Principle #3 of Capacity Planning: Matching Supply to Demand
In the last two posts on the principles of capacity planning, we touched on the advantages of thinking of the team as a resource unit, and how it’s better to be “roughly right” than precisely wrong. These are both foundation principles when matching demand and supply.
The third principle of capacity planning, matching demand to supply, emphasizes the importance of making choices. It’s necessary to match overall portfolio demand with capabilities and capacity supplied by existing teams in the near-term, while shaping both the demand and supply sides of the portfolio for the long-term. Matching demand and supply must look deeper than just allocating resources to include the interactions between multiple sources of demand and the capabilities of the available teams. The net result is more effective delivery of value, aligned to overall business strategy by more clearly focusing on completing those things that matter most to the business.
Successfully managing a technology portfolio is primarily about making choices that will maximize value delivery for the business. This often means making tradeoff decisions to match overall portfolio demand with available capabilities and capacity. One CTO I recently worked with said his goal was to “Do more of what matters most to our business and waste less time and money on things that don’t matter as much.”
Portfolio demand represents all the possible work the organization is asked to deliver. Portfolio demand may come from different sources in an organization and be requested in many different forms. Since balancing demand with supply is so important, it’s critical to understand all sources of demand -- anything that will consume time and capacity for the people who deliver valuable solutions, and also contribute to keeping the business running smoothly. This means that all opportunities, not just the exciting new ones, may need to be considered as part of a technology portfolio. Activities for business as usual and keeping systems up-to-date also need to be considered as part of demand, if they overlap with any part of the delivery stream.
Business demands may fall into categories like project, program, initiative, goal, and essential activity. Since all of these consume supply capacity, generalizing to a single term is useful. An “initiative” is a unit of demand useful for mid- to longer-range planning, because it represents the investment decision and corresponding funding. Initiatives are often requested by a given business unit to improve a business value stream.
Initiatives typically have:
- a specific purpose with a clear end result that can be achieved in a meaningful timespan
- business justification for funding and prioritization
- forecasts for cost/effort and benefit/value
A “roughly right” match can be made to prioritize initiatives that fit current and forecast supply. When justified, product managers or business owners for an initiative engage the organization to elaborate the list of marketable features needed to achieve an initiative.
The biggest constraint for technology portfolios in today’s highly competitive climate is the supply of effective knowledge workers. Catherine Connor refers to this constraint as an industry-wide “talent management crisis.” Traditional portfolio management approaches often assume an elastic supply -- that you can hire or contract resources for any opportunity with a big enough ROI. Technology leaders understand the fallacy in this thinking. It takes several months for new people to get up-to-speed and contribute effectively to delivering new solutions; that’s on top of the months it takes to recruit or contract talented people. Forecasting your need for talent in a 6-to-18-month planning horizon is an important part of portfolio management. Conversely, choosing the highest-value delivery for existing talent is the best strategy for this quarter and the next.
Portfolio supply is realized by the people, technology, and other resources that, combined, have capability and capacity to deliver solutions of value to the business. Traditional project and portfolio management often fixate only on counting resources for development work; the capability and capacity to deploy and effectively launch each opportunity is an equally important constraint to consider. Portfolio managers should also consider whether there hidden costs to conceive, justify, plan, launch, and utilize new initiatives. Product managers and business owners tend to be very busy people with limited time to collaborate on defining and elaborating requests and requirements.
Matching Demand to Supply
Value streams are a useful concept from Lean thinking that can help us understand better ways to match business demands with the available supply. From an IT or technology development perspective, we may think of a value stream as the steps from a new solution concept to launch and measurement of the financial results. This is often referred to as the “concept to cash” delivery stream.
The business will also have other value streams that may be more paramount. End-to-end scenarios or workflows for how the business delivers value to customers and stakeholders represent business value streams. Optimizing these value streams is often the focus of different business units within a larger enterprise. These business value streams provide the context for better understanding customer and stakeholder problems and collaborating on superior solutions. The responsible business units are often the sources of demand; they may be requesting new capabilities, enhancements, or changes, or just fixes and operational improvements.
In smaller organizations or isolated situations, it’s sometimes possible to directly align the “concept to cash” delivery stream with the business value stream. It’s rare that this simplification will work for a large-scale portfolio that has multiple sources of demand. For these more complex portfolios, it’s useful to think of how these orthogonal value streams, business value stream, and delivery stream, create a “value network.”
Delivery streams are often aligned with software products, applications, or platforms that have a delivery group with assets such as a technology stack and teams of people who know how to work with it. In the first principle of capacity planning -- using the team as a resource unit -- teams become the “currency” for capacity planning. When scaling up to the enterprise level, it’s useful to have a larger unit of “currency” for capacity planning by combining the teams that work on a given delivery stream into a delivery group. This unit is similar to an Agile release train, as expressed in the Scaled Agile Framework®. Using delivery groups as a higher-level unit of capacity is useful for longer-range planning, to keep it “roughly right” without elaborating unknowable details up-front.
Traditional project and portfolio management often focuses on the critical path schedule and resource utilization for each project individually, without taking into account conflicts and collisions with other projects. Visualizing a value network exposes interactions across projects and programs to better match demand and supply. Initiatives and marketable features help fill out and connect the value network. Think of an initiative as the funding source for delivery of marketable features, potentially supplied by the different delivery groups. The feature backlog for the next quarterly mid-range planning of a given delivery group may supply marketable features for several initiatives from different business units.
Visualize a Value Network
Visualizing a value network by separating delivery streams from business value streams makes utilization of available supply much clearer. Some of the ways demand can be better matched to supply include:
- Determine which delivery groups can best supply the marketable features requested for a given initiative
- Reality-check that total demand from multiple initiatives fits the capability and capacity available across different delivery groups
- Prepare realistic feature backlogs for quarterly mid-range planning by each delivery group
- Support longer-term planning for how future hiring or contracting needs shape supply to meet demands, 6 to 18 months out
Join me at RallyON 2014, June 9-11 in Washington, D.C., to hear more about applying the demand and supply model described here. You can chat with us live and hear more solutions for optimized capacity planning. Or, email us at firstname.lastname@example.org to learn more. Look for our next blog about principle #4 of capacity planning, coming soon.