The Power of i(n)teration in Scrum: Compound Interest, Knowledge and Value. Bonus: The Toyota story and the birth of Lean. This is the continuation of the session given at Agile Portugal 2015! – Money: The basics behind compound interest. – Field: Our own real Agile story from the trenches (Farfetch since its startup days). – Power: Toyota story (a must, our greatest influence), Lean birth, Lean Thinking, PDCA. – Lessons: The lessons we took from our own experiences. – Value: What really means? Lean & Scrum similarities. Compound knowledge. Compound value. A simple example of compounding value in Scrum.

1. Agile
The Power Of
I(n)teration
ScrumRio 2015
August 13-15, 2015

2. Hi, I’m Bruno Teixeira
Agile Coach @Farfetch
twitter.com/bruno_cacho
linkedin.com/in/brunocacho
Hi, I’m Nuno Gomes
Product Owner @Farfetch
twitter.com/nrgomes
linkedin.com/in/nrgomes

3. Agenda
Money1
2
3
4
Field
Power
Lessons
5 Value

4. Money
1
...the root of all Evil.

5. I have
always
been afraid
of banks.
Andrew Jackson

6. John, money and his father

7. John, money and his father
When John turned 25 his father gave him $30,000.
His Dad taught him that money makes money.
And advised John to build his retirement.

8. “How much will I have in 40 years?”

9. Your money and your bank
Do banks have an answer?
Oh Yes.
You guessed!

10. “It depends!”

11. Money Variables
Interest Rate
Years of Investment

12. 403020100
211,200
97,861
30,000
Risk Product Interest rate Multiplier
Low Pension fund 3% / year 3,3x
Medium Indexed deposit 5% / year 7,0x
High Mutual fund 7% / year 15,0x
449,234

13. Compound Interest

14. Compound Interest
Always reinvest every cent you earn!
A small rate increase makes a huge difference!
The more you compound, the more you gain!

15. Exponential growth, on a steady pace!

16. Compound Interest
𝑨 = 𝑷 × ( 𝟏 +
𝒓
𝒏
) 𝒏𝒕
A = Amount accumulated after t periods
P = Principal amount (initial investment)
r = Nominal Interest rate (%) within period t
t = Number of periods to compound
n = Number of compoundings per period t

17. Compound Interest
𝑨 = 𝑷 × ( 𝟏 + 𝒓 ) 𝒕
Simplified (n=1)
A = Amount accumulated after t periods
P = Principal amount (initial investment)
r = Nominal Interest rate (%) within period t
t = Number of periods to compound

18. But, wait a minute...

19. Compound Interest and Scrum?
Is there a relationship?
Are we in the business of making money?


20. We will get there... hopefully.

21. Field
2
Experiment. Fail. Learn. Repeat.

22. I am not afraid
of storms
for I am learning
how to
sail my ship.
Louisa May Alcott

23. Our story.

24. It all started back in 2010
Startup of 4 developers...
2 experienced “waterfall” geeks joined!
Early investors proposed...

25. It all started back in 2010
“Let’s do Scrum!”
And so we started our journey!

26. Round #1

27. Round #1
We were smartasses, hence need no help…
Translating… no time for learning! Too much to do 
After “deeply” study it, our verdict was…

28. Round #1
“Scrum is very simple!”
We ended up with…

29. Anarchic Scrum
Act… without thinking.
Sense… without data.
Respond… without awareness.

30. Anarchic Scrum
We rock it 
But someone else didn’t…

31. Round #2

32. Round #2
“This is too much turbulent.”
“We need some top management skills.”
And a budget was given…

33. Round #2
“Let’s buy Scrum!”
We ended up with…

34. ScrumFall
A very modern way of “water-falling”…
In a 3 week (kind of) steady pace…
And with a new set of tools to pressure people…

35. ScrumFall
Management prioritization
Resource planning
Estimations as commitments
Sprint, sprint, sprint ...
Additional Testing
Detached Delivery
Fixed scopes
Handovers
Big Design Up Front
And lots of meetings!Comparing velocity between teams
Fixed deadlines

