Burn-up! Forecasting in Agile Product Development

The Product Owner’s Dilemma

The new product must be delivered by November 30th at all cost” – who in product development has not already heard such demands by their stakeholders?  Or: “You’ll have to work overtime when the deadline is coming closer!” is also popular. “Can IT estimate whether they can deliver Scope X until the end of the next quarter?” Nice is also: “We need a project plan so that we can manage the risks of the project better.”

How can Product Owners and development teams positively deal with such pressure?  How can the following goals and questions effectively be addressed?:

  • Are we still “on track” or do we already have to communicate a deferred delivery of the next release?
  • How can we convey that the additional feature X will put the planned delivery date at serious risk?
  • How can we quickly develop a good feeling about the feasibility without defining and estimating the full scope in advance?

Developing products for customers is a highly complex endeavor.  There are imponderables everywhere.  Which features will be of the highest value for customers? Which requirements have to be implemented in which way? How long will the development of certain features take? These are questions that simply cannot be answered reliably in advance.  There are many unknowns in the game, especially when you begin the journey with a team that has just been put together.

It is therefore all the more coherent that such projects are often approached iteratively, using empirical management.  This lies at the very core of agile product development.  It means that the work that must be done is not defined and planned at the beginning but rather that it develops over time. The idea is to work in small steps against a goal and to continuously incorporate newly gained knowledge along the way into the development process. This also enables reacting to unplanned events at virtually any time. However, this causes a problem for stakeholders, sponsors, and those in charge of the product development: it becomes difficult to predict delivery dates of product features, milestones, or even the entire product.

In the development of our e-commerce platform, we use so-called Burn-up Charts to continuously reflect upon our progress and to enable forecasting for our sponsors. We explain how we do this in the remainder of this text.

What is a Burn-up Chart?

If you have ever concerned yourself with agile methodologies such as Scrum, you might know burn-down charts. Teams use burn-down charts on a daily basis to record the amount of work they have been able to complete from the given scope in an iteration.

Figure 1: A typical sprint burn-down chart in Scrum

As shown in Figure 1, in a burn-down chart is visualized how progress is made in completing work from a given scope (red line). Ideally, the rate of completing work is near an ideal, linear line (grey line) that runs straight from the top left to the lower right. This can help the team to learn whether they are on track managing their work and how likely it is that they will deliver the planned scope.

This works well for tracking during an iteration because these are usually short and their scope is fixed. A typical iteration in Scrum – called a sprint – has a duration of one to four weeks. But what about forecasting for a whole product or a product release of which we neither know the exact scope nor the rate at which a team can deliver results of their work?

This is where burn-up charts come in handy: in principle, a burn-up chart is an upside-down burn-down chart in which the completed work is recorded. The resulting curve runs from bottom to top.  The gradient of the curve reflects the rate at which work is being completed – the velocity.  We use burn-up charts at the iteration-level, that is at the end of each iteration in the project, we record how much work has been completed.  The actual trick, however, is to use a second curve that shows the complete known scope at the end of each sprint.  Typically, the complete scope will be small at the beginning of a project and grow over time.

Figure 2: Burn-up chart for a product release

This is illustrated in Figure 2: the red curve, showing the work completed, runs towards the blue curve which shows the complete known scope at that point in time. 

This way, we visualize well how completed work compares to the complete scope that is planned. Moreover, this enables us to forecast. A product release is done when the red curve intersects the blue curve. 

Trend Lines for Forecasting

We plot trend lines at the earliest possible moment so that we can forecast when the curves might intersect. With every iteration we update all curves and trends, increasing their accuracy. The following assumptions are the basis for the trend lines: the velocity of the team(s) will increase slightly after the first few sprints and then stabilize at a certain rate. On average the red curve will therefore be a nearly straight line and it is fair to assume a linear trend for that curve if the team(s) remain stable. 

