Financing

Welcome to Definitely Maybe Agile, the podcast where Peter Maddison and Dave Sharrock discuss the complexities of adopting new ways of working at scale. Hello and welcome to another episode of Definitely Maybe Agile with Dave Shark and Peter Madison. And uh my good friend Dave is here, and uh we're looking forward to another exciting conversation today. And so what are we gonna be talking about, Dave?

Isn't this our Dragon's Den episode, the one where we start talking about financing and how to get your particular program or idea funded and rolling?

Ah, yes, yes. That's what we're gonna talk about. Yeah, and so so who wants to go first? What can we put in front of the dragons?

Well, I I mean, yes. So I think that before we have that, I think we have to talk about how to get to the point where you might actually have um financing that is that is done iteratively, that is is incrementally, you know, you're selling something to get approval from stakeholders, fund, you know, finance uh the the finance holders, the owners of the the uh money to make sure you know where you're going and that you're doing things which are in line with what the company wants. How how have you seen it? Maybe what's the starting point of looking at finance from the view of agility and and and product delivery?

So I th this is typically where I see a lot of organizations uh hit one of their biggest hurdles, is where you have a funding model that consists of a PMO that uh is the one who's kind of responsible for tracking how money is being spent and bringing together different buckets of money from different parts of the organization to fund the project, and then this kind of misnomer that we'll somehow be able to track time down to the millisecond as to the optimization of the usage into that and and create all of these fancy financial models, and and it none of it works. It it it's it completely derails the actual funding because you uh if you're still funding in that project type mindset, this really doesn't match what we need to do from a product delivery perspective. Uh so where I've seen uh organizations start to go from there is uh there's a few different pieces. One is uh start to get faster at their budgeting cycle. So that's very often a first piece that they do. They instead of budgeting on an annual basis, they start to budget on a quarterly basis, and uh, but they still go through a lot of the same budgeting cycle pieces, but they just start to shorten that budget cycle until they can get to a more continuous sort of model for it, um, and eventually start to evolve towards how do we um fund long-running teams and value streams instead. And so, what sort of things have you seen?

Um it it's a it's an interesting one because uh here's a couple of things that you see. First of all, we need to recognize you can't change the financing model first. You've you've kind of got to change it behind the behind the pace of the change that you're doing in your organization. And the reason for that is the finance, the AOP, you know, annual operating budget process, whatever that might be, is already looking at 2022 right now. So you're not going to change how they look at 2022 because we're six months out, or whatever it might be, there's no way they're going to take that risk. So any sort of significant change that you're going to be able to bring to the table is probably 12 to 18 months away from seeing the light of day. And I think that's something that we've got to recognize. There is a reason why finance do what they do, whether they're using projects and portfolio and how they're funding things. The reason for that is they're running an organization and they need to be accountable to shareholders or investors or whoever at the board, in terms of how they use it. And exactly like we all do at the beginning of a year, we think about what we're going to be spending, where we're going to go on vacation, whatever it might be, the costs that we have, and how we might address it personally. So I think that's one of the first things to recognize because um a lot of the time we try and go hitting the finance process hard without recognizing that there is a built-in lag in there that we have to recognize. That's perhaps the first thing. Um having said all of that, there's always room to work within the process because finance is not rigid, however much it may appear to be, and it's dollars and cents in columns in a spreadsheet. The reality is there has to be movement backwards and forwards to allow the real-world delivery to happen. And so there's always a little bit of give and take in there. So we can use that to pilot and educate and bring finance on board so that they see that they still have governance, control, visibility into what's being done. There can still be a strategy with a well-thought-out funding model behind it. It's just we're wanting to build in flexibility into that process so that we can respond to the market much more quickly than we can if we have a 12 or an 18-month committed portfolio of project to worry about.

Yeah, very much so. It's uh I I always say that when I'm starting to work with a new organization, I think one of the first things I do is I look at how does money flow through that organization, how would the how is it finance, where are the the different people who are involved in that process? Because that tells you a lot about how the organization is investing and where they're looking at going and what are the things that they care about most. And and you're completely right, that there's always flexibility in those models. Uh, it brings up one of those those points that we were talking about uh briefly earlier around to this idea that the uh we have to make sure though that those models aren't driving our decision making, but they're helping to sort of guide it, that it's the um the the various different buckets that money gets slotted into. There's always different ways we can move that money around to start to uh sort of generate space to be creative to do things that we uh that would help us experiment and drive things forward.

