What to consider when approving Epics?
“Always show your working out!” was the mantra of my maths teacher in senior school. This series of blog posts “On the Nature of Lean Portfolios” is an exploration of Lean Portfolios. It is the thought processes running through my mind, exploring the possibilities so that I understand why things are happening rather than just doing those things blindly. It is not intended to be a fait-accompli presentation of the solutions within Lean Portfolios but an exploration of the Problems to understand whether the solutions make sense. There are no guarantees that these discussions are correct, but I am hopeful that the journey of exploration itself will prove educational as things are learnt on the way.
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Epic Approval
The previous post looked at What Makes A Good Epic? One of the defining characteristics of an Epic was Choice. That choice is made at the Strategic Portfolio Review (Epic Approval), the event has been described in the blog posting on Portfolio Events but whilst it stated that decisions need to be made about which Epics are approved and in-play, it didn’t discuss how that decision is made and the factors that influence the decision.
Considering Epic Approval
Therefore, this blog post is going to examine Epic Approval and the thinking that goes into it. The Epic needs to be considered within the context of the Portfolio rather than in isolation. What is that wider portfolio context?
Business Case
Does the Business Case make sense? This is the Compelling criteria discussed in the previous post.
Epics derived from the vision should naturally fit but there will also be Epics that are opportunities to change the business that the DVS/ARTs have identified, these need to be compared against the vision. If they are contributing towards that vision then approval should be considered. If they aren’t contributing towards the vision then there are options: they might be compelling enough to change the vision to incorporate them into the vision, they could still be approved even though they don’t contribute to the vision, and finally they might be rejected outright.
Returns isn’t necessarily new money, it could be some other form of value. e.g. Regulatory work in Finance companies doesn’t generate new money but allows the organisation to continue trading, to continue gaining the existing money. Loss-leader, an opportunity being pursued that won’t generate new money, or at least not enough to cover the expenditure, but is generating some other form of value in terms of presence in a new market, increasing the customer base ready for future monetisation. Think Cost-Of-Delay, the three categories covered by Cost-Of-Delay are a good starting point for considering the dimensions of value beyond the simplistic monetary returns.
Does the organization have the skills and resources, or a plan to gain the skills and resources, to pursue the opportunity? If the answer is no, the organization won’t be able to pursue the opportunity even if it is approved. Answering “no” to the achievability question doesn’t automatically mean that the opportunity is rejected, the opportunity might still be approved but with the constraint that the first thing the opportunity needs to understand is how it will gain the skills and resources.
Available Capacity
The Portfolio is a fixed capacity machine, even if you can obtain more money you’re just creating a bigger fixed capacity machine1. If you give the fixed capacity machine more work to do then that fixed capacity gets spread thinner and thinner across the set of work.
There is nothing stopping the Lean Portfolio Management from approving more and more Epics, other than their own discipline. The more they start, the more that they are delaying the completion of the existing approved Epics.
This becomes a nuanced conversation, not every Epic touches every DVS/ART in the Portfolio, so it is possible to have multiple Epics running at the same time without them impacting on each other or slowing each other down. The trick is to approach this not from the perspective of the work, but from the perspective of the DVS/ARTs, if an ART is doing substantial2 work on more than one Epic then it will be delaying the realisation of value for those Epics.
For the set of Epics that are approved and active are any ARTs working on two or more Epics?
Balance Of Risk
Changing the business is risky, but those risks are where the big rewards lie. Businesses need to balance the risks, but they also need to take those risks otherwise they will never change and therefore become extinct as the world around them evolves and out-competes.
Fig 1: Balancing Risk - Potential Rewards against Cost Of Failure
The balance is how much risk can the business take on? The risk being if the opportunity fails can the business continue. What allows the business to take risks is a stable baseline income. The more stable and profitable that baseline income is, the easier it is to take risks. Google can absorb a lot of risk, it can experiment by pursuing opportunities in lots of fields outside of it’s origins, such as pharmaceuticals and self-driving cars, because it has a sizeable, stable baseline income from the advertising attached to the search results. If those opportunities fail Google will survive, the baseline income remains.
For organizations without such a stable income the balance will be much tighter.
