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December 01, 2020

BTOES From Home - SPEAKER SPOTLIGHT : Project to Product: Driving Digital Transformation Insights with the Flow Framework

Courtesy of Tasktop's Dr. Mik Kersten, below is a transcript of his speaking session on 'Project to Product: Driving Digital Transformation Insights with the Flow Framework' to Build a Thriving Enterprise that took place at BTOES From Home.

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Session Information:

Project to Product: Driving Digital Transformation Insights with the Flow Framework

In many enterprises, digital transformations are starting to get board level visibility as the need to become a software innovator becomes critical to company survival and success. But how many of these transformations are on track in terms of producing the results that the business is expecting? How many of these organizations are tracking the results of these transformations, rather than just the activities, such as training and tool deployments? The fundamental problem is that the way these transformations are structured has a very different meaning to the technology side than it does to the business. Key concepts that should be shared by both sides, such as technical debt, are not part of the common language. It is these disconnects that cause large-scale transformations to fall off the rails.

In this talk, Dr. Mik Kersten will summarize his best selling book, Project to Product, by presenting the historical context of the technological revolutions and providing advice to business leaders to help organizations thrive beyond the turning point.

Session Transcript:

Hello everyone, I'm Mik Kersten. I'm pleased to be joining you today from Vancouver to tell you about how you can drive digital transformation with insights from the flow framework and really transition from project to product.

Let me just quickly tell you how this journey started in terms of my career I started working as an open source developer so I spent basically a decade writing a lot of open source code much of it still news today looking for the next big big leap in transformation and productivity for building software. I realized through this journey by working closely with some of the best developers programming language designers and others that what we were really seeing in terms of programming languages and technical improvements was not going to get us that next 10x there was a more fundamental problem in the way that business and technology work together to understand and to manage software delivery.

So I actually left industry started working on my PhD thesis and trying to understand what these value streams are how do we actually deliver value through software not not how do we measure technical progress with software how do we define software architectures but how do we actually measure the flow of value and this journey had me working with some of the best leaders in the industry.

Screenshot (67)How and helping support very large-scale transformations i realized that some companies became very good at this they were actually very good at connecting business technology whereas others weren't and so i started one to understand why is it why do we have these disparities why do we have what i was noticing and actually being able to measure with some of the open source tools that we created at 10 or 100 fold difference in the product of your software in some companies who are now tech giants on some tech startups or unicorns versus what we're seeing in the enterprise organizations.

All of whom we're trying to go out all through this period so this journey really brought me to the flow framework and to the book project the product which I'll summarize for you today uh one of the main stories in the book is my experiences working with Nokia and if we think back this far back to 2007 uh nokia for a year had known that apple was going to ship an iPhone.

We found out in 2007 uh it turns out they found out a bit earlier so they underwent a really large initiative they realized software was the bottleneck that the digital experience would now define the consumer experience right they would not be just around these shiny stainless steels buttons but the software on that screen would be what was so important so Nokia became a poster child for agility by leaning so hard into the digital transformation by having it uh sponsored at exactly the right levels of leadership and really becoming the first poster child for for an agile enterprise.

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They even defined something called the Nokia test for agility where they were seeing how many people were trained on an agile methodology called scrum at that time and still a very popular one today and how many people are using an agile tool chain so you'd think things would have gone well but actually under the hood what happened is they made their agile development teams move faster without ever understanding at this point in time the core problem the fact that they were building on the platform that was riddled with technical debt they could have never done the kind of innovation that the business wanted on top of the technical platform they had and the engineers and engineering managers.

I was working with understood this but somehow the business didn't and what was most interesting to me is as we witnessed the decline of this business Nokia's entire mobile business where they had majority of the market share and over 99 of that business disappeared over the coming decade uh that leadership never quite understood what was wrong and that to me i thought this was just fundamentally wrong.

So what I realized through this journey is that they were measuring the wrong thing the way that Nokia was measuring the adult transformation was actually by measuring these proxy metrics for how agile they were they were never actually measuring how much value more value they were delivering through their software through their digital value streams they've been become very good at that for their hardware for their supply chain but they never actually understood this at a business level and software and they never realized until far too late that they were they were building on what Stephen Allen player called a birthing platform.

