November 22, 2017

Outcome based agility: Optimize your business using LEAN and Scrum

LEAN is an excellent way for companies to start optimizing their way of working and make sure the production of waste is kept to a minimum. Scrum itself is based on those very principles. Many companies use LEAN to optimize their business processes, but rarely do I see them actively involve the scrum teams in these efforts. But how can organizations benefit from effectively combining LEAN optimization of operations of the different business processes and scrum to develop the software needed to support those processes?

The core of the solution is feeding back operational information into the development process and use that information to set goals for the teams. I am not talking about IT operational data, this is what DevOps focusses on. The data I am talking about is business operational data, like number of customer calls handled, the number of invoices send on time or the time it took to fulfill an order. That is where the company makes the many and software can have real impact.

Let’s take the example of a bank that sells mortgages to people. In order to validate a request for a mortgage there is a process in place that checks various risks, this process of course is supported by one or more IT systems by one or more scrum teams. DevOps practices ensure close cooperation between the development and IT operations.

Lean and scrum

How I see organizations operate

LEAN looks at factors that are critical to quality. Using those factors LEAN will try to optimize the process. Some of those optimizations might impact the IT system. The proposed changes are discussed with the product owner and put on the product backlog. The development team then delivers an increment of the IT system that is deployed into production.

Sounds great, right? You might think so, but there are a couple of drawbacks with this method.

  • There is no real cooperation between the business and IT in solving the issue, changes are merely “ordered” by the business. This does not breed a culture of joint responsibility,
  • Ownership for innovation lays primarily with the business, IT is following,
  • IT works output based and has no visibility on outcome.

What would work better?

Introduce a feedback loop from the business operation into scrum and DevOps ecosystem, Outcome based agility as it were. The feedback loop starts with the information obtained from the LEAN business process, the factors critical to success and create KPIs for them. Based on these KPIs, targets or goals can be created for a given time period that impact those KPIs. For instance: Increase the throughput of mortgage applications by 5% in the next 3 months or increase customer satisfaction by 10% over the next 6 months.

Outcome based agile

The Scrum Team together with the business can take ownership of the goals and work together to obtain the goal. This has the following benefits:

  • Increased transparency because the purpose of the work is clear and feedback is instant. This is not only motivating for people but allows inspection of the actual impact of changes in the IT system on the business outcome,
  • Not providing the solution and giving people the autonomy to create their own solutions will breed creativity and innovation,
  • The targets will help keep the product backlog lean because the relationship between the product backlog and the expected value is transparent. Backlog items that have no impact on the business outcome or a different impact can be either removed or positioned lower on the backlog.

Conclusion

Business processes can be optimized using LEAN. In current practice, there is not always a good link between the results of LEAN effort in the business process and the development of the IT systems that support these business processes. Instead of having scrum teams follow the business and implement the changes that were “ordered” there is an opportunity to take agility a next step. Outcome based agility will further align the business and the agile teams by feeding operational data from the business processes (LEAN KPIs) into the development lifecycle. Setting S.M.A.R.T. goals for these KPIs for both the scrum teams and the business will create transparency on required business outcome so the developments efforts are directly tied to outcome instead of output.