Theory of Value-Based Systems and Software Engineering

Apurva Jain, [email protected]

USC Center for Systems & Software Engineering http://csse.usc.edu

Context and Definitions – Value-Based SSE

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

 Definition – “the explicit concern with value (financial and non-financial) in the application of science and mathematics by which the properties of computer systems and software are made useful to people”  Practicing VBSSE – “integrating stakeholder value considerations into the full range of systems and software development principles and practices” 2

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Context and Definitions – Value

   

Origin

– from Latin “valere” – to be worth

Definition (Webster)

– relative worth, utility or importance

Financial or non-financial (Maslow, Kaplan and Norton) Key non-financial corporate value drivers (Forbes.com with Wharton and E&Y)

– Innovation, ability to attract talented employees, alliances, quality of major processes, products, or services, environmental performance 3

Key Observations from Literature

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- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

1.

2.

3.

4.

5.

6.

7.

Organizations are social units – people-centric Assume bounded rationality (Simon) No silver-bullets, not one-size-fits-all (Brooks) Stakeholder values are financial and non financial (Maslow, Forbes-E&Y) Timeless theories of physics will not apply (from 1-4) Organizational systems affect the bottom line (Burton and Obel) Engineering theories must take the organization in context (from 4 and 6) 4

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Successful Project? Multi-Contingency Organizational Context (Burton and Obel)

GOALS, MISSION BOUNDARY STRATEGY ENVIRONMENT SIZE TECHNOLOGY MANAGEMENT STYLE CLIMATE ORGANIZATION’L STRUCTURE

Key Observations from Literature

(contd.) 8.

9.

Management theories usually take at least a decade for conclusive evidence Problem and solution space is huge, balance on breadth and depth (T-shaped) Therefore: Avoid reinventing the wheel, capitalize on existing research 5

What is a Theory?

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- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

 1960s : System of general laws – Spatially and temporally unrestricted; nonaccidental – Does not work for systems and software  1994 : System for explaining a set of phenomena – Specifies key concepts, laws relating concepts – – Not spatially and temporally unrestricted Better for people-intensive activities 6

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- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Theory W –

Enterprise Success Theorem

 “Your enterprise will succeed if and only if it makes winners of your success-critical stakeholders” Proof of “if”: – – Everyone that counts is a winner…(i) Nobody significant is left to complain…(ii)  Proof of “only if”: – – – Nobody wants to lose…(iii) Prospective losers will refuse to participate, or will counterattack…(iv) The usual result is lose lose…(v) 7

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Theory W –

WinWin Achievement Theorem

Making winners of your success-critical stakeholders requires – Identifying all of the success-critical stakeholders (and the contingencies they “bring-in”) (SCSs)…(i) – Understanding how the SCSs want to win …(ii) – Having the SCSs negotiate a win-win set of product and process plans…(iii) – Controlling progress toward SCS win-win realization, including adaptation to change…(iv) 8

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

VBSSE Theory – 4+1 Model

Contingency Theory How do contingencies affect value realization?

What values are important?

How is success assured?

Theory W: SCS Win-Win How to adapt to change and control value realization?

Control Theory Utility Theory How important are the values?

How do values determine decision choices?

Decision Theory

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OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Supporting Theories –

Contingency

 Provides insights into various organizational and project contingencies – “What the best way to do

x

?” “It depends.” – Spans socio-political, environment, cultural, technical dimensions  Component theories include – Benefits Chain, Model Clashes, Network Analysis  Primary contributions include – Helps identify contingent success-critical variables – – Applies to whole (socio-technical) system Appeals to intuition that systems fail because of mismatches.

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Environment – Framework (Porter, Burton and Obel)

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- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Uncertainty Equivocality Complexity Hostility Buyers’ Bargaining Power Suppliers’ Bargaining Power Threat of Substitutes Threat of New Entrants Inter-firm Rivalry

 Systems & Software Project Implications – – – Process System Architecture System Capabilities 11

Environment – Propositions

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

 Propositions for organization structure – “If the environment has low equivocality, low complexity and low uncertainty then formalization should be high, organization complexity should be medium and centralization should be low” (i) – “If the environment has low equivocality, high complexity and low uncertainty then formalization should be high, organization complexity should be medium and centralization should be medium” (ii) – – “If hostility is extreme, then formalization should be low, and centralization should be very high” (iii) … 12

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Management and Leadership Style – Frameworks (Burton and Obel)

Leader Producer Preference for Delegation Level of Detail in Decision-Making Reactive/Proactive Decision-Making Decision-Making Time Horizon Risk Preference Motivation and Control HIGH LOW PROACTIVE LONG HIGH INSPIRATION HIGH HIGH REACTIVE SHORT LOW CONTROL Entrepreneur Manager LOW LOW HIGH PROACTIVE LONG HIGH INSPIRATION HIGH REACTIVE SHORT LOW CONTROL

