Agile business planning: Agile fundamentals for annual planning cycles

Businesses are becoming more digital, and new technologies are reshaping functions, processes and activities. Many organizations are developing their own custom software, which opens further digitization opportunities. These factors are leading organizations to shift to agile practices and agile planning.

Agile planning is an iterative approach to project management that emphasizes frequent value delivery, constant user feedback, cross-functional collaboration and continuous improvement. Rather than working within a predefined scale and scope, agile planning embraces agile principles. These principles enable team members to pivot in real time, enhancing an organization’s business agility.

Agile methodology represents a fundamentally different approach to working and planning. When agile work must be planned alongside traditional waterfall-style projects, it creates challenges. As agile programs begin to reflect larger areas of work and investment, it is important that all business planners proactively understand the key differences between agile practices and anticipate how best to incorporate them into the business plan.

There are common elements to all agile work and planning. Understanding these elements enables organizations to successfully account for agile programs within traditional annual planning cycles and even embrace elements of agile methodology to make traditional planning processes more responsive.

The three elements of agile planning are:

• Timeboxed
• Iterative
• Responsive

While agile principlesexpound on how to fully prioritize business agility, keeping these essential ideas in mind can help an organization implement agile business planning effectively.

It is important to remember how significant timeboxes are when incorporating agile practices. While there are numerous methodologies and frameworks for agile practices at both the team and enterprise levels, they all emphasize distinct, iterative blocks of time.

Team-level agile methodologies use sprints or increments that are typically two to four weeks long. Enterprise agile frameworks often emphasize programs, made up of a set number of increments, which typically reflect a calendar quarter. Agile product and program teams, as well as portfolio managers who manage agile-heavy portfolios, proactively plan everything according to these timeboxes.

Business planners should anticipate the need to balance various traditional projects that have their own specific timelines with agile projects and programs in neat, fixed length timeboxes.

The strict adherence to timeboxes is highly beneficial for all levels of planning because agile practice is also iterative. Each timebox leverages the same structure and approach to plan the sprint or iteration, deliver the outcome, and conduct retrospectives to review the sprint and capture lessons learned. This iterative nature enables teams to continually improve the accuracy of future work planning.

For business planners, this means that they can place a higher degree of confidence in planning and forecasts associated with agile programs, especially those leveraging established teams. At the strategic level, this can mean that there is less risk associated with objectives publicized in an annual business plan that is delivered through agile programs.

Business planners can also make their established planning cycles more iterative by performing lightweight reviews and updating strategic plans on a quarterly or even monthly basis.

The timeboxed, iterative nature of the work is what grants these practices their namesake agility. If the need arises, agile work can be paused, and the following sprint and remainder of the program can be replanned to align with an updated strategy. Agile teams can react quickly to change and are often accustomed to doing so.

This is key for business planners to acknowledge. Agile programs can be adjusted midflight, and this flexibility helps business planners respond to shifts in macroeconomic trends or unprecedented events such as the COVID-19 pandemic. One way that organizations can reduce portfolio risk is by expanding the segment of agile programs in the portfolio and reducing traditional projects, which are inherently less responsive.

Overarching business plans, including both agile programs and traditional projects, can also be made more responsive by adopting iterative replanning on quarterly or even monthly timeboxes. As organizations adopt more iterative planning cycles and refine their agile approach, they can even facilitate triggered planning updates at any time in response to market changes.

Traditional planning methods often focus on a long-term plan. In a traditional business plan, milestones and roadmaps are defined at the beginning of the process, with the aspiration that a well-articulated business plan can account for all the whims of the market, as well as necessary changes in the process of creation. In life and in business, things rarely go exactly to plan.

Agile business planning is designed to account for a rapidly changing business environment. It enables enterprises to prioritize values streams and comprehensive business strategy over other measures, such as static metrics. The agile mindset also allows an organization to put greater focus on customer needs with any new product or service by incorporating retrospectives and feedback sessions with stakeholders. This approach can help reduce the amount of time that is wasted on strategies or plans that aren’t working and help teams create more focused products or services.

Agile planning works by embracing the agile mindset and agile principles. Instead of following a fixed long-term plan, projects are broken up into sprints that enable frequent adjustments. After the end of each sprint, there’s an opportunity for stakeholders to hold a retrospective where work from the sprint is reviewed. Lessons learned are noted, and adjustments are made for future sprints. Any work that is not completed during a sprint is added to the backlog and assigned for completion during the next sprint.

Agile planning often incorporates popular agile frameworks and methodologies such as Scrum and Kanban. Scrum is a popular agile framework often used for software development that enables teams to take full accountability for decision-making during the development of a product or service.

In scrum, large teams are broken down into smaller units, led by a scrum master. The scrum master answers to the product owner, who also acts as the point of contact between each scrum team. These small teams are encouraged to take ownership of their assigned tasks during each sprint, enabling adaptability and creative solutions without the need to stop and wait for feedback from other stakeholders.

Kanban is a visual project and workflow management methodology that uses a Kanban board with cards and columns to better understand project progression and responsibility. Kanban boards help teams keep track of where a project stands and who is responsible for moving the project to the next stage. Kanban is used to limit work in progress, identify and resolve bottlenecks and continuously improve project flow.  

Agile practices still account for costs both through forecasting and capturing of actuals. But due to the time-boxed, iterative and responsive nature of the work, both when and how costs are estimated and actualized are different. Instead of budgeting by initiatives, agile budgeting focuses on funding value streams or products for a specific time frame. In addition, costs are actualized by effort completed or work performed per team.

An important consideration for business planners is that much of the financial management and cost optimization focus within agile practices today focuses heavily on labor costs. However, as businesses continue scaling agile practices, they are realizing the significant impact agile delivery can have on product total cost of ownership (TCO), overall business expenditure and revenue.

A new feature can impact revenue and subscriptions, consumption of cloud services, support and contract fees, unit costs, required capital asset expenditures and long-term operational costs. This is one area where business planners might need to anticipate taking steps to collaborate with agile planning teams and emphasize the need to adopt a more holistic view of financials into the planning cycle.

Accounting for growing segments of agile work and practices throughout the business in annual planning cycles is crucial for today’s leaders. While nontechnology businesses or even large technology departments within a business might not ever be fully agile, business planners should anticipate how agile programs fit into strategic plans as well as the opportunities (reduced risk) and considerations (holistic financials need to be prioritized) they merit.

Enterprise Agile Planning (EAP) tools can make this process easier. Leading tools offer various solutions that help business planners define strategy and objectives, confirm that work at all levels of the business is linked to those objectives, and adopt agile principles to other areas of planning, such as resource management.