So i realized this is a actually a co was a common thing in the industry and this is not only Nokia but the majority of the large enterprises I was working with were not understanding how to measure their transformation but what was worse is that they were measuring their transformations the wrong way and so here's a slide by my colleague john smart who actually tried to do this at Barclays he tried to say okay let's look at how.

We're measuring today because he realized Barclays was uh was celebrating the success of becoming agile but if you actually looked at the end to end flow of value all the way from the business to software running for the customer even if that agile teams were doing things on a two-week cycle or a three-week cycle it was taking months to get any value to the customer.

So we had all of these bottlenecks upstream and downstream development they're actually getting in the way of being agile so from the development team's perspective they had achieved agility from the customer from the market perspective from the business they certainly hadn't nothing had really improved and this experience really catalyzed uh it wasn't that specific one was actually working with another live financial institution and this is documented in project a product.

BFH BLOG

This is a top 25 bank a third transformation it looks kind of similar to me to the one that we just saw from Barclays but the scale of this one is even larger so this transformation is now with another buzzword not just agile It's with devops uh so everyone thinks it's going to be quite successful whole new set of tools and what's fascinating is a billion dollars is being invested in this transformation.

So a massive budget everybody wants to win and let's see what happens so the thing i notice as this is happening two year by the way it's a two-year project is that this two-year transformation project uh is what everything is being managed to and these project management plans both in terms of what should be delivered how it's tracking and then the cost profiles of it are are how everything's being measured two years later I do the same kind of interviews I did with Nokia and what i realized is interviewing executives cxos uh senior management as well as people on both the i.t and the business side is that there's a general consensus.

That after this transformation has been deemed a success it is delivering even less to the business than it was before so there's just something profoundly wrong with this picture where you can invest this much money uh everybody wants this transformation to win the whole thing looks like it's on track and it's claimed to be a success but everyone feels when it's done it's delivering even less to the business than before and I realized the problem here is this broken layer this project management and cost center lens we've become very good at measuring cost and i.t and as I've ballooned in many organizations.

We've become very good at measuring projects and how are we measuring value because what happened here is the transfer the transformation was managed to costs and to projects and there was no common measure of value so at the end of it a lot less value is being delivered than when it started and when you look at it this way maybe it's a bit less of a surprise now the problem is this is happening all over the industry.

So we've seen this we've seen this accelerate through the pandemic as well but what we're seeing is organizations that know how to measure value through software delivery such as amazon who have set up their value streams aligned those value streams to their org chart align that org chart to their software architecture again that failure we saw with Nokia have been able to thrive tremendously the challenges and this is just the retail apocalypse is that all these other organizations are undergoing transformations and they're not getting the sort of results uh that that they need in order to accelerate in order to actually secure their place in the market and at the current rate of transformation again even further accelerated by Covid.

We should see over half of the s p 500 be replaced over the next 10 years the parts that will stay will be the ones who are software innovators those will be the additions and the challenge of course is how do we help existing businesses transform to avoid the scenario and the key thing is to do this we actually need to understand how to measure value you look at what's happening just in the financial services sector banks have spent as of just over a year ago over a trillion dollars on digital transformation but few have reaped the rewards and I fundamentally believe in the whole thesis around project the product is that we will never actually know how to reap the rewards or get these rewards of transformations unless.

We have a consistent way of measuring and managing value in both transformations and in software delivery as a whole so I started out and this I'll just rewind a little bit here for some business context and some historical context but i actually started out on this journey trying to understand has this happened before have we had these massive shifts where some companies become so good at managing and innovating and so many others get left behind so this really introduced me to the work of dr Clara Perez.

My colleague jean Kim introduced me to her work as I was writing project to product and koda paris uh wrote this book in 2002 published in 2002 and in it. she speaks about these five technological revolutions these five periods of massive change where some new means of production becomes very cheap and that might be electricity that might be mass production in the age of software and digital that's actually been these intangible assets of software and of data so some means of production becomes very cheap some companies get very good at it and then it really wipes out what was there before.