Figure 3: Burn-up chart including trend lines for forecasting

For the blue curve, we use a logarithmic trend.  This is based on the experience that the scope usually develops rapidly in the beginning before it becomes rather asymptotic. We often see that, in product development, little is known about the exact scope in the beginning.  The amount of work that is believed to be necessary then usually grows quickly and stabilizes when more and more knowledge about required features is added to the product backlog.  That is, the full scope of the product becomes clearer with time. 

In our example in Figure 3, the full scope of the release is expected to be delivered in sprint 6.  Room for maneuver results from either adjusting scope or from taking measures for increasing team velocity.  However, as we know, the latter has smaller potential (“The Mythical Man-Month”, Frederick P. Brooks), and is in the short term nearly impossible.

What about Storypoints?

Alert readers may have picked up that the vertical axis in the burn-down chart (Figure 1) is captioned with “Story Points” while in the burn-down chart (Figures 2 – 4), we use the “Number of Issues”.  Using story points is omnipresent in Scrum. Story points are an abstract measure, putting features and requirements (often User Stories) of different sizes into relation to one another. This relative estimation helps teams to better plan the amount of work they want to take into one sprint. Each team develops their individual scale of story points, which means that a story point has no meaning outside the team.

We do not use story points in our burn-up charts, instead, we work with the number of issues because:

  • Story points would be possibly more accurate but allow for what is known as Gaming (Goodhart’s law: “When a measure becomes a target, it ceases to be a good measure”);
  • With story points we would require an always completely estimated backlog so that we can draw the blue curve;
  • The imprecision is unproblematic to make a forecast. Greater precision does not add any new information.
  • That user stories differ in size does also not have a negative effect because what concerns us is the question: “Is there still work to do or not?”.  The average size of the stories remains largely the same and is therefore not of any consequence. 

Release Management

By continuously visualizing the known full scope compared to the current work that has been completed, we uncover the main options to tweak in product management. This helps all involved to understand what is possible and under which conditions a release may be delivered at a specific date. Managing scope is by far the most effective activity if there is the need to deliver in sight of an approaching deadline. 

Step by Step

In our development, we use several milestones.  These are stage goals on our roadmap, each of them reflecting a certain subset of features of the product’s full feature set.  They may be seen as early product versions.  The scope of a milestone usually reaches a stable condition faster than the product’s full scope, allowing us to get a good impression early of when specific goals can be reached.

Advantages

Clear Stakeholder Communication

All essential information is conveyed at a glance, including (sometimes) inconvenient truths.  Arbitrarily, illusionary chosen deadlines will be quickly exposed as unrealistic. What’s possible will become apparent.

Gaming – Fudging improbable

Whether intentional or unintentional, teams will hardly be able to influence this kind of progress tracking in any way.  So-called gaming becomes very unlikely.  This is because additional stories would later have to be closed at some point.  In other words: if additional stories would be used to pretend greater progress, they would be counted in the full scope as well. The distance between both curves would be the same.

Chopping stories into smaller (and thereby more) chunks would have the same effect. This would be compensated by the fact that then more stories would be completed per iteration.

Built-in Continuous Improvement

Indeed the forecast will be rather rough and imprecise at the beginning. However, after only a few iterations you will get a good understanding of what will and what will not be possible.

This helps to better get to know the teams and learn about the specifics of the entire ecosystem in which they operate, allowing conclusions concerning possible structural issues. The forecast will become more precise and more reliable with time.

Focus on the Essentials

The visualization focuses on the essential parameters, namely velocity, and scope. This clears the view and puts the action-guiding information right in your hands. 

Summary

Using trend lines in combination with specific assumptions, which can be sketched in as data points, we can simulate and assess different scenarios.  Every team will have to develop their individual strategies and solutions. For example, we have found it very useful in our project to assume a scope of approximately 600 stories towards the end of the project to visualize the converging scope, as shown in Figure 4. This enables us to keep track of a delivery date that we are approaching in about one year.

