A recent Harvard Business Review article revealed that one in six IT projects has a cost overrun of 200%. Debbie Madden, CEO and Cofounder at Stride Consulting, shares her views on no-estimates, in her blog on “Your Agile Project Needs a Budget, Not an Estimate”. She says that because of the high rate of failure for estimation, stop estimating and start budgeting.
Every software development project starts with some common questions like how much is this going to cost? How long will this take? How many people do we need to hire and so on. Corresponding to all these questions, there is a simple answer, i.e. let us estimate and will get back to you. Debbie says:
For most strategic decisions, estimating is too precise. Estimating breaks down a software project into granular, 1-to-3 day chunks. For a $100,000 project, that’s a lot of work. For a $1 million project or bigger, that’s inordinate. If you attempt to break an entire project into estimates at the beginning of the project, you are truly wasting weeks of your time. Why? Because there is no way that you are going to get estimation at a granular level correct at the beginning of a project.
Vasco Duarte, Managing Partner at Oikosofy, shares alternative ways estimation in taking business decisions in his recent blog. He mentions following questions while defining a decision-making strategy:
- How well does this decision proposal help us reach our business goals?
- Does the risk profile resulting from this decision fit our acceptable risk profile?
Vasco describes 5 different decision-making strategies that can be applied to software projects without requiring a long winded, estimation process up front.
- Do the most important strategic work first - To implement a new strategy, allocate enough teams, and resources to the work that helps validate and fine tune the selected strategy.
- Do the highest technical risk work first – In case of transition to a new architecture or adopt a new technology, start by doing the work that validates that technical decision.
- Do the easiest work first – At the time of team expansion, give opportunity to team members to know each other and learn to work together, by giving easy work.
- Do the legal requirements first - In medical software there are regulations that must be met. Those regulations affect certain parts of the work/architecture. A medical organization that successfully adopted agile used this project decision-making strategy with a considerable business advantage as they were able to start selling their product many months ahead of the scheduled release.
- Liability driven investment model - This approach is borrowed from a stock exchange investment strategy that aims to tackle a problem similar to what every bootstrapped business faces: what work should we do now, so that we can fund the business in the near future? In this approach we make decisions with the aim of generating the cash flows needed to fund future liabilities.
These are just 5 possible investment or decision-making strategies that can help you make project decisions, or even business decisions, without having to invest in estimation up front.
None of these decision-making strategies guarantee success, but then again nothing does except hard work, perseverance and safe experiments!