Traditional budgeting is driven by past operational expenses, or what funding is needed to accomplish pre-determined plans that have a cost determined from bottom up estimation. All of the costs are tallied, and the value of each of the proposed costs are compared in some way, and then based on what is available in the overall budget, the sub budgets are allocated.
Agile budgeting turns traditional budgeting upside down. In the agile corporation, the focus is on expected ROI and a budget allocation is made available to areas as they align to the organizational objectives, and the strategic planning and the budget is made available in prioritized order of the expected return. Of course, the budget is kept available for necessary expenditures such as keeping the lights on, but outside of that, the budget is initially allocated based on how the funding can boost the bottom line of the organization. In practice, it is common that the actual needs of the areas are not exactly aligned to the budget allocation, and some level of redistribution occurs.
Capitol Expenditure, CapEx
Operational Expenditure, OpEx
AASF™ Requirements Planning
Agilest AASO™ - Adaptive-Agile™ Strategy Officer