by Hakan Altintepe

In the digital age, speed is the new scale – are you mastering it yet?

Sep 12, 2018
Digital TransformationIT LeadershipIT Strategy

Enterprises are craving for more speed to gain competitive advantage during digital transformation; but surprisingly, executives have limited options to respond with.

teach train direct coach stop watch speed
Credit: Thinkstock

Speed is the ability to exploit emerging business opportunities by consistently bringing differentiating digital solutions from concept to market at the pace of the customer; and, it has become the new scale in the digital age as repeatedly highlighted by BCG, McKinsey, Forrester, Forbes, MIT, and others.

Back in the industrial age, business and IT executives were supported by an array of proven management techniques and tools – financial accounting, capital allocation, project management, and cost accounting among others – that allowed them to confidently govern technology investments to achieve greater scale advantages. As we are getting knee-deep into the digital age however, a comparable set of techniques and tools aren’t available to master speed as a competitive advantage. When it comes to governing technology initiative portfolios, executives are left to their own devices and primarily guided by their convictions. Consequently, speed is often the first one to give in under pressure among other management priorities that are, unlike speed, well understood and rigorously governed, like risk, scope, cost and schedule.

Beyond nurturing a digital culture, workforce and partner ecosystem, there is a technical side of mastering speed, which involves prioritization of activities, allocation of resources and flow of work within the technology initiative portfolios. Previously, I estimated that initiative portfolios are likely to suffer from up to 45 percent speed degradation due to shortcomings of the current management techniques and tools. Specifically:

  • Work intake rate and portfolio throughput can’t be synchronized – When the rate of new work placed on team backlogs considerably exceeds the ability of those teams to timely perform work, flow concessions happen unexpectedly and frequently across the portfolio.
  • Upcoming workload can’t be accurately predicted – One of the key levers of speed optimization is to maintain an optimum balance between workload and capacity at each team in the portfolio. When this balance is disturbed, capacity bottlenecks slow down the flow of work in the entire portfolio.
  • Backlogs can’t be effectively prioritized – Team backlog prioritization decisions are frequently disconnected from portfolio goals and constraints and omit the cost of delay, i.e., the opportunity cost of business outcomes that may not be realized if an activity is not completed on time. Furthermore, activities that are completed before their required time, hide local resource excesses, increase work in progress inventory, and generate little, if any, additional value for customers. Early completions aren’t typically observed at an initiative or feature level, but they regularly occur among the hundreds of lower level activities performed by IT on daily basis.
  • Impact of dependencies can’t be adequately mitigated – Cross-team dependencies that are not resolved in time, not only slow down the progress of the dependent activities, but their ripple effect is often felt throughout the portfolio.

As economies of scale are about controlling the average cost and the marginal cost of products, economies of speed are about mastering time-to-market of technology initiatives. The average time-to-market should match with customer needs while the variance should be minimized to reduce the cost of contingencies and failures. Furthermore, due to ever accelerating pace of business change, the average needs to be continuously improved. Let’s uncover some of the management implications of these principal requirements:

  • Standard activity milestones – such as initiated, planned, executed, delivered, closed – are known for years and supported by most enterprise project management tools, but rarely employed, since they are viewed as being subjective and without enough substance. To master speed, however, they are indispensable. The data associated with these milestones provide the necessary means for measuring, monitoring, controlling and improving time-to-market across the portfolio.
  • Despite the uniqueness of each initiative and the inherit complexities of each portfolio, the relationships between the speed, scope, risk and cost performances of the portfolio are sufficiently deterministic. To optimize the management trade-offs involving the portfolio speed, the speed goals, targets and KPIs should be formally defined.
  • Traditional benchmarking methods are not suitable for managing the speed performance of initiative portfolios in the digital age. Instead, a continuous improvement performance framework should be established.
  • Milestone forecasting has been a controversial topic among agile practitioners for some time. However, without a robust milestone forecasting capability, no organization can truly master speed. The anticipated impact of cross-team dependencies needs to be fully incorporated into forecasts, and the forecast accuracy should be continuously monitored and improved across the entire portfolio. All activity prioritization and resource allocation decisions should be informed by the milestone forecasts.
  • The opportunity cost of delay of activities should be formally accounted for and incorporated into prioritization decisions.

Although enterprises are craving for more speed, these management practices haven’t become mainstream yet; and consequently, business and IT executives have limited options when it comes to speeding up their digital transformation initiatives.  However, this may change soon with advances in scaled-agile methodologies, and emergence of innovative solutions like lean portfolio management, value stream management and agile ppm. Given that it may be possible to accelerate technology initiative portfolios by up to 45 percent, business and IT leaders are likely to invest more time and money in new management techniques and tools that will help them master speed.