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It there's a there's a really large period of creative destruction so let's take a look more quickly around what dr perez's models look like and let's see what's really going on under the hood in terms of what hormones predict because right now uh it looks from from those models like we're in the midst of the next turning point the turning point in the age of software so she breaks up these periods of this wrapped innovation into into three segments.

So there's the installation period where again that new means of production becomes cheap and some companies some organizations get very good at it so for this installation period in the age of oil and mass production think back to detroit think back to henry ford where he put electricity in the center of a plant replace steam and all of a sudden started being able to mass produce cars and at that point in time there's a frenzy of innovation so that at that very moment there were over 300 car startups in the city of detroit alone.

So you've got this massive frenzy because what's happening is financial capital and investment is trying to get a high return uh you know 10x plus returns on that new innovation and then you've got this frenzy then you've got a turning point and the turning point we shift from financial capital to production capital where some organizations get very good at actually using this new technology at scale and so you move from creative destruction to this period where you've got these companies who master production at scale for the new technology back then it was the ford and gm's and bmws in the age of software and digital it's actually the the fangs at Microsoft there baidu alba and tencent these companies have become so good at managing software at scale that collectively.

They're actually uh today holding more than than the the equivalent of the third largest economy so they're basically the equivalent of the size of the the Japanese economy in terms of its GDP so these companies have managed to become incredible at managing billion line software code bases it's becoming truly agile it's applying all these technical principles and the question becomes how do we actually bring along your businesses all of the other organizations to become as innovative and as effective at operating at scale as they are and if we do then there's this deployment period where we have technological diffusion and the rest of the economy becomes good at managing software at scale becomes good at that new means of production and that's exactly the whole goal of project product to learn these practices that have been learned over the last 50 years and mastered by the tech giants by technology innovators and startups and to bring them to the rest of the economy to traditional businesses to your organization.

So the way we're going to do that it turns out uh i realized it's not going to be through more project management because project management each is a discipline that was actually that came about in the age of steel and heavy engineering each of these technological revolutions has brought with it a new discipline of a new managerial discipline uh and even in the age of all in mass production treating people like cogs in the machine as was one of the side effects of Taylorism uh was not sufficient right henry ford realized you needed to invest in staff in order to become in order to produce cars at scale you needed a train staff.

You need to actually engage them and tech giants have realized something similar that this this way of managing just does not work for innovation and software scale and we need something new so in terms of that's something new I realized that one of Tasktop's largest customers was actually one of the companies that made it through that period in the age of oil mass production they made it through that turning point where so many of those hundreds of car brands disappeared they're the one the ones who made it and so I went and did a two-day visit of the their flagship plant BMW Leipzig plant.

This is that plant here was just an incredible uh experience because i got taken through the leadership of the plant through the entire assembly line uh and really learned how they think about scale how they think about innovation how they think about delivery for the customer so all of this goes back to what i think are the the principles of lean thinking these are straight from jimmy max book and i think it's really important for as we want to transform as we want to lead into becoming more agile and adaptive to the market to actually go back to those first principles because these are what we're so embodied by this particular plant and by the entire way that the BMW group innovates.

So the lean principles are precisely specified value by product so we always need to understand what the product is identify the value stream for each product so how value actually flows and is delivered to the market to the customer make value flow without interruptions so we need to have these processes that actually allow us to innovate and iterate quickly and let the customer pull value from the producer so in the end this value is all about what the customer pulls it's not about internal activities it's about the pull of the customer and you know we've had these kinds of discipline re-engineering the corporation and the rest but this actually seems really different than what i was seeing in most enterprise.

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It organizations so if we actually look at and i did this when i was there at the BMW plant from space everything is set up around these value streams you look at this arrow right here this is the one and two series line where almost 900 cars leave the plant every single day uh over on the right you've got that white building that's the i8 and i3 and this is a completely different value stream with very different business constraints as BMW was learning.

How to manufacture electrified cars at scale so this was just such a stark contrast to me the way that things worked in car productions and one of the most advanced manufacturing plants in the world and what i was seeing in enterprise id organizations and what I unfortunately still see much too often today so in car production everything was around these integrated production lines in enterprise i t we still have these disconnected tool chains.

