Decision making in the presence of uncertainty is a normal business function as well as a normal technical development process. The world is full of uncertainty.
Those seeking certainty will be woefully disappointed. Those conjecturing that decisions can't be made in the presence of uncertainty are woefully misinformed.
Along with all this woefulness is the boneheaded notion that estimating is guessing, and that decisions can actually be made in the presence of uncertainty in the absence of estimating.
Here's why. When we are faced with a decision, a choice between multiple decisions, a choice between multiple outcomes, each is probabilistic. If it were not - that is we have 100% visibility into the consequences of our decision, the cost involved in making that decision, the cost impact or benefit impact from that decision - it's no longer a decision. It's a choice to pick between several options based on something other than time, money, or benefit.
We're at the farmers market every Saturday morning. Apples are in season. Honey Crisp are my favorite. Local growers all know each other and price their apples pretty much the same. What they don't sell on Saturday, they take to private grocers. What doesn't go there, goes to the chains and labeled Locally Grown. Each step in the supply chain has a mark up, so buying at the Farmers Market is the lowest price. So deciding which apples to buy is usually an impulse for me and my wife. The cost is the same, the benefit is the same, it's just an impulse.
Let's look at the broad issue here - not about apples, from Valuation of Software Initiatives Under Uncertainty, Hakan Erdogmus, John Favaro, and Michael Halling, (Erdogmus is well known for his work in Real Options).
Buying an ERP system, or funding the development of a new product, or funding the consolidation of the data center in another city is a much different choice process than picking apples. These decisions have uncertainty. Uncertainty of the cost. Uncertainty of the benefits, revenue, savings, increasing in reliability and maintainability. Uncertainty in almost every variable.
Managing in the presence of uncertainty and the resulting risk, is called business management. It's also called how adults manage projects (Tim Lister)
So with the uncertainty conditions established for our project work, how can we make decisions in the presence of the uncertainties of cost, schedule, resource utilization, delivered capabilities, and all the other attributes and all the ...ilities of the inputs and outcomes of our work?
The Presence of Uncertainty is one of most Significant Characteristics of Project Work
Managing in the presence of uncertainty is unavoidable. Ignoring this uncertainty is also unavoidable. It's still there even if you ignore it.
Uncertainty comes in many forms
- Statistical uncertainty - Aleatory uncertainty, only margin can address this uncertainty.
- Subjective judgement - bias, anchoring, and adjustment.
- Systematic error - lack of understanding of the reference model.
- Incomplete knowledge - Epistemic Uncertainty, this lack of knowledge can be improved with effort.
- Temporal variation - instability in the observed and measured system.
- Inherent stochasticity - instability between and within collaborative system elements
Agile is an Approach to Dealing With Software Project Uncertainty
Going on 12 years ago the topic of managing in the presence of uncertainty was an important topic that spawned approaches to ERP using agile. This work has progressed to more formal principles and practices around software development in the presence of uncertainty and the acquisition of software products.
Picking one Honey Crisp basket over another, not much at risk, low cost, low probability of disappointment. Planning, funding, managing, deploying, operating an ERP system, not likley done in the absence of estimating all variables up front, every time we produce the next increment, every time we have new information, every time we need to make a decision.
