Fixed Bid and Agile: Can They Co-Exist Successfully?
When you hear the phrase “fixed bid project” you probably think of a project with a specified scope, budget, and timeline, emphasizing the budget. On the other hand, when you hear about Agile Projects, you probably think of an ongoing project with fluid scope and an undefined budget. The two appear opposed. But do they have to be? Is there a way for these two concepts to co-exist successfully on a project?
First, we need to take a step back and review the difference between “project management” and “product development.”
Second, we’ll look at how the Agile framework approaches project management and product development.
Finally, we’ll explore ways the “fixed bid” concept and Agility can successfully work together.
Project Management vs. Product Development
“Bringing the project and the product development approaches together, you achieve the Agile Project Management Approach, ensuring your team delivers working products using an agility-based process.”
Let’s begin with the definition of a “Project Management” stated by the Project Management Institute.
According to their website, a project is defined as: “… a temporary endeavor undertaken to create a unique product, service or result. A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources.” A project is also “…unique in that it is not a routine operation, but a specific set of operations designed to accomplish a singular goal.”
Projects have an explicit goal, a specific start date, and a set end date, resulting in defined scope and resources. This format provides clear structure and desired outcomes for the team doing the work. When coupled with an Agile methodology, the Project Management discipline directs this process and ensures the formula is kept in place throughout the project lifecycle.
On the other hand, the “Product Development” discipline is focused on identifying the most valuable features for the desired audience. Timelines can be important in product development, such as getting a new product to market before a competitor or in time for a professional trade show. The issue is that product development most often emphasizes features and functionality that deliver value to the customer, over adhering to a pre-determined timeline.
Successful product development efforts typically adhere to a 6-8 step process, such as this one from Product Plan:
6 Steps of Product Development
- Step 1: Ideate
During the ideation and brainstorming step, the team shares all of its innovative ideas. - Step 2: Research
During the research step, the team spends time validating your idea with potential users and reviewing competitive offerings. - Step 3: Plan
During the planning step, the team begins sourcing suppliers, estimating the production budget, determining how to price your product, and additional items. - Step 4: Prototype
During the prototype step, the team develops a sample of your finished product to share with key stakeholders. Note: this is different from the Minimum Viable Product (MVP), a product with enough features to attract early-adopter customers and validate a product idea early in the product development cycle. The MVP is for early adopters. - Step 5: Source
During the source step, the team puts together a plan for vendors, materials, and other resources required to turn the successful prototype into a mass-market product. - Step 6: Cost
During the cost step, the team documents all of the costs required to bring the product to market. This should include line items for manufacturing, materials, setup costs, storage and shipping, taxes, etc.
Just like with project management, product development has a structure and process to it in order to achieve the best outcomes.
In summary, the Agile Project Management approach can be applied to successfully deliver products. It’s necessary for the two disciplines to come together with flexibility, in order to focus on what’s most valuable to the product’s desired customer.
The Agile Approach to Projects and Product Development
“All Agile efforts start with the Agile Manifesto. The Agile Manifesto defines the values and principles used to successfully deliver high-quality, valuable work, and once again flexibility is a key component. ”
All Agile efforts start with the Agile Manifesto. The Agile Manifesto defines the values and principles used to successfully deliver high-quality, valuable work, and once again, flexibility is a key component. For Agile efforts to work well, teams need to find a healthy balance between process and pragmatism.
Product Development’s focus on delivering customer value makes it a good fit for using an Agile approach. For example, by gaining early and frequent customer feedback, the development team can create the product that best fits the customer’s needs and desires. However, if there is no clearly defined discipline in place, the Agile approach can spiral into an ongoing effort with a never-ending budget and timeline. For this reason, it is imperative to know what constraints are most important when using an Agile approach for Product Development.
Ask yourself what is most important. Is getting a product to market before a competitor the driving force? If so, having frequent releases of valuable software provide the necessary focus and structure (see Agile Principles #1 and #3).
Agile Principles #1 and #3
- Agile Principle #1: Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.
- Agile Principle #3: Deliver working software frequently, from a couple of weeks to a couple of months, with a preference for the shorter timescale.