Figure 4: Burn-up chart with trend and assumption of future scope

This puts product owners in a better position when “negotiating” with stakeholders and sponsors, as the effects of feature creep on the delivery date can be highlighted well and clearly.   For example, I sometimes make it clear as a product owner in such conversations that only 20 are “allowed”.  This helps to manage expectations without an elaborate estimation process.

Finally, this approach allows us to even work with progress reporting in percentages in an agile project. The asymptotic curve reflecting the assumed scope tells us the expected amount of work without having defined all user stories or work packages in advance. This lets us elegantly derive the overall progress of the increment.

Our approach has immediately convinced our sponsors and executives when we first showed it to them. Another acknowledgment of the usefulness of this practice.

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About the authors

Dr. Timo Volkmer began his career as a consultant in computer science and information technology. He is an expert in agile product development, organization design, and works as a coach in these fields.  Momentarily active at  DER Touristik Online, he has previously worked as a freelance consultant for various corporations throughout Germany in agile transformations.  Timo is dedicated to working with teams who create products that customers love.

Jörg Malang has worked as a product manager since 2008, having held several positions as a chief product officer in enterprises of different sizes. Since 2018 he is a freelance consultant and owner of the “Senior Product Leadership Group (SPLSG)”. He advises enterprises in building effective and efficient product development processes.  Jörg is dedicated to developing product strategies and loves agile, customer-centric product development. At the moment Jörg works on a freelance-basis for DER Touristik Online as product owner.

Becoming a “corporate catalyst” or a “garage based entrepreneur stocked with amazing tools”

In the context of my Executive MBA master thesis, I have read the HBR article “The New Corporate Garage” from September 2012. Explaining the four eras of innovation, I realized that the fourth era is perfectly applicable to want I strongly believe in.

My favorite quote of the article:

“Indeed, they empathize with the stereotypical garage-based entrepreneur. Their garage just happens to be stocked with amazing tools.”  (p. 52)

My passion comes from building products that “customers love” (Marty Cagan) combined with EMBA enabled amazing corporate tools. Looking forward to the challenges on my path forward…

The 80:20 rule in times of uncertainty

As many of you have certainly experienced already, there are a lot of managers who expect to have a plan thought to the end – including a business plan. Especially when it is about presenting to a Board of Directors for budget approval. There is nothing wrong about this. I would just like to highlight some caveats that this approach might bear.

Uncertainty

During my business strategy lectures @HEC we have worked on several cases like Dell, Patagonia or the Cola Wars case. Those cases sound “logic” and looking backwards all pieces come together in a meaningful way. We then talked about gaming theory, aka how to anticipate moves of competition and understand the impact of psychology on own decisions. We looked at the Ryainair case for that. In many examples we could literally compute the changes in willingness to pay (WTP) by looking at the numbers given in the cases. But if you go beyond airlines and apparel and enter the space of digital, this becomes more and more difficult. And still: the Professor was talking about such things as “intuition” when thinking about strategy. And finally there is the time factor, typically decision makers don´t have infinite time to come up with conclusions. The more uncertain predictions are the more blurry is the future. Many executives react with the task to try harder to come to a concrete case.

80:20

Everyone knows the Pareto rule with 80% of the effort  needed to get to the last 20% of the result. This perfectly applies to our context. Instead of insisting on getting the last 20% right, there must be a clear decision on how much time and effort to invest to get more certainty. Given the dynamics of the markets and the role of technology there might be the moment to listen more to those who have a good intuition.

Intuition

Right brainers are intuitive, left brainers aren´t. Left brainers even instinctively fear intuition because it makes them feel uncomfortable. Most companies are managed by left brainers. So you can imagine what role intuition is playing when deciding issues. This results in lengthy planning processes and a lot of discussions. This hurts the 80:20 rules and doesn´t always give an adequate answer to current challenges. But – what is much worse – intuitive people don´t feel appreciated in this kind of environments. Going 80:20 means listening to them. Are you really sure to want to invest 80 % of your time to get to an anyway blurry 100% before making your decision? Your stakeholders might have an opinion on this…

 

Bridging the gap between the CxO Suite & Product Development

A challenging role for Chief Digital Officers

Three steps towards successful digital transformation

To successfully respond to the (digital) challenges, there are three simple steps: Have a clear picture on where to go, understand the current situation of your business and ensure the transformation.

