Agile Sourcing, how to plan for uncertain? (LAP Nuggets - Episode 2)
Have you ever wondered, why some of the strategic sourcing cases failed and others were successful?-In a series of episodes we gonna introduce you, what we’ve learned from our LAP Alliance networks’ multiple engagements and successful sourcing cases with LAP. With the LAP Nuggets we’ve furthermore developed and assembled applicable tools, that are easy to understand and will reduce your risks during strategic sourcing significantly!
In this episode we’d like to answer the question: „If we can’t plan uncertainty in strategic sourcing cases, how we can source it then either?!“
<< Back to the previous article of the series: The secret Sauce of successful Sourcing (LAP Nuggets - Episode 1)
Initial position
In our mandates as agile coaches I often hear „We are agile, we follow NO plan!“-This is scary to any leader and not a good ground to start an agile journey in procurement either. Fact is, that this is often taken as excuse of the current chaotic state of their agile transformation. In other words these people haven’t fully understood #BusinessAgility yet. Don’t get me wrong, it’s a journey!-Nevertheless it’s a fact that with Lean-Agile Procurement we’re dealing with the most complex sourcing cases, in strategic new fields mostly unknown and with a lot of surprises to be expected with the first customer contact.
“We are agile, we follow NO plan!
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In complex, strategic sourcing cases it’s very hard to foresee the next few months and to build a detailed plan. Or would you blame your broker because his estimation of the gold price hasn’t met his prediction?!-However we still need to invest in a „plan“ to be successful, but is this still agile then?-Long story short, YES!
The Procurements Dilemma
Procurement professionals or businesses in more general, that like to source more complex, strategic products / services / etc. are usually not aware of the dilemma they are dealing with. Applying the classic sourcing approaches, such as RfX, to complex sourcing cases feels often very hard, as it wouldn‘t be the right tool. Lets dive into the dilemma shortly. Classic approaches are thought to be transactional. In other words take an idea as input and you’ll get a vendor or a product or service as output.
If we think we could specify uncertainty of complex sourcing cases with this ONE-time shot, it’ll leads to a:
HUGE SCOPE - Everybody adds his/her needs and wants, event the nice to have’s
LONG CONTRACTUAL PERIODE - a big scope increases the delivery time and RISK
TIME-TO-MARKET - gets decreased from our experience to 6-12 months
With Lean-Agile Procurement we accept uncertainty and try to source more often focusing on what’s most valuable to the customer right NOW.
This doesn’t come for free either, to work like this we need to:
REDUCE SCOPE - to what we assume is the most valuable for our customers right NOW
DECREASE CONTRACTUAL PERIODE - so that we could test our assumptions of business value at any time with the customer and stop development with partner as needed.
MINIMIZE RISKS - as an investor we’d like to minimize our vague investments every time
TIME-TO-MARKET - while we’d like to be faster as our competitors in the market
Another view on it is if we see it from an investors perspective. Every spend is like an investment, where do we expect a return. If we source just one times it’s usually a huge investment, that takes very long until we’ll get first market feedback and so our return. In a very worst case our competitors are faster than us and we don’t get the expected return at all. Furthermore we need to think of what this means in a strategic/complex sourcing case. What’s the impact of cost savings to our return?-Will we get new innovative product earlier if we have less senior people doing the job?-Most probably not.
Start thinking like an Investor!
LAP and the Lean Procurement Canvas foster collaboration between all parties throughout the whole lifecycle of a product or service. Having such a visual tool in place helps to answer all the key questions WHY/WHAT/HOW/WHO and creates alignment by default.
Imagine you have an investment 100mio worth it. For an investor it’s pretty clear he’ll do just a 1-10mio in a first hand, so that he/she could test market impact. If our most important goals have been successfully received by the customers we’ll invest more, and so on. With LAP we demand the same for procurement and apply this investors-thinking too.
This way our „Savings“ or profit (investment - return) might get hopefully much bigger and much earlier too. Because we will stop our investments if we’ve reached the max. growth. From software we know that just 20% of all features delivered are often used by the users. This means we have a potential of up to 80% „savings“ just by focussing to the RIGHT NEEDS first!-Combined with earlier return, most probably bigger market share as you’ve been much earlier than your competitors the return will be even more maximized.