Um I just came from a meeting, I had a conversation this morning. Uh um one of the uh organizations we're working with is the Government of Canada, federal uh government of Canada. And what was really interesting there, the government of Canada has a very strong machinery, if you like. Of course it does. It's uh it's unfortunately controls how our taxpayers' money is is paid. What was really uh is used, what was really interesting is um one of the comments in the discussion that we were having is if you go to the finance bodies which are involved, we often go there with a mindset that they're there to be strict and stop doing this, this, and this. When in actual fact they're there to enable the business, the organization to get things done, to get the strategically vital things done. So if we go with the mindset that, hey, how can we work together to figure this out? Uh you often get in exactly the right place that you need to, where everybody's a partner in trying to achieve that rather than some sort of adversary control type of relationship. And I I do I thought that that the that really was a great reminder that we're all on the same side. They're they're trying to make sure that good strategic opportunities are taken advantage of, and they're trying to make sure that they're taken advantage of in the correct way. Nothing more. So that's one of the things to pick out.

Yeah, yeah, definitely. It's the one of the the interesting spaces that I run into this a lot, and I'm not sure how often you get into these types of conversations, but is in uh is in like cloud adoption and cloud migration type pieces, where there's the shift from large capital spends to infrastructure. And this is still ongoing, but uh, and you start to adopt operational costs in its place, and how engaging finance to help you understand how best to model that, how to model this in such a way that you can properly absorb those costs, because uh invariably um you you always end up with this spike where you're going to be paying for both capital depreciation and the cost of the operational cost, and which means your overall costs are going up for a period of time. And not to mention that uh typical cloud adoption cycles are that initial adoption spikes as everybody jumps onto the new capabilities and you end up running far more than you meant to, which you end up with larger monthly bills and lots of other ways of that's a whole other conversation around how you go about controlling and managing that and and doing that correctly. Uh but there's but those kind of modeling of understanding what that would look like and ensuring that as you're starting to move down these large technological shifts that you're properly working with finance to help you adopt these in a manner to that they they really bring value to the organization and you get to bring the right capabilities at the right time to the right people.

I think that that's uh an excellent point. That and of course they're experts at it, right? So now it instead of you know, you don't want to see my kind of financial models that I might put together on an Excel spreadsheet, but there are people who who really know what they're doing and can kind of factor in the right things as they do that. Um I also wanted to draw out, and I think you mentioned it right at the beginning, and then we've got we've got waylaid with the AOP piece and so on. But right at the outset, you talked about funding value streams over projects. And I think this is a great place. It's a s it's first of all, and exactly what we're trying to get to. We add on incremental funding, and then you're kind of home and dry. But if you're in a model, if you're in an environment where all the projects are being funded and not value streams, it's one of the simplest changes that can be made because we can sort of look at a value stream, create that value stream, and you'll find there's a whole bunch of funded projects in there because it's a value stream. And so at that point, you're at least able to layer into the existing way that things are funded and start maybe modifying and adjusting in a sort of small ways, incremental ways for some of those projects. The other reason I really, really like value stream funding is because one of the first conversations you come out with is okay, I've got this pot of money for a particular value stream. And if I then ask the question, how many teams can I support through the year, instead of how do I ramp up and ramp down, ramp up and ramp down, which I've seen to be one of the most, I mean, incredibly wasteful exercises in terms of projects that get put on hold because the budgets have been cut down and all the rest of it. It can be really um the churn and the ramp up and the ramp down of that can be so disruptive.

You mean the uh the June of every year when uh all of the contractors get fired and they get hired back on the first of November?

That's the one. That's the one, exactly. Yes. And and the projects and um programs that are being worked on that get put on hold and put on hold and put on hold, and then you've got the ramp up costs because different people coming in, all the rest of it. And so that value stream conversation allows you to smooth that out through the year. So behavior-wise, as well as kind of doing the maths on the projects, you begin to see some of the benefits coming through immediately. And then, of course, the the only thing to add to that is don't start all the projects at once, but sequence them so that as you finish one, you can move that team smoothly on to the next piece of work, which may be called a project, and maybe you know, um uh it is expected to have been started all in Q1 because the financial year or all the projects start, but is actually sequence. You're going to see all of the right sorts of conversations that we're we're trying to create in an organization that works really well at that point. So I'm I mean, I I think that's a great place where you can start. You can already see some of the benefits, it's gonna drive the right conversations. Um, and we've not even added incremental funding at this point.

Yes, and what I was gonna say is the next place I would go with that is that uh the there's because that's often where organizations end up going after that, is where they start to introduce um we're going to now start to fund in in smaller increments, we're gonna start to release money in smaller portions into these different value streams. And uh this is often uh especially when they're you're in transition from one model to another or you're starting to move um in for different areas to more of a product-based model, um, switching to a more um faster incremental funding model is uh typically the way I've seen organizations go. Um the the the only the only other play way I've seen that done um effectively is where somebody has a sufficient level of uh of oversight of their entire P ⁇ L and the organization trusts them with the management of everything below them, and at that point they then fund the value streams under their particular area because they've got sufficient control over that from an end-to-end perspective. But that occurs as I've only seen occur in very, very large organizations where um and where two things are occurring for that to happen. One is that there's um sufficient uh psychological safety that that that person's been given the independence to be able to do that. And and also where um they're there's um where they have that level of control, like um that they can actually they've got enough breadth that they can actually have ownership of enough of the value stream to be able to do that.

