Sunday, December 18, 2005

Estimation versus Analysis

I’ve noticed some confusion over the difference between estimation and analysis. When I’ve suggested stop estimating and focus on analysis some people have struggled to understand the difference. Again when I suggested all estimates are muda,  but continued to encouraged the use of analysis, some people struggled to understand the difference. So I decided to look up the dictionary meaning for clarification.

Verbs first…

to estimate - to calculate approximately (the amount, extent, magnitude, position, or value of something) [Look it up]
to analyze - to examine methodically by separating into parts and studying their interrelations [Look it up]

Now for the nouns,...

estimate - a tentative evaluation or rough calculation, as of worth, quantity, or size; a statement of the approximate cost of work to be done, such as a building project or car repairs [Look it up]
analysis - the separation of an intellectual or material whole into its constituent parts for individual study; the study of such constituent parts and their interrelationships in making up a whole. [Look it up]

It is clear that estimation is about quantification of cost while analysis is about the decomposition and integration of a set of parts. Analysis adds value by creating knowledge about what components we need to create and how they integrate together to synthesize a whole solution. Estimation merely quantifies the cost. I believe that in our industry people are lousy at estimating. And that this may indeed be true of all knowledge work. Estimating knowledge work is hard. It’s even harder without proper analysis. However, reliable and repeatable analysis techniques that, though they exhibit variation and are seldom used perfectly, significantly contribute to our understanding and planning of software development and project delivery, do exist, and should be used. Analysis reduces variation and makes plans more accurate. Estimation does neither of these things. Agile estimating on the other hand uses historical productivity data and uses the output of analysis to provide a reliable estimate with a buffer for variation. The result is a plan that is more accurate with time spent on value adding, knowledge creating, decomposition and integration rather than inaccurate, non-value added cost quantification.