Probabilistic Forecasting - Effects Of Uncertainty On Predictions(aka Controlling Variability)

The variability in Monte Carlo predictions or the range of predictions is a direct result of the variability in the team's daily throughput. A team with a very consistent throughput will produce a "tighter" Monte Carlo result set. The results of simulations for teams that have a regular daily throughput will not change by much at different confidence levels. The results of simulations for teams that have fluctuating daily throughput will have more pronounced changes as we change confidence levels. Lets take the following two hypothetical teams as examples.

Both teams in this case have closed 30 stories over the course of 30 days.

Team A finishes one story almost every day, with a few days where they finish 2 stories. Their historical throughput graph looks like this - 

Here the horizontal axis is a timeline and the vertical axis is the number of stories done on that day. When we run Monte Carlo simulations (10,000 simulations) for this team the following results appear -

The percentage lines on the above graph are levels of confidence that help us interpret the graph. Based on the above results, Team A has a 95% chance of getting at least 24 stories done, 70% chance of 28 or more, and a 50% chance of getting 30 or more stories done over the next 30 days.

Now let us consider Team B, which has a more variable daily closure rate. The team tends to have some days when they close a bunch of stories and other days when they do not close any at all. Their throughput graph looks like this - 

Just like Team A, Team B also competed 30 items over the same time period.

Examining the results from Monte Carlo, we can see that there are many more possibilities and the numbers on the conservative end of the spectrum are much lower. Team B has a 95% chance of getting at least 16 stories done, 70% chance of 21 or more, and a 50% chance of getting 30 or more stories done over the next 30 days.

We can see that in both data sets, the middle value is 30 stories, but values that give the same amount of confidence on the higher side are much lower for the team with higher variability in throughput. We can conclude from this that in order to make predictions with high confidence, that still help us deliver the best results from our teams, we need to control the variability in our throughput. The question though is - How can team create systems that have lower variability so that we can make predictions with higher confidence?