 Systems & Software Project Implications – Staffing – Process 13

Management and Leadership Style – Propositions

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

 Propositions for project structure – “If an individual is a leader, then   “Centralization should be low (i) “Formalization should be low (ii) – –    “Complexity should be medium (iii) “Incentives should be results based (iv) “Coordination and control should be loose” (v) “If an individual is a manager, then  “Centralization should be high (vi)    “Formalization should be high (vii) “Complexity should be high (viii) “Incentives should be procedure based (ix)  “Coordination and control should be tight” (x) “If an individual is a producer, entrepreneur… 14

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Technology – Frameworks (Perrow)

ILL-DEFINED

CRAFT NONROUTINE ROUTINE ENGINEERING

WELL-DEFINED FEW EXCEPTIONS MANY EXCEPTIONS

TASK VARIABILITY

 Systems & Software Project Implications – – – Staffing Process System Architecture 15

Technology – Propositions

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

    vs. Strategy – “Nonroutine technology is a misfit with a defender strategy” (i).

vs. Management Style – “Nonroutine technology is a misfit with a manager leadership style, except in small organizations” (ii) vs. Organizational Climate – “Nonroutine technology is a misfit with an internal process climate” (iii) vs. Organizational Environment – “Nonroutine technology is a misfit with a high equivocality environment” (iv) – … 16

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Technology – Frameworks (Al-Said, Boehm)

 Systems & Software Project Implications – – – Staffing Process System Architecture 17

Technology – Propositions

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- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

   Maintainer vs. Developer – Ease of transition is a misfit with freedom of COTS (i) User vs. Acquirer – High levels of service is a misfit with freedom of COTS (ii) User vs. Acquirer – – Application compatibility is a misfit with freedom of COTS (iii) … 18

Supporting Theories –

Utility

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

 Provides a rich theoretical method to infer subjective stakeholder value over a set of choices  Component theories include – Maslow, Simon, Multiple attribute utility theory  Primary contributions include – Helps determine Pareto optimality – Works well with subjective preferences – Provides rich fodder (stakeholder utility functions) for other theories 19

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

Supporting Theories –

Decision

 Provides a plethora of techniques and models to enable decision making  Component theories include – Game theory, options theory, statistical decision theory  Primary contributions include – Helps determine risks and opportunities – – Works well with uncertainty Not wedded to a particular decision theory, such as bounded rationality, economic man, etc.

– Provides rich fodder (competing investment options) for other theories 20

Supporting Theories –

Control

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

 Provides theory augmented models for state measurement  Component theories include – BSCs, BTOPP, Risk management  Primary contributions include – Helps determine necessary conditions for enabling control – Works well in situations requiring stability AND adaptability – Provides rich fodder (risks and opportunities) for other supporting theories 21

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

VBSSE Theory –

6-Step Process

4b, 6b. Option, solution development & analysis Contingency Utility Theory Theory 3. SCS Value Propositions 2a. Results Chains 2. Identify SCSs 3b, 4b, 6b. Cost/schedule/ performance tradeoffs 3b, 6a. Solution Analysis (Win conditions) Theory W: SCS Win-Win 4a. SCS expectations management 4b, 6b. Prototyping 5, 6c. Refine, Execute, 4. SCS Win-Win Monitor & Control Plans Negotiation 1. Protagonist goals Control Theory 3a. Solution exploration 6. Risk, opportunity, change management Decision Theory 5a, 6c. State measurement, prediction, correction; Milestone synchronization 4b. Investment analysis, Risk analysis SCS: Success-Critical Stakeholder

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OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

The Incremental Commitment Model (ICM)

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OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

VBSSE –

Phase Configuration

EXPLORATION UTILITY θ CONTINGENCY θ

Protagonist Goals

θ W DECISION θ

SCS (Market, Sociopolitical, Technical, Economic, People) Dependencies Stakeholder Value Propositions Expectations Management Market, Sociopolitical, Technical, Economic Dependencies Stakeholder Value Propositions Solution Analysis Cost, Schedule, Performance Tradeoffs

A

Cost, Schedule, Performance Tradeoffs

A

Investment, Risk Analyses Solution Analysis Prototypes Cost, Schedule, Performance Tradeoffs Stakeholder Value Satisfaction Cost, Schedule, Performance Tradeoffs Stakeholder Value Satisfaction Risks, Capabilities Plans, Control Variables

B CONTROL θ

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Conclusion

OUTLINE

- Overview - Key Drivers - 4+1 Model - 4+1 Theories - Evaluation

 It provides a unifying theory for practicing VBSSE that is: – Entirely theory-based  “There is nothing as practical as a good theory” – Karl Lewin – – – Built on existing research Empirically validated (TBD) Simple  Derived from simple rules, provides step-by step guidance 25