The challenge

Having a clear picture of the future is all about understanding what products will be successful looking forward. Already now it is clear that those products will be based on user interactions (“big data”, “social”, “sensored” context, etc.) and therefore will have to be very close to the behavior and needs of customers. The ways how companies will deliver services to their customers will be increasingly digitally driven. Even the pretty much innovative CVS Extra Care only gives an indication on what will be possible in the future. (So far) other companies like LinkedIn or XING are purely digital. XING have started with the vision to manage your professional network digitally and have become very successful with this. Starting from real life groups, its services have evolved into virtual ones. At the same time, XING isn’t limited to online networking only. It is all about a seamless integration of both worlds – with focus on building superior solutions and services for customers.

How to address the challenge

In other words, there is a strong need for a concrete product vision and strategy. If a CDO is not a strong Product Manager, he/she won´t be able to come up with it. And yet this won´t be enough. This strategy needs to be embedded into an overarching corporate strategy – and the entire CxO suite is responsible for that. The CDO needs to apply state of the art Design Thinking tools. The CEO might be that strong Product Manager, in this case a CDO might not be necessary. But how many CEOs of larger companies are good at defining a product vision and a product strategy? And even if they are, a CDO might be a good facilitator of the CxO suite discussions on behalf of the CEO. There is a successful role model for that already: supply chain management. A Supply Chain Manager doesn´t necessarily make the final decisions but is having the whole value chain in mind and facilitates the process. This person makes sure, all decisions are aligned to the supply chain strategy. The CDO needs to do the same: ensuring all decisions are in line with the product strategy of the company.

Understanding the current situation seems to be obvious, but isn’t trivial. The biggest challenge will be to “make the boat leave the harbor” and not to think too incrementally. A CDO will have to be the tireless warner to be more bold while acknowledging reality (e.g. business modeling, the skills available, the time it will take etc.).

Last, the transformation needs to happen in reasonable steps to get to the clear product vision of the CDO. The biggest risk that the steps are mixed up with the final vision. Even the CVS Extra Card is just a first step towards a vision. What will come next? There should be ONE answer, and then it can be broken down into the responsibility areas of the functional experts.

Benefit for companies

The CDO must pave the path into the (digital) future. As Product Manager she/he needs to come up with answers. Building the right products will be decisive for the (digital) future of companies.

Serial thinking doesn´t do the job anymore

Being inspired by the lecture of “A whole new mind” by Daniel H. Pink I am realizing why modern product management will really make the difference. Having just started a new consultancy project for a large scale company, I am experiencing a high level of complexity. And how I am reacting to it today as opposed to a couple of years ago.

Serial

Before, I was trying to control the way I was getting on boarded to a new position in the sense of taking notes, collecting to-dos, approaching the complexity etc. etc. As a strong left brainer I was really trying to embrace the structure in a “scientific” way. Very rational, recalling where I had jotted down the necessary information (I am blessed with a kind of photographic memory), always busy, always down to the facts. What was the result?: I missed important points. Such as empathy for customers. Or the openness to really relevant information.

Now, things seem to have changed for me.

Holistic

It feels more like a mosaic that comes to life step by step. All over the place. And: boy, relax. It´s ok. An analogy is coming into my mind: there are two ways of painting a picture. One is nitty-gritty step by step. Form after form. The other is more generous. A stroke of the brush here, a stroke of the brush there. Only slowly the picture comes to life.  As if by an invisible hand. Now think of the observers in the two scenarios. In the first scenario they are feeling assured that something of value is being manufactured. They can even estimate how long it will take and how it will look like. This is the complete opposite of the second scenario. Only very late there is confidence that something meaningful is coming out of the exercise.

