System vs Value organization - a process based on a dual approach

I often see organizations trying to have one approach throughout the organization. It is either based on value streams or it is based on system organization. Neither work very well as a one solution fits all for different reasons. As organizations grow we see larger gaps between management and IT. This increase the need for control and this is why we see more organizations trying to force a value based organization today. You can read more about this in the chapter "The lack of Portfolio management reduce Trust" in the Portfolio Management section of this book.

 

Value Based Organization

Value streams makes sense from a financial perspective because value is one of the outcomes from the Iron Triangle (cost, time and scope). It is similar to the project based organization in that it has the financial steering as focus.  Value streams aim to optimize financial output to create the most value for each investment. This is done by placing all involved resources and scope into one organization, meaning that you essentially split the organization based on value creation.

Benefits from this include:

• Usually fit well with the company organization that is often based on value or product
• Easy cost/benefit control when everyone is in one organization.
• Easier to manage communication and steering.
• Fewer dependencies
• Faster decisions due to fewer dependencies

There are some drawbacks as well:

• Poor cross collaboration as the team work mostly independently of other groups
• Poor cross communication as the team work mostly independently of other groups
• Increased complexity of work as multiple value streams can touch the same systems
• Fragmentation of work processes is common as the team work mostly independently of other groups
• Increased complexity to maintain system quality and overview
• Duplication of roles as each value stream will have their own roles for quality and steering

 

System based organization

The system based organization makes most sense from a quality and competence perspective. This has been a common way to organize IT for many, many years as it is the most logical way to organize to ensure quality and competence. It makes sense from a delivery perspective to make sure you have the right people, with the right competence working on the systems they know best. It also makes sense to have documentation in one location for every system and one person in charge of the system from an architecture and quality perspective.

The benefits from having a system based organization includes:

• One source of truth for each system when it comes to documentation
• A focused team with the best competence focused on the system they know best
• A focused responsibility for the quality of the system

The drawbacks for this are:

• Difficult to manage financially when value is created over multiple systems
• Difficult to collaborate from a value perspective when systems are isolated entities
• Difficult to communicate from a value perspective when systems are isolated entities
• Increased complexity to manage business need over multiple systems

 

What is the solution?

As both of these organization forms have their benefits and drawbacks. What we want from the organization is the best from both: The ability to organize and follow up based on value from management and the ability to focus competence and quality for IT. So rather than compromise by choosing one group over the other we use both.

We use a value based organization on the management side, and we use a system based organization on the IT side.

Then how would this work 4Real?

We already have this defined in several frameworks like SAFe, even if they do not really spell it out as such. In SAFe it is called a cross-functional agile team, which in reality is a fancy way to say that the value stream dedicate resources from the systems to help facilitate value. The resource or resources will still belong to the system organization, but is dedicated to a value based organization as well.

You can compare this with how consultants work. Each consultant is employed by one company, but work for another in the form of assignments. This is also how a dual organization would work. Each resource is employed by a system organization, but can work for a value based organization in the form of an assignment.

This will allow you to manage value creation from a management perspective while still ensure quality and competence without fragmentation and duplication of roles. This dual organization is the basis for this work process, and we will expand on this topic in the other chapters.