Now being fast is not enough. We still need a „plan“ to get focus. That’s why we’ve put all our expertise together howto write a good agile roadmap and developed the „golden“ LAP Nuggets„Timebox & KPI‘s“ we’d like to share with you in this blog post. More nuggets are about to come in the next episodes of this series of blog posts.
LAP Nuggets: Timebox & KPI’s
If it comes to an internal agreement with our main stakeholders we do exactly need to know what is expected and possible till when. In other words there’s no more the time to run into detailed specifications. We rather need to get a high-level alignment about realistic business goals within a certain time box and how we track, that we’re doing good achieving those goals. If you work together with 3rd party partner this gets even more important, as you’ll have cash-out every month.
In agile I always loved the fact that we agree on a fixed time-box such as a sprint of 2 weeks. Within this time box we try to achieve the most important customer needs possible. A similar concept is used some abstraction levels higher with an agile roadmap. For the very first time we’ve defined what a time box and a good metric should contain.
To make it more easy to understand find below a rough example of a startup, that wants to become the #1 eBike rental-service provider.
Time box - example
The LAP Nugget Time box consists of:
Title, which gives the team a rememberable name / overview of the time box
From / to, which often contains multiple sprints. We also like to make given milestones transparent. In this case we just add the to-date.
Progress, the time is running and can’t be held up. We just make it visual by updating it roughly.
Checklist, which shows us if the time box is just our regular pace e.g. 2 months of 8 sprints each or an external milestone we need to consider.
As always we value from an alignment point of view the co-creation and involvement of all stakeholders more than the result!-Nevertheless it’s also much more effective if it comes to questions with stakeholders, a new person need to be introduced, etc. if the team has all the main informations on the Lean Procurement Canvas hanging at the wall :-).
Metric - example
The LAP Nugget Metric consists of:
Title, which gives the team a rememberable name / overview of the time box
Checklist, which shows us which dimension we like to keep track.
Shared with, PLEASE NOTE: Just by measuring we’ll influence the systems behavior. That’s why we need to ask ourselves which of the metrics we like to share with others and which we keep private like e.g. team velocity.
Agile Roadmap - How all fits together
Similar to the Go Product Roadmap we could know put everything together and get a high-level „plan“ or better an Agile Roadmap. We often see companies trying to make their backlog as part of the contract, which I personally think is WRONG!-The details will change anyway. But we could agree on some more high-level goals, where we’ve co-created key results and metrics. In a truly agile approach even that might get a subject of change.
The Agile Roadmap we usually use as appendix to the Lean Procurement Canvas.
Please note: Important to understand is that all of our LAP Nuggets are not prescriptive to run LAP or use the Lean Procurement Canvas. Majority of users still use just sticky notes. As every good practice one size doesn’t fit it all, but could always be a source for inspiration!-Btw. You might use them in other contexts as well :-)
Learnings
Having no „plan“ is not an option. Every agile team, or team-of-teams do need a direction. It’s in the responsibility of the leadership team to co-create this in a collaborative approach. Otherwise we’ll end up in anarchies!
We take the same principle of time boxing of sprints to the next level. This Agile Roadmap could become our main communication tool with the business, our customers and our 3rd party partners. We often prefer to have it as part of contract than any more detailed scope definition. This way we keep our flexibility while delivery, as with the 1st customer feedback the details will change anyway!
With metrics we do influence the system just by the fact we measure. That’s why we need to consider unwanted side-effects and make certain metrics private. Furthermore are various dimensions to be considered to measure value.
In procurement we need to start thinking more as investors and source more often smaller bits instead of a one time investment. This will reduce our overall risk, increase time-to-market and lead to a competitive advantage with a hopefully higher and earlier return!
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Author
Sources
Lean-Agile Procurement Alliance, 2019
LAP Approach, https://www.lean-agile-procurement/approach
Scrum Timeboxes by https://scrumguides.org/scrum-guide.html
Go Product Roadmap by Roman Pichler
Dimensions of metrics by ScrumAtScale.com
Image sources
Head-image: https://www.mastermindupdate.com
All other images by LAP Alliance