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June 20, 2023

Flow in a Service Organization

By Ivan Krnic

This article is excerpted from the paper “Managing the Flow of Value in Service Organizations,” which appears in the Spring 2023 DevOps Enterprise Journal. It is authored by Ivan Krnic, Director of Engineering at CROZ.

Flow is essential in all organizations but especially so in service organizations. While teams in product organizations share the common context of the product that the organization is building, it is normal for large service organizations to have many unrelated projects for different clients that are not connected in any way but are all started at the same time. As opposed to product organizations, which control all of their processes and decisions, service organizations work with their clients, and it’s usually those clients that call the shots in the end.

Because of their narrow focus on product and complete control over the road map, product organizations experience less variability in their work pipeline, enabling them to achieve better results in improving work processes and making good technical practices repeatable. On the other hand, service organizations work on many more projects, so they experience a lot more variability in their work pipeline and struggle to standardize and improve work processes. And this is a massive impediment to fast flow!

Product organizations generate income by selling their product. This usually involves some kind of passive income stream based on subscription-based or maintenance models. Service organizations, on the other hand, don’t have these passive income streams. They must continuously sell and deliver their services to maintain a steady income stream. Undoubtedly, a healthy flow of value is essential for all organizations. Still, by virtue of their business model, the performance of service organizations is more susceptible to disturbances in the flow. Therefore, service organizations should invest extra effort in keeping the flow healthy.

Maintaining a healthy flow of value in a service organization is more complex than in a product organization because it depends not only on internal organization but also on client organizations. Client organizations can stop ongoing initiatives or create entirely new ones. Therefore, service organizations need to closely monitor the flow of value and promptly remove impediments that could disturb it. The opportunity pipeline shouldn’t be empty, but it also shouldn’t be completely full, providing the organization enough slack to help its clients when they need it and sharpen its skills for the future. Balancing between those two states is an art that happens on several levels in the organization and requires constant fine-tuning.

Klaus Leopold best describes these levels as flight levels. He argues that work coordination happens at three levels in the organization.

Flight Level 1: Operational

The lowest and the most operational one is Flight Level 1. This is the level at which a single team organizes its work. In organizations that don’t implement Flight Level 1, teams don’t use formal coordination and rely simply on ad-hoc planning. On the other hand, in organizations that implement Flight Level 1, teams use some standardized approach to organize and coordinate their activities, typically Kanban or Scrum.

With Flight Level 1 implemented, although the work inside the team is coordinated, the inflow of work to the team is not coordinated. It arrives via the push principle from many directions. This means that the team usually has more on its plate than it can handle. For immature organizations relying on ad-hoc team planning, implementing Flight Level 1 will yield some improvements. Work coordination in the team and improved visibility that comes with Kanban and Scrum will improve team efficiency. However, since the inflow of work to the team is not coordinated, there is a risk that the team will be working on the wrong things. Also, since the work is coming from different directions, there will be many expedited requests and much reprioritization.

Flight Level 2: Coordination

The next level of work coordination is Flight Level 2, which deals with coordinating multiple teams to get the work done. Without Flight Level 2 coordination, each team is an independent well-oiled machine that is very efficient in producing its outputs, but rarely do these outputs align and come together to form a complete solution.

When Flight Level 2 coordination is implemented, all teams have a central and prioritized backlog. Having a central backlog means that teams can pull work when they have available capacity and having a prioritized backlog means that teams work on the right things at the right time. All of that results in fewer expedited requests and reprioritization. If we have a large project implemented by multiple teams, Flight Level 2 is where the coordination between those teams is happening. We can also say that Flight Level 2 coordinates the work on the value stream level. It optimizes the interaction between teams to deliver value most efficiently by ensuring that the right things get done across teams at the right time and in the proper order.

Flight Level 2 coordination ensures that the project or product increment gets done, but the organization is more than just one project. This is particularly true for service organizations that implement many projects for many customers. The success of a service organization rarely depends on a single project. Rather, it results from a complex interplay of business goals, strategy, consulting skills, client organizations, partnerships, technical capabilities, hiring, and retention. Focusing on single projects will undoubtedly help those projects end successfully. Still, in the grand scheme of things, it can harm the organization if we’re not carefully balancing the above mentioned factors. That’s where Flight Level 3 jumps in.

Flight Level 3: Strategy

At Flight Level 3, an organization coordinates the portfolio of projects. It considers multiple projects at multiple customers to support organizational strategy in achieving business goals. Without Flight Level 3 coordination, an organization could work on projects that contribute the least to its organizational strategy.

With Flight Level 3 coordination implemented, an organization makes informed decisions on which projects to commit to and allocates people and resources to those projects to maximize the chances of achieving its business goals. Again, if the organization’s capacity was consistently larger than the demand, we might not need Flight Level 3 coordination at all. We would always implement everything, there would be no conflict over people and resources, and all projects would end successfully. However, that rarely happens, and coordination of people and resources is needed across all projects and customers to achieve the business goals.

To read more about managing the flow of value in a service organization, follow this link to download the Spring 2023 DevOps Enterprise Journal.

- About The Authors
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Ivan Krnic

I am Director of Engineering at CROZ, curator of 0800-DEVOPS newsletter, podcast host and O'Reilly author contributing to "97 Things Every Cloud Engineer Should Know". My main focus is on creating the best possible conditions for teams to move forward. Apart from supporting people and teams, this also means supporting R&D activities, optimizing the development process, leading development community and supporting presales activities. Passionate about tech novelties, I'm always in close contact with the trenches. My special areas of interest cover DevOps culture, sociotechnical nature of software delivery and cloud native architectures. Particularly interested in leadership and organizational change, I'm helping organizations align business and tech, focus their efforts, and essentially work smarter, not harder. Being an agile enthusiast, I'm an active member of the agile community periodically holding courses and giving talks on various agile and DevOps topics, most notably at the DevOps Enterprise Summit conference.

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