The planning process for technology investments is irretrievably broken. Most tech executives would agree that the process of justifying, funding, and tracking resources is bureaucratic, enervating, and inefficient. But few have come up with a better way, because annual zero-based, project-focused planning is so ingrained in corporate routine.
There is a better way, one that borrows heavily from agile methodologies. Rather than slogging through a time-consuming annual process, executives review IT work quarterly or even monthly and make adjustments on the fly. Rather than assuming that most IT work is encapsulated in “projects” that must be justified annually, they recognize that employees work on products or platforms that require ongoing funding. So they do away with the fiction of zero-based budgeting and plan dynamically on the basis of changes in the fixed resources available to them.
Our client work suggests that these shifts help focus the IT department on business value while improving the internal efficiency of the IT planning process by up to 30%, cutting time-to-market almost by half and significantly boosting employees’ morale.
While overall experiences vary, few IT executives would say they are satisfied with the return on the time spent in the annual planning process. Think about whether that process—in which executives compete for funding—produces outcomes consistent with the enterprise’s overall strategy. Think, too, about the time devoted to allocating resources to specific projects, staffing project teams, and ramping those teams up and then down. What about the time spent tracking the hours team members devote to a project? Are these interlocking processes actually capturing business value? Finally, how often does a project team pivot quickly to a new opportunity rather than follow the dictates of its original charter, no matter how far out of date?
The current system creates way too much noise and does not focus enough on business outcomes or ongoing assessments of whether a project is meeting its objective or whether it should be reoriented toward a new one.
Agile organizations take a different approach.
It’s hard to blow up a process that is as entrenched as planning. Doing so requires fundamental shifts in accounting, scheduling, and metrics. For example, companies traditionally capitalize software development costs on the basis of hours worked. An agile organization with ongoing teams, whose members do not track their time, needs alternative methods for calculating what can be expensed and capitalized.
Organizations intending to shift to an agile planning process need to prepare for a comprehensive change management effort that reaches far beyond the planning process itself. Employees generally experience higher engagement in agile organizations, which place a premium on business value rather than hours worked, but the transition is tricky.
Isn’t there a risk of chaos as multiple teams pursue individual objectives? To the contrary, agile organizations generally have stronger alignment among their initiatives. They monitor the performance of these teams at least quarterly and make adjustments accordingly. And they allocate budget to the teams according to corporate priorities and continually fine-tune these allocations.
Can this approach to planning be applied outside of IT and technology? Absolutely. Just as agile has migrated beyond software development, agile planning can apply to any project-oriented part of an organization. Marketing, for example, is a fertile area in which teams can be organized around channels and brands instead of around projects.
Is project work, as we know it, dead, too? No. Organizations will always need teams to tackle specific objectives, such as the launch of a product or the completion of an M&A deal. But increasingly, IT and other traditionally project-oriented areas should be organized around ongoing products and platforms.
The creation of an agile planning process is just one feature of an overall agile operating model. (See “Taking Agile Transformations Beyond the Tipping Point,” BCG article, August 2018.) While it is possible to have early success with agile pilots, an organization that wants to fully commit to agile ways of working must ultimately go beyond pilots and embed agile throughout the enterprise. Planning is an important piece, but as one of the main characters, a detective, in the television show The Wire would say, “All the pieces matter.”