If staying within a specific budget to meet available funding is most important, then focusing on delivering the highest value items first is crucial for creating the best product before running out of money (see Agile Principles #2 and #4).
Agile Principles #2 and #4
- Agile Principle #2: Welcome changing requirements, even late in development. Agile processes harness change for the customer’s competitive advantage.
- Agile Principle #4: Business people and developers must work together daily throughout the project.
Project Management is used to ensure that work stays within a timeline, budget and scope. When using an Agile approach, focusing on early and frequent value delivery, a project can adhere to the given timeline and budget. With the Agile framework focused on delivering customer value, there is flexibility to define scope as the work progresses more clearly. Therefore, the initial scope defined in the project may change during development as a result of discoveries during early and frequent releases with customer feedback, actual IT constraints, and undefined challenges that could not be forecasted.
This feedback loop is advantageous, and at times projects can finish earlier than initially planned as feedback and results are calculated and changes made that help meet project goals earlier than expected. In these instances, time and money can be saved when focusing on delivering the highest value aspects of the project first and identifying changes to requirements that can be eliminated or refined.
Agility and Fixed Bid
“Using an Agile approach is not an excuse to throw out timelines, scope, or budget. With discipline and structure in place and a focus on delivering customer value, Agile can be used to deliver a fixed bid project successfully as long as the project execution is flexible. “
Fixed bid projects emphasize getting a specific amount of work done given a certain budget, timeline, and resources, and unless the budget is fairly large, no matter what methodology used to estimate the project, the numbers will likely be off given all the unknowns of a software development project. However, when applying the Agile customer-focused, value-first mindset, projects are able to deliver the essential functionality early in the project lifecycle. As the project progresses, less critical items can be prioritized lower in the overall work plan. With this emphasis on value first, the necessary functionality is built at the beginning and incrementally improved. When the budget is met you may not have every single detail from the initial project design, but you will have the most valuable features and functionality for your customer.
Using an Agile approach is not an excuse to throw out timelines, scope, or budget. With discipline and structure in place and a focus on delivering customer value, Agile can be used to deliver a fixed bid project successfully — as long as the project execution is flexible. This requires frequent feedback loops to inform the development efforts and evaluate where the project is as to the budget.
And lastly, it is crucial that the whole team embraces the Agile mindset laid out in the Agile Manifesto values and principles. Only then will you achieve the necessary balance between flexibility and structure.
Conclusion
There is no doubt that this is a delicate and challenging balance to find. Doing so without clearly defined deliverables that everyone agrees with and a seasoned Agile Coach with a pragmatic approach to guide your team and leaders on how best to implement the Agile Manifesto is ill-advised. However, with exemplary Agile leadership, you will be equipped to successfully deliver work using an Agile approach, whether it’s open-ended Product Development or a fixed bid project.
If you are looking for guidance to lead a successful Agile development project, reach out to us. We have seasoned coaches that have helped numerous companies transform. From start-ups to Fortune 500 companies, Intertech has experience helping companies from nearly every industry transform how they work.
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Director of MomentumWorks™
Stevie Borne
Stevie has over 20 years of software development experience, with most of that being on Agile teams. From her first Agile project, she was hooked on the collaborative, customer-focused approach that enabled her teams to delight customers with incremental, valuable deliverables. After moving on from a developer role, she has held numerous roles, including Product Owner, Scrum Master, Project Manager, Coach, and Development Manager.
“I have had the opportunity to coach hundreds of Agile teams and leaders, from start-ups to Fortune 500 companies worldwide. During these engagements, I’ve guided leaders and team members alike to discover a practical approach to apply Agile values and principles successfully. Mentoring is one of my true passions. ”
Why Did You Choose This Field?
I don’t have a good answer for this….I fell into software development and along the way discovered I enjoy helping clients solve their problems with creative technical solutions while equipping their teams to do their best work.
Sideline
Stevie is an international speaker, trainer, and professional life coach. She holds numerous Scrum, Agile, and coaching certifications. When not working with her software teams and leaders, you can find Stevie outside hiking, biking, and rock climbing.
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