Strategic Agility – It’s About Time

Sep 18, 2017

One of the key differences between the agile approach to strategy and traditional approaches is that time is treated as a scarce resource.  Yes, business cases consider the so-called “time value of money” via discounted cash flows.  Assuming that the discount rates used are accurate (which is a big assumption in itself) the DCF method is still a gross oversimplification.   The Cost of Delay, while hidden, can greatly damage the lifetime value of any new product or service initiative, undermining the business case.

In a world where competitive advantage is fleeting, the lifecycle of any product or service is limited.  Delays in implementation result in lost revenue that can never be made up.  Delays don’t merely push revenue further into the future – in fact they limit it substantially.  This may happen for two reasons.  First, products have an end-of-life (think of it as a “shelf date”) that is independent of when they get to market. Inevitably a more competitive product or substitute will enter the market. Second, and even more drastically, earlier entry of a competitor or substitute may lead to loss of “first mover advantage” and you may never recover from that.  In either case, a delivery delay will decrease the amount of time that a product or service delivers value – even while the cost remains the same or higher.   The business case goes out the window.

There is much that strategists can learn from the prioritization practices employed by agile software product developers.  One popular, and powerful, method is called “Weighted Shortest Job First.”

In WSJF, the first factor to consider is the Cost of Delay.   This can include estimated revenue impacts, penalties for late entry, or perpetuation of known risks.  The second factor is Duration – how long will it take to get the strategic initiative done?

The rules are simple. When the Cost of Delay of two initiatives is equal, do the shortest job first.  When the Duration is equal, do the initiative with the highest Cost of Delay first.  Otherwise, prioritize based on Weighted Shortest Job First, which is calculated as Cost of Delay divided by Duration.

That’s the analytical part. But how to make it work?

In order to minimize time to market, often measured as “Concept to Cash,” it’s critical to build the capacity for fast, high-quality workflow.  Many organizations get this all wrong.  They measure individual utilization as a proxy for productivity.  In my years as a consultant with a couple of the large firms, the timesheet reigned supreme.  Depending on your level, you were expected to bill anywhere from 60% to 100% of your time to client projects. Getting our timesheets right made the bean counters happy, but contributed nothing to understanding how a consulting team could provide value to the client in the shortest possible amount of time.

The fact is, most work is accomplished by teams, often in a value chain that involves other teams. What we should be measuring is how fast value is created for a customer at the end of that value chain.  The principles are the same, regardless of whether you work in software or some other function.

  • Cross functional teams with clear authority to get the job done reduce communication errors and decision delays.
  • Transparent objectives, desired results, and progress updates improve communication and innovation.
  • Small batches of work move through to completion faster than big ones, and generate faster feedback for course correction.

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