Definition:
SAFe Principle #1 – Take an economic view highlights the key role of economics in successful solution development. SAFe recommends a dramatically different approach to budgeting, reducing the overhead and costs associated with traditional cost accounting while empowering decentralise decision making.
Lean enterprise moves to ’Lean Budgeting, beyond project cost accounting’ which provides effective financial control over all investments with far less overhead and friction. Lean Budget is a set of practices empowering value streams rather than projects while maintaining financial and fitness-for-use governance.
In Traditional way, cost-center budgeting creates multiple problems where the project budget process is slow and complicated, where it requires many individual cost centre budgets to fund. This leads to fine-grained decisions early in the ‘cone of uncertainty’. Project based constraints are induced which impede adaptability and positive economic outcomes. Traditional cost accounting undermines the goal of faster delivery and better economic outcomes.
Lean Agile enterprise moves from project based, cost-center accounting to a more streamlined, leaner budget process where funding is allocated to long lived value streams. Each value stream budget can be adjusted over time a PI boundaries, based on relative value that each value stream provides to the portfolio.
Further Reading:
Book: Principles of Product Development Flow: Second Generation Lean Product Development
by Don Reinertsen
https://www.scaledagileframework.com/economic-framework/
https://www.scaledagileframework.com/lean-budgets/