So I mean I've seen that in smaller organizations where effectively I'm thinking here startups in the sub-5,000 or thousand-person organizations, because you often have individuals which have a pretty broad span of control over that. You're describing that in a much larger organization by the sense of it.

Yeah, I was thinking of a much larger one. But yeah, I can see how it could work in small organizations too. But it's that it's the kind of financial control piece of it. Where does that belong? Or not necessarily belong, but where is it? Who's the one who's uh releasing those funds? Yes.

But but having introduced uh incremental delivery, I mean, this is where we start talking about Dragon's Den and the uh the whole approach of you know pitching to get the funding for the next round of whatever the growth is. And one of the things I really like about this is is a few things. One is stakeholders getting actively engaged and seeing what's happening and what's being delivered by their teams instead of being disengaged for a long period of time. I think that's just just on its own, even if it's a pro-former conversation on a say a quarterly basis, there's still value in just having that sort of touch base and feedback and face-to-face conversation, if that makes sense. But just as importantly is and this is we've got to remember, Dragon's Den, not everybody gets funded. So there's a there's a huge value in an organization getting to the point where not everything automatically gets the follow-on funding. But now we're really talking about cultural change, right? Um, I've so I've seen this happen in in studios, certain gaming studios, where the not getting funded means those teams are let go. And and that's not the sort of culture that you want, because that's going to breed certain things in terms of those follow-on conversations. But if you imagine a situation where if the initiative that you're involved with doesn't get funded because there are better opportunities elsewhere, and we're repurposed and added to these better opportunities to make them get to market that much quicker and realize that identified opportunity that much quicker, I think now there's this really healthy competition about making sure that what gets attention, what gets funding, what gets the people assigned to that work are the things that are really generating value for the organization, hopefully by generating value for the customers, of course.

Yes, and it's uh and if we prioritize things by the value that they deliver, then we're gonna deliver the highest value things first. And so eventually we will want to start to move teams onto other higher value things. So we want to move them on to the next more valuable starts of things, yeah, types of things. Uh so with that in mind and and where we are time-wise, uh, should we sum this up with uh three points? Would you would you like to go first?

Yeah, sure. And and um so let if I think back to the start of the conversation, one of the first things I think is is we've got to recognize that finance is there to serve the organization and they're on side. And I think sometimes we see that as a constraint to us being able to do whatever it is that we want to do. And I think we do need to recognize there's conversations to be had there. Anytime, certainly I've had those conversations, it's been a partnership, it's not been anything other than that they're wanting to achieve the same things, and the question is how can they best do it while meeting their requirements in terms of what they're responsible for and whatever the business is trying to achieve as well. So that's maybe the first thing.

Yeah, and I think uh I and I've seen actually I was talking to a senior leader earlier this week where I saw an exact example of that where he was explaining to me that uh the finance uh guy who was supporting his initiative was um actively saying, Well, no, no, we need to categorize this this money in this way in this revenue because because that's the only way that it'll look the same on the reports that I deliver. But it's something that's so totally new, it's like, well, no, I'm like we we don't change the way that we do the project delivery to keep the report the same. We change the report.

So exactly, exactly, yes, yes, yeah. That's very true. Um, I mean, I I think there are a couple of other things uh just to throw in there and now uh to to remember. And one is what you said about funding value streams over projects, and we identified maybe that's sort of that step one piece. Uh, coupled, of course, then with shifting towards that incremental funding, with maybe the question mark around the incremental funding, bearing in mind what we really want to do is stop funding to the low-value things in order to move resources and money and so on, and attention to the high value things and making sure the culture is aligned with that.

Very much so. Yeah, and ensuring that we we have that incremental funding to support all of it, so that we're able to have a model that allows us to continue to support this and that we're able to make faster decisions and get feedback as we go along. So I think uh that's good. So I I as always I really enjoyed the conversation, Dave. And uh if uh if anybody wants to reach out and uh provide us some feedback, they can do so at uh feedback at definitely maybeagile.com. And uh and with that, uh any final words, Dave? I'm looking forward to the next conversation. You've been listening to Definitely Maybe Agile, the podcast where your hosts Peter Maddison and Dave Sharrock focus on the art and science of digital, agile, and DevOps at scale.