Minimizing Risk
The biggest risk is not taking any risk…
In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.Mark Zuckerberg
The risk is there, it can’t be avoided, you have to take risks. How do you minimize the risks? The risks get smaller when the experiments get smaller, your exposure is smaller when the experiments are smaller. This is Lean Start-up territory: what’s the minimum that can be done to prove the viability of the product, MVP. Don’t mistake your first release, your Minimum Marketable Release, MMR, for an MVP, MVP’s are small experiments to gain insight.
If the experiment tells you that the opportunity will fail, cut your losses quickly, pursue another opportunity. No need to reallocate funds, the investment in the DVS/ARTs is still their, just flow work for the new opportunity into their backlog.
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Horizons Guardrail The Horizons Guardrail is also part of Balancing the Risk. It is trying to encourage organisations to take some risks to ensure that they have future products/business when those products/business are a risky endeavour whose outcome is uncertain. Horizon 1 with an immediate return on investment should be the low risk opportunities, but equally the rewards are likely to be low. These should be safe bets, guaranteed income because they are extending existing products. Horizon 3 with a potential return on investment many years in the future is the high risk opportunities, new business lines, that may, or may-not, work. High risk, but new business is also high reward. The balance between the horizons is trying to encourage taking sensible risks and attempting something to try and gain the big rewards whilst most of the effort is spent on the low risk opportunities. |
What Are You Approving?
You are giving the Epic permission to negotiate work, Features, into the backlogs of any relevant DVS/ARTs thus consuming capacity from those DVS/ARTs. Consumption of capacity is the DVS/ARTs time, and time, through the wage bill, is eventually money.
Are you approving the whole Epic? You don’t have to. Approval could come with constraints, typically the constraints are running the experiments, the MVPs, to gain understanding before Lean Portfolio Management commits to continuing the Epic. This limited approval is minimizing risk and exposure.
Anti-Patterns
Everything gets approved
If everything is being approved then where are the bad ideas? Are there really no bad ideas making it into the process? Are the bad ideas being filtered out earlier? Why are they being filtered out instead of being presented as options to the Lean Portfolio Management? Is your Lean Business case not as lean as it should be; leading to the false optimisation of eliminating opportunities before building the business case, rather than leaning out the business case and provide Lean Portfolio Management with more opportunities to choose from.
Is everything being approved because Work-In-Process limits and the fixed capacity are being ignored? Why don’t the Lean Portfolio Management realise that higher WIP means slower delivery? Do they have the visualisation and metrics to understand the load that the different DVS within the Portfolio are working under?
Did this really need approval?
This loops back into the “What Makes A Good Epic?” discussion, it’s only worth looking at the Opportunities that span across time or trains, or where executive visibility is important. If the Portfolio properly empowers it’s Product Managers to own their Product, and gives them discretionary capacity to spend on their own, locally generated, Features, then the Portfolio can focus itself on just those changes that cut across, or need Portfolio visibility. Why does the Portfolio struggle to decentralise towards the ARTs? Why doesn’t it trust the trains to do the right thing? Why doesn’t it have the right metrics in place to check that the ARTs are delivering value?
Everything Elaborated Up Front
Why are Epics being solved up-front instead of using the Lean-Startup mechanisms to manage risk and exposure? Why is the whole Epic being approved rather than the Portfolio providing steering as to what results they expect in order to provide further approval to continue? Are the Epics opportunities to experiment on, or just work-to-be-done? Work-to-be-done will lead towards elaboration up front and dictating the work towards the ARTs rather than engage in experimentation and continuous negotiation of what to pursue next.
Is up-front elaboration being caused by the persistence of old-world behaviours which demanded that the everything be understood at the beginning? Have the old process just been rebranded rather than new lean-agile processes being adopted?
Conclusions
Approving an Epic involves more than just looking at the Business Case and liking the Business Case. The Epic needs to be seen in the context of the wider organisation and the organisations ability to do the work, both available capacity but also the ability to manage the risk involved in changing the business to pursue the opportunity.
Next Steps
How do Epics get things done from a practical perspective and the behaviours expected of the Epic Owner and Product Manager to truly make that work from an Agile perspective.
#1 The money is the slowest loop running, changing the money is the slowest loop running, as discussed in Managing Investments – Value Streams
#2 Where do you draw the line on what constitutes substantial work? Providing insight and advice probably isn’t substantial work, active development probably is substantial work.
I hope that provides some insight into what to consider when approving Epics, watch out for the further blogs on Features and User Stories!