This document summarizes a presentation on balancing capability with demand. It discusses improving capability through new processes and tools, but also emphasizes understanding customer demand. Limiting work-in-progress can help create flow by establishing a pull system. Most waste is caused by imbalance between demand and capability. Studying demand to understand what creates value allows shaping demand and designing work around value creation. The goal is for capability and demand to be balanced so the system operates optimally with smooth flow and high throughput.

1. © Reaktor 2013
Achieve flow! Balancing capability with
demand
Sami Lilja
Agile coach and Trainer
Finland
1Saturday, June 15, 13

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I dare you..
Is your company “customer-
centric” or “customer-oriented”?
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Today’s agenda
• Understanding Capability
• Flow
• Understanding demand
• Balancing demand with capability
• Designing system to meet the demand
• Controversial thought
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Balancing Demand with Capability
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Improve capability
Most management only focuses on this side!
New processes
New tools
Organization change
Removing waste
Targets and bonuses
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Process Improvement?
Do we need this process at all?
What kind of thinking has
created this process?
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System
Thinking
Performance
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Organization change?
!!
!!
!!Com
panies lose
m
oney
in
this direction
Companies make money in this direction
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What if Demand > Capability?
Prioritization
meetings
Working weekends
and overtime
Waiting for another
team
Multitasking or lot
of work-in-progress
Filling in status
reports
WASTE!
Work that adds no value
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Should we remove waste?
Optimizing part of a
system will not improve
the whole system
“Getting rid of what you
don’t want does not give you
what you do want”
- Russell Ackoff
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Most of so-called waste is a
product of imbalance between
demand and capability
Getting rid of waste requires
getting rid of unevenness and
overburden
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Theory of variation
• We should expect things to vary, they always do
• Understanding variation will tell us what to
expect
• Understanding variation leads to improvement
• Causes of variation are always found in the system
• Understanding variation tells when something
has happened.
• Crucial for learning and performance improvement.
Source: http://www.systemsthinking.co.uk/variation.asp
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Capability of an organization
Sprints
Ready&tested
features
Target setting? Bonuses?
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14. © Copyright Reaktor 2011 Confidential
Improve capability
Most management only focuses on this side!
New processes
New tools
Organization change
Removing waste
Targets and bonuses
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Little’s Law and work-in-progress
• Most organizations try to increase throughput by ...
• ... demanding higher velocity from teams
• ... decreasing project duration by cutting corners or
• ... imposing impossible deadlines
• Limiting work-in-progress would give better results
Time through system =
Work-in-progress
Throughput
Little’s Law
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Why WIP limits?
• Limiting Work-in-Progress creates Pull
• Without WIP limit, we do not know when to
take (pull) new work
• Why Pull system?
• Creates visibility to system
• Removes queues from the system
• Helps organization work in optimal way
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Achieving flow
Pull creates visibility to the
system and makes it work at its
current optimal
Limiting Work-in-
Progress (WIP) enables Pull
WIP-limits and Pull create
Flow
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19. © Copyright Reaktor 2011 Confidential
Improve capability
New processes
New tools
Organization change
Removing waste
Targets and bonuses
Create FLOW
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20. © Copyright Reaktor 2011 Confidential
1. Eliminate
causes of
failure
demand
2. Shape
Demand
1
Most significant improvement is on this side!
Improve capability
Create FLOW
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Value demand and failure demand
Value demand
Adds value to our product or
service from customer point of
view.
Something customers are willing to
pay for.
This type of demand we want.
Failure demand
Failure to do what customer
needs.
Bad quality, delay, wrong product or
service. No product or service.
Missing either what or how customer
wants the service or product.
Can account up to 80% of work
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Sources of Failure Demand in SW Development
• Poor quality of work
• Bugs
• Technical Debt (also Architecture Debt, Learning Debt etc)
• Features developed without thinking about User Experience
• Requirements solely driven by HiPPO
• Lack of end user involvement
• Lack of understanding what matters to customer
• Misunderstandings
• Dependencies
Source: http://www.thekua.com/atwork/2013/05/what-is-failure-demand-in-software-development/
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Shaping Demand
• In order to create value, we need to
understand what is value
• Customer demand tells us where the value is
• Only after we have the knowledge we can
shape demand
• I.e. choose what value we deliver
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Spectrum of work
IT Ops
Helpdesk
Software
maintenance
Major
projects
Mostly Failure
demand
Lead time
Change requests
Product fixes
Throughput
MostlyValue
demand
Learning
Push/Reactive
Pull/Proactive
Little scope to
shape demand
Large scope to
shape demand
Improve
capability
Reduce failure
demand
Treat demand as
pool of options,
improve option
conversion rate
Improve
capability
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Demand Analysis
1. Define work item types. For
example
- Source
- Destination
- Workflow
- Order of Magnitude in Size
2. For each work item type analyze
- Demand
- Arrival Rate (seasonal
fluctuations?)
- Nature of Demand (stochastic,
burst, seasonal, batches, chaotic)
- Customer Expectations (even if
unreasonable)
3. Describe Sources of Internal
Dissatisfaction
-Variability that randomizes the
process
- Prevents work being delivered
on-time, with good quality etc
4. Describe Sources of Customer
Dissatisfaction
- Reasons customers are
unhappy / expectations not met
(or points of customer conflict)
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Priority or Capacity allocation?
Product
Owner
Team
Product
Owner
Team
40%
40%
20%
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Project delivery or Classes of Service
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Demand, Value and Flow
Study and understand customer
Demand
Understand what is Value
from customer point of view
Design Flow of work against
value demand
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The foundational principles of Kanban
Start with what you do now
Agree to pursue incremental,
evolutionary change
Initially, respect current roles,
responsibilities & job titles
Encourage acts of leadership at all levels
Study and understand customer demand
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Measurements
• Measure against the Purpose of the organization
• From customer perspective
• Look at variation over time
• Allows learning
• Measure to understand and improve
• Instead of arbitrary target, bonus or competition
• Measurements are used (a) by those who do the
work and (b) people who design and act on the
system
Are we achieving the
Purpose of the system?
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Summary
• The system operates at its optimal when demand
and capability are balanced
• Limiting work-in-progress creates a pull-
system which helps to achieve flow
• Flow improves predictability and throughput of the
system
• Studying and understanding Demand is the most
important activity when designing a system
• Understanding Demand creates Purpose and makes
measurement possible
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I dare you..
Is your company “customer-
oriented”
Study and understand
Demand
Measure against
Purpose
Limit WIP in order to
improve lead times
Have Pull system
Remove root causes of
Failure Demand
Design work against
Value Demand
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34. © Reaktor 2013
Controversial thought
All work management systems are
waste!
Need for management system is a
symptom of imbalance between
demand and capability.
Understanding demand helps
to find the right system to manage
work, reach balance and
achieve Flow!
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35. © Copyright Reaktor 2011 Confidential
Thank you
Twitter: @samililja
Linkedin: samililja
Blog: http://samililja.wordpress.com
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