Agile Development Blog

Original F4 Technologies logo 2002-2004

I know what you are thinking with the title of this post – I am drinking the Kool-Aid. Just bear with me  for a minute. Back in 2002, when I started working on Rally, it was originally known as F4 Technologies. It was known as F4 because I did not want to work on anything that did not have the potential impact of a Factor of Four, for example a 4X increase in productivity or effectiveness.   There are two reasons for this:

1. Andrew MacAfee and John Gourville at HBS have shown that you need a 9X improvement with a new tool, technique or method to un-seed the incumbent.
2. According to Paul Hawken in Natural Capitalism, we need a 4X productivity increase in the use of natural resources to get to a sustainable place with the current population in the world.  Chapter 7 of that book helped form the core purpose and mantra of Rally – “Muda, Service and Flow.”

Now seven years into Rally, we have the proof that teams – including large and distributed teams – can be 4 to 10X more productive by following Lean principles and effectively implementing Agile development.  Like the story of “Good to Great”  from Jim Collins, you can’t leap here, but you can put yourself on that path by adopting a continuous improvement approach like Agile.  If you do that, you can be a “great” software development organization that dominates your market and is 10X better than the good ones.  Great organizations that dominate in their industry also have the knowledge and resources to change world, a la Google.org, the Salesforce.com Foundation and or through my favorite the Entrepreneur’s Foundation.

My summary take-away from Good to Great is:

“Right people building the right things right”

“Disciplined people, Disciplined thought, Disciplined culture “

If you are working toward this, I believe you increase your business value by 4 to 10 times.  I am going to make the case with the help of ROI models from David Anderson.  (BTW, I love his book – it does a great job explaining the simple physics of Agile.)

From Chapter 2 - David Anderson's "Agile Management for Software Engineering"

This is a very simple model of software process.  David shows more complex ones that model all the loop backs of large shipping software, but let’s work with this one.  So, the rough equations to calculate the business benefit of the process are the following:

Net Profit = Throughput – Operating Expense 
ROI = Net Profit / Investment

In the following four pages, I am going to look at how this equation plays out for four different scenarios:

1. Good waterfall team, on the mean line of the QSMA Agile Impact Report
2. Beginning Agile team in Flow benefiting from the 25% productivity savings of an Agile teams in the same study
3. Intermediate Agile team in Pull with incremental releases of value
4. Advanced team in Innovate that cuts time-to-market in 1/2 to end early after delivering 50% of the work but 80%the value

What you will see in this hypothetical modeling exercise is the true power of Agile to dramatically impact the software development teams in the organization. For a deeper understanding of what I mean by Flow, Pull and Innovate, please Jean and I’s white paper on moving to Program Pull.

Here is the summary:

1. Good waterfall team – ROI – 0.8
2. Beginning Agile team in Flow  – ROI – 1.4 (1.6 factor better than good waterfall team)
3. Intermediate Agile team in Pull  – ROI – 2.6 (3.2 factor better than good waterfall team)
4. Advanced Agile team in Innovate  – ROI – 6.3 (7.7 factor better than good waterfall team)

Factor or Four or better – that is why there is such a rush towards Agile development.  Of course, you can’t have your cake and  eat it too.  Moving up this maturity curve takes long-term dedication to increasing discipline and agility across the entire organization, but there are dramatic benefits if you can get on the continuous improvement path and stay there.