Where the business the development business analysis support operations are all using different tools so again this this just would just never fly in a modern manufacturing shop everything there is managers products whereas again we manage projects completely different mindset as we'll discover in a moment everything is architected around flow so all of those lines are about maximizing flow uh of cars and quality cars in terms of getting and getting those to the customer whereas in in 19 technology we keep architecting around technology layers.

So not architecting for value stream flow product architecture around technology boundaries which is just a fundamentally different approach everything in the car plant is optimized end-to-end you don't look at optimizing how agile on my developers you're always optimizing how quickly am i getting cars to the customer and everything is done in terms of measurement of business results not in terms of measurement of these proxy metrics such as how quickly did we write the line of code or deploy a line of code so again a very different approach and the whole goal is to now break how how can we bring this approach.

How can we bring this kind of flow-based approach rather than this project and proxy based approach to how we innovate in software and how we transform now the interesting thing is if we think about the flow of business value uh at the BMW plant it's pretty straightforward right it's cars that deliver us to your driving pleasure but the interesting thing is these cars are designed in yearly cycles even though they're delivered every 70 seconds.

So the creative and the manufacturing process are actually decoupled and that feels a little bit different than what we've got going with technology and these things flow across this linear production line and software doesn't actually seem that way right we've got different teams collaborating handing things off uh using all sorts of varieties of tools so now think about the flow of business value and the technology part of the organization and the digital innovation uh it's the units are not cars.

So what are they we're not we're not shipping cars no one cares about shipping releases anymore we really care about what's in the releases so it's really about new features that deliver success and delight to your customers that deliver some kind of new business value to your customers but these are designed and delivered in daily cycles not in yearly cycles and the creative and manufacturing process it turns out as we've actually visualized their customers value stream networks at task stop they're actually one process.

So they're coupled they're not they don't happen in different uh parts in the different parts of the organization or different buildings and they flow across a value stream network so if we actually visualize how this knowledge is built up over time you can see almost like this airliner or trainer or car traffic network that's the underlying organizing principle rather than this linear production line so really what the challenge is is how do we measure the flow in that network and that value stream network of how we're innovating for our customers and really the question is what flows in software delivery because if we can measure that and we can connect that to what we're spending in terms of costs and projects plans then we would actually have a way of measuring value and that's really what project the product and the flow framework answer so the flow framework introduces four flow items and it's to connect business and technology in one way of measuring things.

It keeps things very very simple there's just features that's new business value that's pulled by the customers defects those are quality improvements also pulled by the customer risks risks are pulled by security officers compliance needs and so on that's privacy security availability and so on and debts technical debt infrastructure debt and those are critical in terms of the investments that we need to make in our software in order to make it viable in the future so these four flow items are mesi they're mutually exclusive and comprehensive exhaustive.

That means you do more of one you're doing less of another uh if you're doing more compliance work you're going to get fewer features done and there's these zero-sum trade-offs which are critical to understand at both the technology and the business level in order to properly guide investment in software and digital so i'll give you a really quick example here but uh when you think of a push-to-market so you're trying to innovate trying to bring some new product to market.

It's really all about how many features you can get into that product the more features you get into it the more competitive it'll be the more I'll delight your customers the more it should drive a business result however uh just to illustrate this this with a simple up and down arrows as you do that debts and risks will rise and as debts and risks rise the quality of the software goes down and as the quality of the software go down it goes down the amount of defect work the amount of unplanned work just goes up and up and up to the point where you get into this death spiral.

Where I've been more times than i care to uh imagine or explain but what happens is this validation basically becomes bankrupt as as we saw with Nokia right where it's inundated with defect work and no feature work gets delivered and everyone's very very unhappy at this point so the key thing is how can we detect this and how is it some companies are very good at understanding this and some others are very bad at understanding this so let me give you an example of company that's that's that's amazing and actually understanding these trade-offs of the flow of value in software delivery this is a story back from Microsoft in 2003.

When bill gates did this fascinating thing he said that okay this was after sql slammer a big big security incident uh we're going to stop all feature work at a time where that feature work was really important to keep Microsoft competitive as they did that he said we're going to focus the next year basically across Microsoft's value streams on network and remember this is this is not easy to do at Microsoft probably has more legacy software at this point than anyone else on the planet because they've been added since they basically defined the start of the age of software.