36. ScrumFall
“What the hell?”
We started our “dynamic duo”!

37. Round #3

38. Round #3
“Nuno, something is wrong!”
“Bruno, you sound like La Palice!”
We begun to look behind the curtain…

39. Round #3
“Let’s go deeper!”
And we made a new friend!

41. Scrum
Manifesto
Flows
XP Practices
Pull vs Push
Kaizen
Systems
Constraints
Complexity People
Kanban
Hyper Productivity
Science of Teams
Scrum Patterns
Lean Thinking Agile Transformation
Culture

42. Let the experiments begin.

43. Outcomes:
Shared common goals.
Boost on all communication levels.
From a group of individuals to a Team.
#1
1 Week
Sprints

44. Outcomes:
Emergence on solutions.
Boost team morale and confidence.
Excellence on engineering practices.
Dramatically improve client’s trust.
#2
Working
Software
Mindset

45. Outcomes:
Increase client’s engagement.
Amplify Learning & See the Whole.
Improve all communication channels.
Learn from the client, “fast & furious”.
#3
Scrum
On a Lean
Client

46. Outcomes:
Boost on team morale!
Clarity on team capacity!
Development steady pace regained.
#4
Pulling
The Sprint

47. Doug Larson
The trouble with
learning from
experience is that
you never graduate.

48. Power
3
You have to learn the “rules of the game”.

49. Any fool can know.
The point is to
understand.
Albert Einstein

50. Scrum origins.

51. Toyota True Mission
Develop People First
…and only then, Products.
How did they get here?

52. Toyota... Post-World War II

53. Post-World War II... 1949-1950
Low Japanese purchasing power.
Therefore, low sales and production.
Company's financial situation deteriorated.
And, on top of it… massive strikes!

54. Post-World War II... 1949-1950
Toyota Bankruptcy…
Almost 

55. Banks’ bailout conditions
Sales independent from manufacturing.
Elimination of "excess manpower“, aka, layoff:
2,146 workers & managers left!
Founder Kiichiro Toyoda resigned!

56. Toyota... Post-Layoff

57. Toyota Post-Layoff
Almost no managers?
Wait a minute...
No thinkers?
Are you for real?

58. Toyota Post-Layoff
Only workers?
Well no, we will have something different!
All workers must be thinkers!

59. How?

60. What to do?
Frederick Taylor
Scientific
Management
Multi-
specialization
Taiichi Ohno
Just-in-Time
Autonomation
W. E. Deming
PDCA
Systems Thinking

61. The birth of Lean

62. Toyota Production System... Lean
LEAN
TPS
Scientific
Management
Multi-Specialization
Just-in-Time
Autonomation
PDCA
Systems Thinking

63. Toyota breakthroughs

64. Toyota breakthroughs
From Push to Pull production.
From Mass (Ford) to Lean production.
From Workers & Thinkers to Thinkers only!
From a Resources to a Systems Management.
From Disruptive Innovation to Continuous Improvement.

65. Again... Toyota True Mission

66. Toyota True Mission
Develop People First
…and only then, Products.
Did you get it?

67. Now that we know a little better,
do we fully understand it?
“Any fool can know. The point is to understand.” Albert Einstein

68. Lean understanding

69. One Thinker = One PDCA
D
P
C
A
0
1
2
3
T1 T2 T3 T4
Standard 1 Thinker
Standard 1 Thinker
Mechanics

70. Two Thinkers = Two PDCAs
D
P
C
A D
P
C
A
0
1
2
3
0
2
4
6
T1 T2 T3 T4
Standard 1 Thinker Standard 2 Thinkers
Mechanics

71. N Thinkers = N PDCAs
D
P
C
A D
P
C
A D
P
C
A D
P
C
A D
P
C
A D
P
C
A D
P
C
A
0
1
2
3
0
2
4
6
0
7
14
21
T1 T2 T3 T4
Standard 1 Thinker Standard 2 Thinkers Standard N Thinkers
Mechanics

72. N Thinkers = N PDCAs
D
P
C
A
D
P
C
AD
P
C
A
D
P
C
A
D
P
C
A
D
P
C
A D
P
C
AD
P
C
AD
P
C
A D
P
C
AD
P
C
AD
P
C
A D
P
C
A
Organizational View

73. Only top hierarchy are Thinkers and so competent to develop Product
(N-Workers) Thinkers = (N-Workers) PDCAs
Organizational Blockage
D
P
C
AD
P
C
A
D
P
C
A
D
P
C
A
Workers in production line to execute only!

