thomas

Counter intuitive Agile practices  People are more productive if nobody tells

them what to do  Pair programming leads to more (effective)

production code  Business partners must be full-time

engaged (co-located) with the development team


Counter intuitive Agile practices  Only the business has the right to choose

what gets done  An efficient team must have “slack”, must

have people sitting idle, with nothing productive to do, on a regular basis

 Etc.


Software ‘inventory’


“Work-in-Progress is a liability – not an asset”

Tom Breur, 2011

Simplified development


Error Reports

Idea Develop Test Working Code

(More) realistic development


Idea Analysis Design

Working Code

Code

Acceptance Test

System Test

Unit Test

Error Error Error

Agile manufacturing


Theory Focus J-i-T Inventory TQM/QA Quality & Conformance T-o-C Bottlenecks Lean Inventory, Quality &

Conformance Six Sigma Quality & Variance

Throughput Accounting metrics


THROUGHPUT

Rate of cash* generated through delivery of working code into production, not merely code

complete

*Assuming a constant level of Investment

INVENTORY

Quantity of ideas for client-valued functionality queing for input to, in-

process through, or waiting for output, from the system

INVESTMENT

The sum of money invested in the system of software production plus

the sum spent to obtain the ideas for client-valued functionality input to the

system (gathering requirements)

OPERATIONAL EXPENSE

The sum of money spent in the system to produce working code from

ideas for client-valued functionality (marginal expense to create

production code)

ROI in Throughput Accounting


ROI = Unknown (T) – Pretty hard to guess (OE)

Didn’t bother to measure (I)

NP in Throughput Accounting


(more) Net Profit (NP) = T – (less) OE



(more) ROI = Throughput (T) – Operating Expense (OE)

(less) Investment in Inventory



(more) ROI = (more) Throughput (T) – Operating Expense (OE)

Investment

(more) Net Profit (NP) = (more) T - OE

Focus on Throughput  Focus on T, I, or OE?  Throughput is unlimited, it can grow

forever  Focusing on cost has a logical (yet

unattainable) lower bound – namely zero  Throughput focuses on the customer –

externally  Cost focuses on the team – internally


Investment  Minimizing Investment (I) drives ROI up  Minimizing Investment also reduces OE,

by reducing carrying cost of capital  And, most importantly  Lower I means lower inventory,

which leads to reduced Lead Times, hence earlier delivery of value (Agile Manifesto principle #1)


Cost vs Throughput Accounting Cost Accounting   Inventory is an asset   Efficiency = function/

dollar (hours) labor is a “variable” cost

  People sitting idle are discarded!

Throughput Accounting   Inventory is a liability   Efficiency = function/

direct costs (idle or not) labor is a “fixed” cost

  People sitting idle are a part of the system!


Cost vs Throughput Accounting


Cost Accounting

Operating Expense Inventory Production

Throughput (Production) Inventory Operating

Expense Mos

t Foc

us Least Focus

Throughput Accounting

Agile & Data Vault  (very) few other architectures allow

incremental build at such low marginal cost  Deliver early – in (very) small increments

 (very) few other architectures allow ‘mistakes’ in your model, that you can recover from inexpensively  Deliver early – (long) before you have settled

on “the” final business model www.xlntconsulting.com 18

Conclusion  By providing appropriate metrics

(=Throughput Accounting), complex adaptive systems (Agile projects) will display the desired emergent properties

 Agile BI is not about delivering faster (or cheaper) – efficiency

 Agile BI is about delivering in arbitrarily smaller increments to end-users – hence gathering feedback about effectiveness


Data & Analytics

Tom Breur - Agile Business Intelligence - accounting for progress - keynote data vault conference 20111006