A Business Case for CFOs – Agile Development vs. Traditional Waterfall (Part 3)

(Please visit here to see Part 1 of this article, which was an overview of Agile and Waterfall frameworks. Please visit here for Part 2 which presents the economic and mathematical realities of each framework.)

Hello! Welcome to Part 3 of my 3-part analysis of Agile vs. Waterfall frameworks from a CFO point of view. I’d like to take a moment to apologize for the delay in posting the final part of this series. That said, I’d also like to express my excitement at the reason for that delay. Specifically, in late March my wife gave birth to twin baby girls (my 3rd and 4th child, respectively). Between taking a bit of time off to spend with them and then catching up from that time off once I got back, this blog has taken a back seat. However, going forward I plan to resume my every-other-week update schedule.

Without further ado, part 3….

Continue reading A Business Case for CFOs – Agile Development vs. Traditional Waterfall (Part 3)

A Business Case for CFOs – Agile Development vs. Traditional Waterfall (Part 2)

Milton Friedman, father of Modern Economics. Also a shout-out to my alma matter, University of Chicago.
(Please visit here to see Part 1 of this article, which was an overview of Agile and Waterfall frameworks)
Economics 101 and Agile

One of our Sr. UX designers was giving a presentation on Agile Development. He put up a graph talking about the number of users that actually use each feature (the feature’s “Value). It was steep at first, then leveled off as you added more features. Take a look:

Agile Feature Curve

Now, think back to Econ 101. What does that look like? Let me give you a hint:

Marginal_Utility

A Utility Curve. And what does Economics 101 tell us? The Law of Diminishing Marginal Utility. As you consume more *of anything* the value of each marginal piece decreases.

Continue reading A Business Case for CFOs – Agile Development vs. Traditional Waterfall (Part 2)

A Business Case for CFOs – Agile Development vs. traditional Waterfall (Part 1)

JT_Posing

I work at a tech company. For those of you out there who aren’t familiar with recent driving forces in technology, one of the biggest changes in the software development process is a shift from a “Waterfall” framework to an “Agile” framework. You may have heard the term “Scrum” in place of Agile, but Scrum is a specific process for implementing the Agile framework. Examples of other specific Agile structures include kanban, Extreme Programming (XP), and Feature/Test Driven Development (F/TDD) and others.

I’m going to be up front here and say that I believe that Agile methods are, hands down, a better option than Waterfall from a financial and mathematical perspective in multiple business cases (The exception is for very small projects of 1-2 months or less. You’ll see why later). At each point in the analysis, I will highlight specific tenets of that business case, again starting from more abstract economics and moving towards more concrete business analysis.

This post is primarily geared towards CFOs, Business Analysts, and other people whose jobs involve making sound financial planning decisions for their company. So, in the interest of making this readable for everyone, I’m going to do a quick overview of both frameworks for those who are unaware of them. If you know them both, feel free to skip down to the section titled “The Mathematical-Financial Case for Agile Development”.

Continue reading A Business Case for CFOs – Agile Development vs. traditional Waterfall (Part 1)

Get a Lawyer, Dummy

lionel_hutz1

Someone posted this article on my Facebook wall the other day. It linked to another article I remember reading about a year ago, talking about a Kickstarter creator (What is Kickstarter?) getting sued by one of his backers when he failed to deliver.  At the end of the post, they talk to the creator about lessons learned. Here are some quotes:

Quest [the creator] did not have contracts already in place before he went on Kickstarter–a novice mistake…manufacturers were able to see precisely how much money Quest had raised on…they gained too much leverage in negotiations

And

[Quest] has tips, he says, for other entrepreneurs who want to crowdfund projects on Kickstarter. First, he says, keep the product simple. If the product has multiple parts, the incremental costs of manufacturing can be deadly. It’s also essential to have a prototype of the product, and at least three price estimates from manufacturers–in writing.

But, as I read these takeaways, I just kept hearing a line from earlier in the post:

Because [Quest] never incorporated Hanfree, Quest was personally liable for the refunds. But the money from the backers was gone, spent on engineers and contract manufacturers. The lawsuit forced him into bankruptcy.

and just kept hearing myself thinking over and over “They missed the most important lesson.” And it’s not: “Incorporate to protect yourself from liability,” though that’s an important lesson too. No, the most important lesson, and one that EVERY startup should know is Step 1. No, Step 0. Step negative 1000. As in, do this before you do anything. And that is, you need to:

Continue reading Get a Lawyer, Dummy

Unknown Unknowns

Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.

– Donald Rumsfeld, Former US Secretary of State (Wikipedia)

The first thing an Employee #7 needs to recognize is that there is a *lot* of information out there. No one person can know all of it. Just off the top of my head:

  • Federal Employment Laws
  • State Employment Laws
  • Business Licences
  • Tax Law
  • GAAP Accounting Standards
  • Financing options
  • Budgeting
  • Recruiting
  • Renting Office Space
  • Buying/Leasing Furniture
  • Cash Flow
  • Securing Credit
  • Collections
  • Vendor Management

Continue reading Unknown Unknowns