What are the two biggest challenges when painting holistically?: first the observers (let´s name them “managers” and “stakeholders”) and second the uncertainty that is in yourself (let´s name that “missing roadmap” or “missing PRD”). Big things only can be created if right and left brain thinking come together. Serial and holistic thinking will do the job.

In that sense: Product Managers, brave the gap!

Why designing for innovation contradicts focus on cost saving

Reading about supply chain management educates me that there are basically two dimensions to look at it: risk in supply vs. risk in demand. As long as you can accurately predict the demand of your products, you can optimize your production capacity and therefore reduce costs. But as soon as you have to take risk on the demand side, it will become more important to react quickly to changes in demand. Speed over costs!

And this stuff is not about agile development. It is part of our lecture “Operations Management” @HEC Executive Education. Those concepts are not new. Companies like P&G, Zara and others have optimized their value chains giving good example cases.

I am writing about this because I was very often in the situation where the Executives wanted me and my team to innovate and at the same time precisely forecast the demand and save costs. Intuitively I was reluctant to even try this. Working agile means being able to react to changes in demand. When you are building, measuring and learning this is exactly the same challenge. You need to be able to read the signal of your customers as soon as possible in the process and to adjust the “production” accordingly.

In the traditional supply chain model this would be described as “speed to react upon changes in demand”. There would be a business case for heavy investments – as long as your products don´t fall into the commodity space. Then you won´t achieve high margins. But what else than achieving greater margins is innovation about?

So, companies, believe in your ability to innovate. The reward will be superior margins!

Old and New Economy – A bigger gap than expected?

Impressions from the Best of Both 2013 in Berlin

Panel Discussion on Best of Both 2013 in Berlin

Create a new conference format that goes clearly beyond investment pitches by start-ups to get funding. Bring people together who would normally only meet occasionally, but not necessarily discuss with each other about what is really important to them. Hope that they meet on peer level. Hope that they discuss content and go beyond clichés like start ups are faster and bear higher risk.

This is what I would hope for if I organized a conference like this year’s Best of Both in Berlin. Hosted by SWAB, a German foundation focussing on bringing the two worlds together, it gathered more than 200 people from the old and new economy respectively.

bestofboth_logo-300x300A lot of interesting speeches and statements, but beyond “vision, sales and leadership” there was not so much concrete input. On the other hand, the representatives of the new economy also focused on things one would expect them to say (e.g. ” watch out, the social wave is coming” or ” we are just at the beginning”). As very often in similar situations, it felt like them creating fear and leaving behind uncertainty among the more traditional folks. Just as @Ibo put it: “there is a lot of uncertainty around digital. But nearly no one dares to admit it.”

Ibrahim Evsan on stage during Best of Both 2013 in Berlin

The good news wasn’t discussed: that there are ways to deal with the challenge of transformation. Social or big data are much more than technology. It is a fundamental change of behavior of customers. I was happy to hear Cafer Tosun from SAP Innovation talk about Design Thinking. This focus applies the same way to an old economy company trying to deliver a world class service to its customers as it applies to a startup that is trying to build products that customers love…

Finally, Burkhard Schwenker, the CEO from Roland Berger Consulting was also trying to identify the common ground of old AND new economy: good entrepreneurship. And with that speech the conference ended.

All together this type of content only represented a small share of the whole program. I personally believe this is a missed opportunity for a conference with its legitimate ambition to bring together both worlds that are facing similar challenges. But thank you to SWAB for hosting this event and to Caspar von Gadow & Team for organizing it. Keep it up!

Stories from the search for fresh digital blood | Russell Reynolds Associates

Stories from the search for fresh digital blood | Russell Reynolds Associates.

Very interesting article about the role of digital leadership in established boards and companies. As a headhunter has put it when I met him on Wednesday: “you are surfing on the right wave, your moment will come for sure”. But one thing cannot be learned with a MBA program: leadership. You need to get experienced with real transformation situations in larger corporations (e.g. in the media and/or telecommunications area). But the more experienced you get in those areas the less entrepreneurial you might become. This explains why those candidate profiles are pretty rare out there…