Over the last few weeks, I have spoken with numerous insurers that have accelerated their move to Agile and the Scaled Agile Framework (SAFe) in response to the major changes brought on by the COVID-19 pandemic. Many of these carriers have been doing Agile at a project level and are rapidly moving toward a new portfolio-level implementation.
Sounds great! However, as organizations have been doing this, some are encountering unexpected pushback from business executives on how to measure return on investment as well as how to define and control budgets. Traditional budgets include maintenance, enhancements, and projects. As carriers mature, they typically move to a product orientation, transitioning from projects with a defined beginning, middle, and end along with (hopefully) a specific budget to having product teams that own an area or function (e.g., B2B, B2C, underwriting, claims, distribution).
These teams are cross-functional and made up of business team members, developers, testers, and software architects. If the product teams take a DevOps approach, they will also include traditional software operations employees with experience including release, change, and configuration management. Many of the centralized support teams merge into the product teams, either virtually or physically. The IT overhead areas shrink to lightweight groups that enable testing capabilities as well as security and architecture best practices.
Product Team Approach
The product team receives a budget from senior management, not a project. This budget is often reset monthly or quarterly (and accounts for any team changes) instead of yearly as in traditional organizations. What is capitalized? What is maintenance vs. enhancements vs. true new development? Product teams achieve epics through program increments, which are typically 2-3-month timebox planning intervals where an “Agile Release Train” delivers incremental value through tested software or services.
These increments can be tracked in tools like Jira. With product teams doing development and maintenance, investment can be tracked using timesheets (the traditional approach) or stories to determine time spent on capitalizable activities or operating expense activities.
The idea is to measure return on investment for everyone in the product team by business value, not features or functions delivered in code. The business leader helps define those business metrics. Agile is intended to maximize time to value for that product area and ultimately minimize the allocated time needed from shared service organizations. The business KPIs measuring value such as number of submissions processed, number of claims adjudicated, etc. are part of an overall product roadmap that is co-owned by the product manager and the business leader.
Managing SAFe and Agile Teams
Under SAFe, in addition to understanding the business vision and roadmap, the product manager is responsible for the overall program backlog, driving program increment planning given capacity constraints and knowledge, and validating features for each specific iteration within a program increment. The product manager may have many product owners, each with their own Agile team.
Product owners manage team backlog, define user stories, and manage program increments with the product managers. The product manager and business leader work closely together; they have the flexibility to draw down their budget in the priority sequence for epics, features, stories, and related capabilities as they see fit or to change the sequence as needed in the roadmap via team backlogs.
Success is measured by cumulative business outcome metrics and product team accomplishments. These metrics and accomplishments are reviewed frequently and changed if needed to ensure the roadmap stays relevant. The process is one of continuous change, with no real beginning or end, just increasing business value generated from value streams.
Yikes! Where is the business case? Where is the start and end? What will the CFO get for the money provided? The ultimate effect of this approach is pushing accountability into the overall business organization, not just IT, and consistently measuring the outputs based on outcomes. As companies continue to seek greater agility, they will often dispense with more and more of their centralized control structures. It happened with enterprise architecture, then project management offices, and now it’s happening with finance.
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