Category: Delivery Horizon

Techniques: Real Options

Techniques: Real Options

Real Options focuses decision makers attention on the items that need to be decided now, at the last responsible moment.  By focusing on the appropriate time for making a decision, items which are not needed can be delayed making the decision process much simpler.

Think of it this way, to be agile, we need to have flexibility.  However, the criticism is that with flexibility comes chaos. How can we bring in the latest information and use it for decisions in an orderly way – without disrupting everything we’ve been planning? We need a way to make a decision based on a logical framework, and Real Options is one of the techniques that has been developed to do just that.

It starts with the question, “What is the latest point at which a decision can be made?”  Anything before that means we may have missed important late breaking information.  Anything after that, and the decision is made for us.

In other words, there is a valid reason for Procrastination.

Elements

Agile Extension to the BABOK®  Guide – section 7.12

It’s a little different from how we normally think about problems and decisions.

First, An option is only an option if it can expire.  Otherwise there’s never a reason to decide.  So by definition, options have a point where they can expire.  That can be a point in time, or an event that triggers a decision point.  So long as it can expire.

Next, if this option is taken, one or more other options are excluded.  This is a choice of one out of more than one, with one choice winning.  If a competing option is still available after the choice, then it was not paired with the right option.  In other words, it wasn’t understood correctly.

If there’s a “cannot” phrase associated with the option, then it isn’t an option either.  Options are only options if they can be put in place.  If there’s a reason it cannot, then it isn’t an option.

That sounds intuitively true when you think about it.  But we don’t usually think about it that rigorously.

In addition, options must exist within organizational commitments, such as standard tools, acceptance criteria and delivery.

As mentioned, they must have a means or time when they expire, after which the choice is made for you instead of by you.

The earliest option defines the end date for the collection of information in order to maximize the ability to make a decision.

Description

Agile Extension to the BABOK®  Guide – section 7.12

There are 3 statements that are important to remember, highlighted in the Process section here.

  • Options have value
  • Options Expire
  • Never commit early unless you know why And this belongs to the Product Management or Refinement context, directed toward the Internal Team.

Usage Considerations

Agile Extension to the BABOK®  Guide – section 7.12

As we stated at the beginning, Real Options simplifies decision making by allowing the decision-maker to focus on decisions that are needed now, instead of the entire project upfront.  This removes complexity and allows decisions to be prioritized based on events, time, or other constraints.

But it isn’t the most intuitive way to think about decisions, which means – though it simplifies the decision itself, the process supporting this technique is not so simple.

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Goals of Agile Analysis at the Delivery Horizon

Coming into Delivery, the Strategy has identified a need to be met, and the Initiative Horizon has identified a solution and its features. When working as an Analyst in the Delivery horizon, the key is to expend the least effort to discover information and support informed decisions about the solution.

I’m sure you realize it is not easy.  It requires a great understanding of what information is useful for decisions on the solution, as well as how to find quickly, and present it in a timely, understandable fashion.

Someone introduced me to the concept of “Planned Spontaneity”  That is where the person has things set up so that if they want to go on various kinds of excursions, they always have bags and supplies packed and ready to go. It takes a lot of planning to be spontaneous. Or, as Rod Stewart used to sing, “Her adlibbed lines were well-rehearsed.”

So when this “Challenge” involves the least amount of effort, I think that also consists of a lot of planning to make it happen, so that the work at the time it’s needed is minimal. To do this, the Delivery horizon addresses two questions. First, looking at the unfinished but defined backlog, the Analyst asks what has the highest value. Then the delivery team asks how to deliver value most efficiently, with the least waste.

A Ready Backlog

Agile Extension to the BABOK®  Guide – section 6.3.1

In the Agile Extension, there is a discussion of how to know when a requirement is ready, as well as when do you need to have it available.  On the first of these questions, the Extension talks about “Invest” criteria.  For now, we’ll say Invest stands for “Independent, Negotiable, Valuable, Estimable, Sized Appropriately and Testable.” I intend to get to the techniques later and will elaborate more at that time.

Whether you are talking about User Stories or other formats for requirements documentation, the INVEST criteria work well.  The point is that the requirement is well constructed with Clear and Concise acceptance criteria and is achievable and Desired as shown in Prioritization

For the second question, sometimes the requirements should wait and be ready in the near future. Agile suggests having things prepared for near term development. If something has to wait, then having it ready now is wasted effort, which takes away from the closer requirements.

Additionally, some frameworks offer suggestions for how far ahead to finalize requirements, so that you don’t rewrite the requirements as better understanding surfaces.

Prioritization and Sequencing

Agile Extension to the BABOK®  Guide – section 6.3.2

The next element of the Delivery Horizon is Maintaining the Backlog. Here we work with the Product Owner to Set priority and sequence to deliver value quickly. The purpose is to support near term development, and the outputs are decomposed features and refined requirements.

Supporting Delivery

Agile Extension to the BABOK®  Guide – section 6.3.3

The Agile Analyst’s efforts prevent obstacles in several different ways, such as facilitating a better understanding of dependencies, coordinating efforts with other groups, and removing roadblocks.

How do Analysts remove Roadblocks?

This question requires an understanding of the Analyst’s role versus other leadership roles on the team. Then, within the Analyst role, what are the roadblocks that can occur.

The first one is a lack of understanding. If the team does not understand, it will cause churn or will prevent the story from being worked.

Another is the interrelationship between features internal to the solution.  Without these interrelationships being understood so that proper sequencing can occur, you may be trying to develop against something that doesn’t exist.  So when it’s delivered, there’s no way to know if it works.  Remember, we’re delivering working software.

Another is external dependencies, which are much like what was just discussed.

Ensure Learning Happens

Agile Extension to the BABOK®  Guide – section 6.3.4

Next, there is Ensuring Learning Happens in the Agile Context, and in this, we first are talking about Processes. By Processes, we are talking about how the team works, not how the process works, or the stakeholders will use whatever is being delivered. 

The team is observing how well they are working, and can they work better.  These observations include feedback to the Initiative or Strategy Horizons because they need to know how to help Delivery better.

The other learning involves the product itself.  Constant feedback determines whether the value is being delivered and the expected results met.  This feedback may affect prioritization and also other horizons. Here is one of the distinctions between Agile and Waterfall – that feedback from Delivery can affect the other horizons. Waterfall would say, Delivery is the result of planning, so there’s nothing that goes back in time to fix what has been done.  Perhaps that’s a bit oversimplified. The Agile Mindset recognizes this project is not performed in a vacuum.  The speed of delivery affects resource availability for other initiatives and other needs.

Focus on Vision and Value

Agile Extension to the BABOK®  Guide – section 6.3.5

Finally, there is Maintaining Focus on the Product Vision, Customer, and Value. The Agile Analyst’s work continually promotes a shared understanding of how the work achieves the vision. Focusing on value means the most valuable things are prioritized and delivered early.