Chapter 3. Model and Measure Investment Risk
Doubt is not a pleasant condition, but certainty is absurd.
For enterprises experimenting with new business models and products, as for startups, the biggest risk is a failure to create something that actually delivers value to users. The Lean Startup framework allows us to rapidly discard ideas that do not deliver value or will not be adopted sufficiently quickly so we don’t waste our resources on them. However, the principles behind the Lean Startup can be applied to all kinds of activities within the enterprise, such as building internal tools, process improvement, organizational change, systems replacement, and GRC (governance, risk, and compliance) programs.
In this chapter we present the principles and concepts that enable us to take a systematic approach to managing the risk of planned work, by gathering information to reduce uncertainty. This framework forms the basis of a practical approach to exploring new opportunities we present throughout the rest of Part II.
Model Investment Risk
Typically in enterprises we must build a business case along with a plan to support it before we can get approval to proceed. This usually involves a team of people creating a detailed document that estimates the value the proposed initiative will create. The business case describes the required resources, dependencies, and finally a beautifully crafted set of numbers detailing the planned work with costs, key metrics, a resource plan, ...