Most organisations don't suffer from a lack of innovative ideas, they suffer from not being able to pick and nurture the best ones, and deliver them quickly enough. Thanks to the consumerisation of IT and software "eating the world" this is getting worse. Innovation and "software development" is already synonymous in most organizations.
"If you are not moving at the speed of the marketplace you're already dead – you just haven't stopped breathing yet." – Jack Welch
So how do we improve the way we prioritise to ensure that we're delivering value quickly and not wasting our precious capacity to innovate? Some organisations reach for the MoSCoW method, attempting to categorise everything into four groups of priority: Must have, Should have, Could have Would have. The problem with MoSCoW is that you invariably end up with most of the list under the "Must have" category. Trying to get multiple stakeholders to agree over what the must haves are is a bit like an NP-complete problem.One alternative is the Equity model. The basis of this approach is an attempt at fairness. Usually this is done on an annual basis, where a percentage of development budget is allocated to different departments, stakeholders or large projects. This approach is still largely blind to value, assuming that the proportions allocated will deliver the most long-term value for the organisation as a whole. This can work, if there are no dependencies between the different departments, but this is hardly ever true. In most cases, the budgets are set without a proper understanding of the capacity constraints, assuming that development capacity can be turned on and off like a tap. Making this worse, most organisations are not organised along value streams, so there are significant dependencies between teams who usually have no way of making the trade-offs between different demand streams, other than by responding to whoever shouts the loudest. Needless to say, the silos are often in competition with little reference to what matters most for customers, or for the organisation as a whole.
Organisations who operate with some form of "Agile" aren't spared this. Scrum has nothing to say about which projects to start, and nothing to say about when to stop and move on to something else. Within the project, most implementations attempt to decouple prioritisation by deferring to what we like to call the HiPPO model of prioritisation. This is where prioritisation is mostly driven by the Highest Paid Person's Opinion. Ever found yourself doing something that everyone on the team believes is mad, but someone much further up the food chain has made apparently made a commitment that everyone feels powerless to do anything about? Welcome to HiPPO-land. If you happen to find yourself with a HiPPO that scores high on the Epistemic Humilty scale, then you're in luck – they will probably seek out the opinion of others and rely more on data-driven decisions with small experiments that are safe to fail. Unfortunately, these people are often not the ones that get promoted to these positions. You're far more likely to be assigned a HiPPO that suffers from Epistemic Arrogance: blind to what they don't know, and prone to making bold commitments rather than keeping options open.
Since economics is all about scarcity, we can turn to economics to help us quickly discover, nurture and speed up the delivery of value. We need to understand value and urgency of the options and know the Cost of Delay. We can then use CD3 to prioritise and improve ROI.
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