74. Blockages?

75. Embrace the change!

76. Thinkers versus Workers? Organizational blockages?
Toyota’s employees did not fall into this cultural trap!
After all, they all are Thinkers!
And with discipline and resilience from their Culture…
They embraced the change!
Embrace the change

77. PDCA compound effect

78. After 60 years of learning...
...and literally, gazillions of PDCA’s after...
PDCA compound effect
0
1
2
3
0
2
4
6
0
7
14
21
T1 T2 T3 T4
Standard 1 Thinker Standard 2 Thinkers Standard N Thinkers

79. On Toyota:
From bankruptcy to world’s 1st automaker
From 11,706 (1950) to 10,117,274 (2013) vehicles/year
From bankruptcy to world’s 11th company by revenue
From bankruptcy to world’s most profitable automaker
PDCA compound effect

80. In Japan:
From defeat & destruction to a postwar miracle
From bankruptcy to world’s 2nd developed economy
From bankruptcy to world’s 3rd economy by nominal GDP
PDCA compound effect

81. From Lean to Scrum

82. From Lean to Scrum
1986 – ‘The New New Product Development Game’ paper.
Japan’s emergent study on Product Development:
Type C – Overlapping Phases of Development
Also referred as “Moving the Scrum Downfield”.

83. From Lean to Scrum
1993 – First Scrum Experiments (Sutherland, Schwaber).
1995 – ‘Scrum Software Development Process’ paper,
by Sutherland and Schwaber
2001 – Manifesto for Agile Software Development

84. From Lean to Scrum
D
P
C
A
Lean
Plan
Do
Check
Act
Scrum
Planning
Sprint
R2 = Review & Retrospective
Emerge into Backlog
S
P
E
R2
S
P
R
E
R

85. N Thinkers = N PDCAs
D
P
C
A
D
P
C
AD
P
C
A
D
P
C
A
D
P
C
A
D
P
C
A D
P
C
AD
P
C
AD
P
C
A D
P
C
AD
P
C
AD
P
C
A D
P
C
A
Organizational View

86. N Thinkers + X Scrum Teams = N + X PDCAs
D
P
C
AD
P
C
A
D
P
C
A
D
P
C
A
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
Organizational View

87. N Thinkers - X Scrum Teams = N - X PDCAs
Scrum Teams as Workers in production line to execute only blocking Emergence
D
P
C
AD
P
C
A
D
P
C
A
D
P
C
A
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
Organizational Blockage

88. Project Driven Thinkers = 0 PDCAs = 0 Learning
Scrum Teams as Workers in production line to execute projects iteractively.
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
S
P
R
E
R
Design
Plan
Execute
Design
Plan
Execute
Design
Plan
Execute
Design
Plan
Execute
Organizational Blockage

89. Thinking People…
Developing PDCA’s together…
Continuously Improving over time.
The Lesson

90. Does our Lesson fit into Agile Values?
How about Agile?

91. How about Agile?
Customer
Collaboration
Working
Software
Individuals &
Interactions
Responding to
Change
Agile
Values

92. Let’s do a simple exercise:
Map the Agile Values to core Compound Concepts!
How about Agile?

93. Interaction, Iteration & Agile Values
Interaction
Driven
Customer
Collaboration
Individuals &
Interactions
Iteration
Driven
Working
Software
Responding to
Change

94. Thinking People…
Interacting through Iterations…
Delivering Value over time.
The Power

95. Lessons
4
Sometimes we win, sometimes we learn.

96. The only
source of
knowledge is
experience.
Albert Einstein

97. Outcomes:
Shared common goals.
Boost on all communication levels.
From a group of individuals to a Team.
#1
1 Week
Sprints
Lessons:
Leads to false felling of delivering value.
Iteration is nothing without Interaction.

98. Outcomes:
Emergence on solutions.
Boost team morale and confidence.
Excellence on engineering practices.
Dramatically improve client’s trust.
#2
Working
Software
Mindset
Lessons:
Working Software is not always what the
customer values the most 
By delivering frequently we are
compounding value fast.

99. Outcomes:
Increase client’s engagement.
Amplify Learning & See the Whole.
Improve all communication channels.
Learn from the client, “fast & furious”.
#3
Scrum
On a Lean
Client
Lessons:
Customer Collaboration has huge impact
on the compounded value.
It is easy to slow down iteration pace,
hence, a balance must be pursued.