So they focused on that network they made their platforms more secure we saw things like windows update pure blue screens of death and so on debts and risks went down and then quality and feature work went up and they created and they basically rebuilt a platform for innovation so they were able to actually navigate this and make these trade-offs unlike Nokia.

Who actually tanked because of the amount of technical debt that they built up and so really the whole goal of the flow framework is to provide today's business leaders with a way of navigating that with a way of understanding these trade-offs and with a way of navigating and being able to strategize around what kinds of investment across the portfolio will drive the business results that they're after so as you just saw the flow framework over here.

You see the flow distribution portion introduces this zero sum game trade-off of features defects risks and debt you define every product value stream you define it from the customer's point of view and you track that and then you've got these two key things you've got the flow metrics these are four simple metrics for tracking value and how value makes it to the customer uh and then what we've got is these business results these are your okrs your kpis your metrics.

BFH BLOG

So we'll go through each of these quickly but uh basically flow velocity is how much of each flow item you're getting to the customer so flow velocity of features tends to define the success of a product but you of course also need to make sure that you're investing sufficiently in risk reduction uh flow efficiency is the ratio of active working to weight states for that so it's really your productivity flow time is your time to market your time to value how quickly those features are end to end remember all these metrics are completely intent from the customer's point of view how quickly you're getting that product a tech company can do that in days whereas older enterprise id organizations.

Who are struggling with the transformation it might take months to actually end to end on average get value to a customer and flow load is how much load there is on the particular value stream the more we overload our value streams the less the loss that we get and these dynamics need to be clear on the business results side uh there's some kind of value metric this this could be a a revenue okr an arr customer retention or so on a cost metric these are actually the cost but the cost across the value stream.

So all staff needed to build that all hosting costs all infrastructure costs a quality metric and a happiness metric of the staff working on that value stream this is actually included because what we've noticed is that as flow load goes up velocity goes down developers get very unhappy because they're not able to do the thing they love to do which is deliver value to the customer so now i'll give you a really quick a few really quick examples of how these flow metrics work to hopefully inspire you to add these to the way.

That you're thinking about your uh your your plans and how you're going to measure the results of your transformation how are you gonna actually add these things to things like like your okrs for the coming year of making sure that you're keeping up with the market you're innovating and your transformation is working so this is an organization.

This was nationwide insurance they presented this at a at another conference but when we engaged with them they asked us well how what is our flow time what is our time to value for our portfolio this is a really large portfolio at the time of nearly 9000 it staff so we worked with a cio and and we noticed using our our tools that on average was taking 120 days of flow time of time to give value to the customer and so this you know obvious conclusion for the ci would be okay we need to go faster we've got a lot of ensure tech companies here who are moving very quickly.

How can we actually innovate faster and and give value to the customer more quickly and so the answer is like we need to hire more developers and we said hang on a second let's look at how that flow time's composed and let's look at where you know let's look last year where the where things are waiting and where things are being actively worked on in terms of flow efficiency what we learned is that only two and a half percent of the time was spent in development so that means if you hire a bunch more developers and developers are not usually the cheapest to hire you're getting effectively zero value out of that investment because that's not where the constraint is they had very substantial constraints in upstream of development.

Where there are not enough business analysts and none of user interface developers these are experienced developers and so that's where that's where everything was waiting on and this is the whole point of measuring flow time so you've got this metric that tells you this is exactly how long things tend to take end to end this is exactly where things get stuck and they were not getting stuck in development development was actually doing all sorts of activities they should not have been doing in support of the plan because they were waiting so often on things upstream and dancing from them and this is the power of actually understanding end-to-end times and the power of guiding your transformation to flow metrics.

So just as an example uh successful organizations will actually drive their cloud transformation around not just a cost reduction or the economics of hosting but around reducing flow time because the more that you can reduce flow time the faster you can innovate the faster you can respond to the market and then you're actually are getting the true benefits of cloud so that's that's just one example of uh of the flow metric and really the point here is that with the flow framework you can track each of these metrics you can make all of the this the flow of your value streams visible and you do that by connecting to your existing tools.

