David –

Over a decade ago, when Jeff Sutherland invented Scrum, he was faced with a situation in which his product development process bottleneck was the capacity of skilled developers.  He designed Scrum specifically to exploit the capacity of the bottleneck, to subordinate everything else to ensure maximum throughput through the software development process, and to elevate the capacity of the bottleneck by removing impediments.  As we report in chapter 5 of Implementing Lean Software Development, at PatientKeeper, Jeff requires that all items eligible for inclusion on a sprint backlog be fully defined and ready for implementation with all UI design, data format and other issues fully complete.

A nice summary of the TOC focusing steps is at http://www.goldratt.com/lucas.htm .  You will notice there is also a fifth step, “If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system's constraint.”  Modern agile software development practices may very well take us to the stage where step five directs us to look at whether the bottleneck ahs moved to an earlier or later stage of the concept to cash value stream.  In the majority of organizations we critique value stream maps for we see that the biggest delays and wastes are in the approval / requirements cycles or in the testing / deployment cycles.  If the bottleneck really is software implementation, then, indeed the quality and timely availability of the inputs is critical to maximizing throughput and downstream QA and deployment processes that waste or delay availability of the output of the bottleneck will negatively impact the cash available from the throughput of the process.

Keep in mind, however that TOC, like the Toyota PRODUCTION system are applications of the scientific method to repetitive PRODUCTION environments.  While there may be analogies useful to product development work, the two areas are NOT the same.  When you apply the scientific method to DESIGNING products rather than to manufacturing them, Toyota gets the Toyota Product Development System.  Agile methods are a part of what follows when Lean is applied to software development.

I say part because I concur with Phil Armours notion that software is not like other products as it is essentially executable knowledge.  The creation or discovery of the knowledge to be expressed by the software is the primary determinant of the value generated by the whole value stream.  Lean focuses on maximizing customer value at the least possible cost to maximize sustainable profit to the producing organization.

The test of the validity of the knowledge or theory represented by a piece of software and by the product or business process in which it is embedded is the success in the market or the impact on the cash flow consumed or generated by the business process.  The effectiveness of the development process is the ratio of the cost to the realized benefit.  Each release is an experiment which provides more data that can be used to systematically and deliberately extend the knowledge of the team and the organization. 

- Tom