One of the earliest conversations in any project is about the budget. How much money do you need, how many people (and other resources), for how long?
Project budgets are never easy
Most budgets start with lots of debates about scope, specifications and detailed estimates.
If it’s something you’ve done many times before, like a routine marketing campaign, that’s not too hard.
But many projects aren’t like that. Especially if your proposal involves changing your organisation, processes, or systems. Those kinds of projects are one-offs.
Estimating - or guessing?
That means, for most projects, you’re trying to guess how long it will take to do something you’ve never done before. Even something that sounds predictable, like upgrading to a new accounting package - well, no one has ever tried that specific package in your particular organisation, with your processes, and your colleagues.
The only thing you can be sure of when estimating is that there will be things you haven’t thought of, and problems you never imagined!
But at least on conventional projects, you can start from a specification. Compared to this, agile projects seem impossible to budget.
Agile projects start with goals, not plans
When I talk about agile projects, I mean the kind that iterates towards a solution. You agree on the goal at the beginning, but nothing else is set in stone. The team build and test in short cycles (or ’sprints’). The solution emerges piece by piece, through prototyping, piloting and customer feedback.
That means you don’t know how the team are going to solve the problem until they’ve done the work. You don’t have a specification when you start. So how are you supposed to work out what it will cost?
Start with the benefit, not the cost
The secret is to think about your budget differently.
For conventional projects, we focus on estimating the cost.
For agile projects, we start with estimating the benefit.
Once you’ve worked out what value your project will deliver, then decide how much you’re prepared to spend to get that value.
Stop estimating, start allocating
Imagine your project is about creating a new revenue stream worth £1m/year. How much are you prepared to invest to get that revenue stream? What ROI would be acceptable to your board?
That amount of money is your budget. Think of it as an allocation, not an estimate.
Here are some examples I’ve been thinking about recently:
Optimising online conversions. If you set a goal to increase conversions by x percentage points, how much extra revenue does that bring in?
Customer retention. If x percent more customers stay with you at the end of a contract, how does that translate into extra revenue? What about the value of avoiding acquisition costs?
New customer acquisition. If you are launching a new product to attract a particular audience, what is the segment worth? What proportion of the segment do you expect to capture? So, how much are you prepared to spend on the product design and launch?
Not every project has a goal to deliver immediate cost or revenue benefits. Maybe you're investing in a customer research project, or a cool new chatbot to increase customer satisfaction. The approach is the same: what's the goal, and what's it worth to your business?
Think like an investor
This way of budgeting makes for a much more commercial conversation with your colleagues. It's no longer about precisely what you plan to do, how accurate your estimates are and how you overspent last time. You can focus on whether this work represents a good investment at all.
Of course, all project bids should include a clear picture of expected benefits. But often there’s much more time spent on the estimates. That’s one reason why so many projects fail the value-for-money test: no one took enough time to work out what the benefits were likely to be!
Agile approaches have to focus on ROI because there’s no bottom-up estimate to justify the work. But that discipline might help you create a much more commercially savvy approach to investment across your business.
You still have to plan - a little bit
I’ve found that even when you present your board with a fantastic business case, they always want to know at least something about how you're planning to spend the money. So you need to give them some ideas.
This planning also acts as due diligence. Use it to check you will be able to deliver the promised benefits - or any benefits at all - with the budget available.
Some projects involve a lot of small changes to existing services or processes. In this case, you're almost guaranteed to deliver something of value. If you’re planning to launch something entirely new, there’s likely to be a minimum investment before any benefits come on stream.
Can you afford your Minimum Viable Investment?
To draw on the common analogy for agile projects, you should always start by building a skateboard, rather than the wheel for a car. But if even a skateboard is beyond the budget available, it’s better not to start!
Other useful things to include in your budget presentation
It can be a good idea to include an explanation of what agile projects mean - especially if you’re the first person in your organisation to try this approach. The skateboard analogy is common, but I also like this analogy based on a holiday park.
Another advantage you might want to stress in your pitch is this: unlike other projects, you can stop whenever you want. Agile projects focus on delivering value at every sprint. That means you bank the benefits throughout the life of the project, rather than only at the end.
So - if you meet your benefits target early, you can stop right there. Give your board the novelty of a project that has underspent its budget. Or you could keep going and deliver even more value.
And what about those situations where suddenly the business has to change direction? You can choose to stop your project and free up resources for this new priority, happy that you did at least deliver part of what you set out to do.
In my experience, this is a persuasive argument for many executives. You’re offering them the ability to change their mind. That makes it much less stressful for them to pick priorities in the first place!
How do you go about convincing your colleagues to invest in agile?
New to agile? Not sure if it’s a good fit for your organisation?
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