100. Outcomes:
Boost on team morale!
Clarity on team capacity!
Development steady pace regained.
#4
Pulling
The Sprint
Lessons:
Overflow blocks Iteration.
Overflow blocks Interaction.
Overflow blocks everything.
Seeing the flow is amazing!

101. Value
5
Money flows in the direction of Value.

102. Price is what
you pay.
Value is what
you get.
Warren Buffet

103. Money and Value

104. Money and Value
Money ≠ Value
Value can be expressed by:
Business Key Performance Indicators (KPIs)
Customer relationship metrics (NPS, engagement, …)
Other metrics… happiness metric ?

105. Compound Interest & Scrum?

106. Compound Interest and Scrum?
Is there a relationship?
Are we in the business of making money?


107. Compound Knowledge and Scrum?

108. Compound Knowledge
𝑨 = 𝑷 × ( 𝟏 + 𝒓 ) 𝒕
Simplified (n=1)
A = Future Value accumulated after t sprints
P = Present Value (of the product/process)
r = Nominal Improvement rate (%)
t = Number of sprints to compound

109. Compound Knowledge
Does it make sense to you?

110. Going back to Lean and Scrum

111. Going back to Lean & Scrum
D
P
C
A S
P
R
E
R
Lean (PDCA)
Done by Quality Circles
Mindset: Increase Standards
Focus: Continuous Improvement
↑ Cycles ≫↑ Improvement
Scrum (PSR2
E)
Done by Scrum Teams
Mindset: Solve Problems
Focus: Value Delivery
↑ Cycles ≫ ↑ Value

112. Going back to Lean & Scrum
Lean Scrum
Mindset Increase Standards Solve Problems
Focus Continuous Improvement Value Delivery
Teams QC Circles Scrum Teams
Cycle PDCA Sprint (PSE2
E)
Deliverables Improvements Increments

113. Going back to Lean & Scrum
Lean & Scrum are made by Thinkers!
PDCAs and Sprints are both empirical processes!
Learn by doing!
And only by learning a lot…
…your organizational knowledge is increased!

114. Going back to Lean & Scrum
Both Lean & Scrum have deliverables!
And only by delivering your process/product is improved!
You can deliver with an high or low frequency!
You can also deliver high our low value improvements!
This is what we call the Improvement rate (per delivery).

115. Going back to Lean & Scrum
The Improvement rate is, therefore, a function of:
Team’s iteration (learning) cycle, the shorter the better.
Team’s delivery (compounding) cycle, the shorter the better.
Team’s interaction frequency & quality with the customer.
Team’s (compounded) knowledge over time 

116. Compound
interest is the
8th wonder
of the world.
Albert Einstein

117. A Simple Example

118. A Simple Example
Your 2 ecommerce sites’ monthly sales are $30,000/site.
You want to improve it 
You assemble 2 Scrum Teams, 1 per website…
… and gave them a KPI to improve over 40 weeks:
Gross Transaction Value (GTV)

119. A Simple Example
Team A decides:
Iteration cycle = 2 weeks
Delivery cycle = once every iteration
Improvement rate = 5% (assumption)

120. A Simple Example
Team B decides:
Iteration cycle = 1 week
Delivery cycle = once every iteration
Improvement rate = 5% (assumption)

121. 403020100
211,200
30,000
Team Improvement rate Delivery cycle Multiplier
A 5% / deliverable 1 every 2 weeks 2,7x
B 5% / deliverable 1 every 1 week 7,0x
79,599

122. Summing up
Our experiments on the field, highlighted these 2 properties of an Agile
Ecosystem, hence, no matter what you do or how you do it, just:
Iterate & Interact
to unleash…
The Power of I(n)teration

123. Our great references 

124. Our great references 
Hirotaka Takeuchi & Ikujiro Nonaka: https://hbr.org/1986/01/the-new-new-product-development-game
Jeff Sutherland & Ken Schwaber: http://navegapolis.net/files/Scrum_Development_Process.pdf
Kiro Harada: http://www.slideshare.net/kiroh/tps-lean-and-agile-brief-history-and-future
Filipe Correia: http://www.slideshare.net/fcorreia/evolving-software

125. THANK YOU!
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