Theory of Value-Based Systems and Software Engineering

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Theory of Value-Based

Systems and Software Engineering

Apurva Jain, apurva.jain@usc.edu

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

OUTLINE

- Overview

- Key Drivers

- 4+1 Model

- 4+1 Theories

- Evaluation

1.

Organizations are social units – people-centric

2.

Assume bounded rationality (Simon)

3.

No silver-bullets, not one-size-fits-all (Brooks)

4.

Stakeholder values are financial and nonfinancial (Maslow, Forbes-E&Y)

5.

Timeless theories of physics will not apply

(from 1-4)

6.

Organizational systems affect the bottom line

(Burton and Obel)

7.

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.

Management theories usually take at least a decade for conclusive evidence

9.

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?

OUTLINE

- 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

OUTLINE

- 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 loselose…(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

9

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.

10

Environment – Framework (Porter, Burton and Obel)

OUTLINE

- 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

HIGH

HIGH

REACTIVE

SHORT

LOW

INSPIRATION CONTROL

Entrepreneur Manager

LOW LOW

HIGH

PROACTIVE

LONG

HIGH

INSPIRATION

HIGH

REACTIVE

SHORT

LOW

CONTROL

 Systems & Software Project Implications

– Staffing

– Process

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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…

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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)

– …

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OUTLINE

- Overview

- Key Drivers

- 4+1 Model

- 4+1 Theories

- Evaluation

Technology – Frameworks (Al-Said, Boehm)

 Systems & Software Project Implications

– Staffing

– Process

– System Architecture

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Technology – Propositions

OUTLINE

- 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)

– …

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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

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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

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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:

4a. SCS expectations

4b, 6b. Prototyping

SCS Win-Win management

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-bystep guidance

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