So all of this information is already there we call it your tool network it's all of the different tools used to deliver value across the organization from that you construct an artifact network where we can actually measure the flows but the flows are digital artifacts rather than of cars and on top of that build the product model and this is really your portfolio that you manage to understand delivery so just as a really quick example you know here's an organization.

Where we can actually see their product portfolio in one of our tools and test.vis what we've got here is a very healthy looking value stream the green here is features so there's a lot of innovation happening here over here there's another value stream that's got a lot of purple so it's making really significant investment technical debt but that could be the right thing for that value stream as well and different flow distributions are important as well as different business metrics different ocrs are important for different value streams uh so once you actually dig into one of these value streams this is one of our own ones on tasktop.

You can see some very detailed insights for example we saw exactly the effect of our work from home productivity dip and understood what actions to take this is back in march obviously what actions to take to support our staff to end up with what we saw later which is an even better productivity increase than we expected now we actually see things like the effects on velocity so this is you know the taller the uh the chart is here the more.

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We're getting done um we actually saw the effect of adding developers without enough sufficient support for our most senior staff who were then overloaded with training new developers as we were ramping up hiring through this period of time so all of these tradeoffs become very visible once you start measuring these flow metrics and really the goal here to start summarizing is to move away from this project mindset to a flow mindset.

Where what we're measuring what we're tracking is not these waterfall activities where we pretend we know exactly what the market will look like in six or nine or 12 months but we're actually tracking flow and able to make incremental decisions as we get more information we move away from projects and cost centers as being the only layer of visibility to actually getting direct visibility in this direct mapping from strategy to what's being delivered by the software value streams uh we move away from basically funding everything up front where you've got this much uncertainty if you if you're doing 12-month funding for detailed very detailed project activities you're not incorporating that learning you actually.

You're actually incorporating too much uh risk mitigation up front versus actually funding value streams incrementally and the key thing is that you move away from bringing people to work this tailors mindset to actually bringing work to people to establishing the stable teams and value streams that take work in and deliver much more than when you've got this again this mindset of completely overloading people so uh the key thing is there's another there's a complete different change on your architecture you know the the fact that a lot of organizations have completely over focused on just their customer facing products is very different what tech giants do once we measure these value streams and their flow efficiency.

We see that investment platform products investments in infrastructure and investments in developer tooling is exactly what differentiates uh tech giants and tech startups who who prioritize this greatly unlike live enterprise iot organizations and this is the same understanding that BMW has that their most important product is not one of the cars it's not the i8 it's actually the plant itself so in summary uh today's approaches will simply are insufficient to navigate the age of software native the kind of disruption uncertainty that we're seeing in the markets uh whether that's things declining or actually things accelerating uh the shift from project to product is needed to install.

The right operating model for technology and this is what exactly what the flow framework provides and the way that you actually do that is by connecting your value stream network defining your products and just simply tracking the flow metrics and connecting those to your business outcomes to your okrs or your other approaches to planning so in summary the goal is to move away from projects and cost centers to product value streams to move away from to move from silos and proxy metrics to flow metrics and business results and to move away from fragment of value streams to an integrated value stream network.

So with that thank you very much uh you can find me here on twitter on LinkedIn get the book by searching for project the product and check out flowframe.org as the portal for learning more so thank you and please get in touch.

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About the Author

download - 2020-12-01T160419.368Dr. Mik Kersten,
Founder & CEO,
Tasktop.

Mik Kersten started his career as a Research Scientist at Xerox PARC where he created the first aspect-oriented development environment. He then pioneered the integration of software development tools as part of his Computer Science PhD at the University of British Columbia. Founding Tasktop out of that research, Mik has written over one million lines of open-source code that are still in use today, and he has brought seven successful open-source and commercial products to market. Mik’s experiences working with some of the largest digital transformations in the world has led him to identify the critical disconnect between business leaders and technologists. Since then, as CEO of Tasktop, Mik has been working on creating new tools and a new framework for connecting software value stream networks and enabling the shift from project to product.

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