Invest, Don’t Budget
Many organizations we work with are very budget-driven. Many organizations do up front funding and budget management. This process feels good, as having a plan provides clarity and accountability. However, this type of process leads to very bad behavior because of a few huge, and often, bad assumptions:
- We know everything upfront. Reality: there is no such thing as perfect requirements, therefore, a plan/budget is an illusion of certainty.
- If we fund it we can find “Resources” to do the work. Reality: the bottleneck is not the money, it is capable people.
- The project will end. Reality: products live on and need constant care and feeding.
If we have an upfront budget plan, we spend our time managing to that plan over maximizing value. Managing to the plan only hopes to deliver the value we perceived at the beginning of the project and doesn’t take into account learning and adjustments we could (and should) make along the way. We also tend to spend the entire budget rather than making the best investment choices.
Investing In Value
Everything we build in technology should be considered an investment. What if instead of granting all the money up front, we give enough money to get started and have periodic reviews to make the case to get more money? Let’s take a look and see what changes in behavior that would encourage:
- Instead of managing to the plan, the focus would shift to get value delivered as quickly as possible.
- This would accelerate validated learning with the market, which would lead to revisions to our remaining backlog.
- Early value should prove the business case for additional funding as well as offset the ongoing costs of the initiative.
- At the point that we have diminishing returns, it would encourage us to move on to the next highest priority initiative.
This won’t work if we are delivering the entire plan in one fell swoop. In order to accomplish this, we need to deliver small increments of value, deploying software frequently, and getting market feedback. We can then use the data to make the business case to receive additional funding for the next cycle.