How much difference can Scrum make?

Introduction

Before you invest in a change, you need some idea that if you invest, you will get a decent return on investment.

Agile-scrum is NOT the easiest change to make happen. Lots of teams and organizations do it in a notably half-baked way. (For lots of reasons. One: not getting to minimum viable bureaucracy.) But we think it offers large returns even in fairly normal (ie, hard) situations.

So, our hypothesis is that it is necessary to invest enough to attain those great returns. Many have under-invested, and therefore have gotten relatively little from agile-scrum.

Also, if you set a goal (of getting some specific ROI level), you are more likely to achieve close to that goal. At least compared to having no goal at all, in this regard.

Background

Let's look at this in a simple situation.

Imagine you have one Team of 7 people. The total cost of those people for a year is $1,000,000 -- all-in. (Not just salary, but all related costs. Your specific number will be different. We are using $1 mil as the example.)

Next, when we invest in a Team, and have them work, they produce work that should give us a lot of Business Value (BV). This actual "return" has a range of variability compared to the expected value. Ideally we could talk about this with the Sigma concept (standard deviation). That is, returns are normally distributed around a median number, if we roll the dice often enough (or if our work is within a reasonable risk range).

I think you can determine a decent guess of this from the total performance of your company's R&D work over the last 3-5 years. (Yes, some weird years in there, given Covid.)

Let's make our example: $3 million in return. And that is earned, by the average project or product over 3-5 years after the product is released. And the $3 million is net of any "required" continuing investment. And the $3 million is the NPV (net present value, discounted back to year 0). [Yes, we have had some inflation recently.]

Again, $3 million is the mean. And there is always variability. And hopefully we can manage that variability.

Key Proposition

Jeff Sutherland's book is "Scrum: How to do twice the work in half the time", which, as I do the math, implies a 4x increase in BV delivered after X period of time.

Let's focus on the first year. I think, if...

... you have a decent PO, a decent SM who will get impediments fixed, and a good team (not a great team), and a decent situation to work in (eg, managers will allow some changes to be made)...

THEN

If you use Scrum decently well, you can increase BV by 100% in the first year, a bit each sprint. Meaning: on average a steady increase from Sprint 1 to Sprint 25. The total increase in the first year is 50% and, by the end of the year, the run rate is 100% higher.

Some Math

Ok, 50% times $3 million is $1.5 million.

That's the additional BV benefit achieved in the first year.

I think a decent SM, with only modest help from everyone else, can achieve that in one year.

How hard is that?

Well, if the SM gets impediments fixed so that on average the Velocity (real velocity, not gaming) goes up 2.85% each sprint, compounded over 25 good sprints in the year, than at the end, of the year, you have double Velocity.

Yes, this does require that your PO is adequate, and the average BV of a story does not decline over that time, by stays steady. If the PO could really execute the Pareto principle (find the 20% of effort the yields 80% of the value), then we would do MUCH better.

But for now, only assume an adequate PO.

Let's assume no further improvement in the next year (we'll call that year 2). BUT, the improved productivity in Year 1 is maintained in Year 2.

Note: Human systems do not maintain a steady state easily. If might be easier to improve than to stay at a stable velocity.

If..., then the BV improvement in Year 2 is worth an additional $3 million (100% of the base, which was $3 million rate as we started year 1).

How much investment to achieve that RETURN?

The cost of the SM for Year 1 is $1 million divided by 7. (I assume 7 people on the Team.) Call it $143,000 per year, total cost for the SM (not just the salary; everything).

Let's say you needed to invest an additional $200,000 to get some impediments fixed. (Let's assume the manager and the SM collaborated on where to spend the $200,000. Sometimes they will win, sometimes lose.)

So, that's a total investment of $343,000 for the year. Against a $3 million return on that investment in Year 2. (For now we are ignoring Year 1 and Year 3 benefits and equally ignoring investment in the SM and such in Year 2, and any benefits that would accrue from that additional investment).

Let's see. That's an 8.7x ROI "in the first year." (A slight misnomer to call it the "first" year.)

How much would you invest?

Is it reasonable to invest the $143,000 of the SM and the additional $200,000 to fix impediments -- IF we get back $3,000,000 in one year?

To me, the answer is obvious.

Is $200,000 reasonable to invest?

So, do you think we could get a 100% increase in Velocity (productivity) over a year with a decent SM dedicated full-time to this goal, and with $200,000 to fix impediments.

Note: I think many impediment need some $ investment, also many other impediments can be fixed easily with handy "free" labor and no additional investment. The"free" fixers are the SM, the Developers, the PO, the manager, and some others outside the Team.

I think: if...

...you set that as a goal

...you practice hard to learn how to do this effectively (plenty of small details to become a better change agent, for example)

...the Team is supported some by a manager or two, in part with decent allocation of the $200,000

THEN: I think this should happen on average.

But several people must decide, and must believe it's possible. At least believeenough to make a reasonable attempt to do it.

So, the manager must decide, and must allocate those funds. Or convince the firm to spend them.

What happens in real life a lot? People do not attempt things that appear difficult.

The Fallback Position

If you can't convince people to set a goal of doubling the Velocity in a year, what can you do?

Commonly three things happen.

• You make a vague commitment to "try" to improve.

Given alternatives, that is better than nothing.

If you can make some progress, and start to give people the feeling that a decent goal is attainable, then you might start making some real progress.

• You do not get any budget to fix impediments.

Not at first, anyway.

This does not mean you can't fight for some money each time you need it. You can do that. It is work, and you might be successful

• the "sharpening the saw" problem

Stephen Covey starts to explain this habit (the 7th habit) by telling the story of a man who needs to sharpen his saw, and won't. Because "I'm too busy right now", as we almost always say to ourselves.

Almost no one will say that improving (eg, by fixing or mitigating impediments) is wrong. But they will say: right now we need to focus on building the product. That focus is good. (And we agree focus is good.) But the Team should always be improving. Until the Team and everything around the Team is perfect, that steady improvement should not stop. (And we advise long-term stable teams.)

Conclusion

You can win either way, I think. At least you can start either way and end up winning.

Let me suggest this to you. Wherever you are in life, with your "sport" or work, you can become a LOT better. If you work at it steadily, with some reasonable improvement techniques.

And this fundamental principle is true for you and for the Team.

PS. There is more to say. And I expect to write a related post soon.