Application of the Iron Triangle in Different Disciplines
In various disciplines, success is measured and determined by the aggregate performance of the portfolio components. Therefore, the key stakeholders must be vigilant to ensure these components are optimized for success. The Iron Triangle is commonly used as a heuristic tool to show the relationship between these components. In this article, we examine the use of “iron triangle” to illustrate the relationship between success factors in different disciplines.
The Iron Triangle in Management of Software Development Projects
Software development specialist, use the iron triangle metaphor to illustrate the factors that should be managed well to determine the success of a project. These factors include time, cost and quality. (https://www.linkedin.com/pulse/iron-triangle-challenge-time-price-quality-pick-2-kevin-harris-faia/)Therefore, irrespective of the scope of work the, software developers must optimize these three variables to deliver the project. In software development, the scope of work refers to required elements to satisfy the desired outcome.
Any changes on one of the elements will have an impact on the other variables. Essentially, as a software developer, you need to understand your scope of work first. Then you should analyze these variables before embarking on your Software development journey. Here is an illustration of how these relate to each other.
In software development, the project starts with designing the solution. In between the start and end, there are various tasks that should be completed. Therefore, the project lead manager must come up with a schedule for each of the tasks.
These tasks should have clear deadlines within which they must be delivered. The effectiveness of the project is dependent on how the team adheres to these deadlines. For instance, the design can be said to be two weeks and the coding can be developed for one month.
Overall, the whole project should have a definite expected time of delivery. Therefore, on the task list, the timeline of each of the tasks should be illustrated.
2. The Software Development Project Budget
How much are you paying the coders? What equipment do you require to deliver the project and how much does each cost? The overall cost should be drawn up and the project funded to ensure smooth operation.
3. The Quality of Deliverables
There are various factors that determine the quality of software developed. To begin with, we have the experience level of the coders, we have the quality of the coding software to be used, and we also have the supplies used for the project.
As a project manager in charge of the software development project, it is important to make sure you balance properly between these elements. The Iron triangle should be used to interlink these variables to ensure the success of the project. A change in any of the elements will ultimately affect the others.
Example: If you are facing a budget constraint, you might have to extend the period required to complete the project. Or, you might be required to reduce the scope of the project affecting the quality of the deliverable.
Application of the Iron Triangle in Countries Economics
Economists Robert Mundell and Marcus Fleming take credit of the Trilemma Policy. This basically expresses the use of Iron Triangle concept as a heuristic tool in a countries economic policy. According to Mundell and Fleming, a country cannot achieve free flow of capital, fixed exchange rate and independent monetary policy simultaneously.
The Trilemma model breaks the options that a country has into three. These three options form the three sides of the Iron Triangle or what is referred to as the impossible trinity. The three options are:
Side A of the Trilemma Policy in Economics: Fixed Exchange Rate and Free Flow of Capital.
If a country adapts a fixed exchange rate and a free flow of capital, then automatically the country cannot have independent monetary policy.
Example: For over three decades, Hong Kong has had a fixed exchange rate against the US Dollar. This decision was arrived at after years of depreciation in the value of the country’s currency.
Side B of the Trilemma Policy in Economics: Free Flow of Capital and Independent Monetary Policy. A country that has Free Flow of Capital and an Independent Monetary Policy will not have fixed exchange rate.
Example: the United States is a good example of a country that has an independent Monetary Policy. The Federal Reserve Bank is in charge of the monetary policy.
Side C of the Trilemma Policy in Economics: The other side of the triangle and an alternative for countries is to allow fixed exchange rates and an independent monetary policy.
A country that has implemented an Independent Monetary Policy and Fixed Exchange Rate cannot have a free flow of capital.
Example: China economy is based on an independent Monetary Policy. The management and monitoring of money is done by the Peoples Bank of China. This is also supported by formal strategic guidance from the Government.
The Iron Triangle in Everyday Life Situations
When you want to implement anything in life, the first thing to determine is what you want to achieve. Therefore, you begin by setting the goals first. Then, we look at the easiest way to achieve the goals that we have set. Lastly, another major component of the decision-making process is the cost element. How much will it cost to achieve the goal in the fastest way possible? This is a common question that individuals tend to examine.
These three components or what we might call the elements of success are what determines our choices. Here is an illustration of all what this is about.
1. Side A of the Life Iron Triangle: Choice between Good and Bad in Life
In life, we are faced with different alternatives. To determine which one to choose, we classify them into good and bad goals. In order to do this effectively, we have determined criteria for determining what is good and what is bad. This is where the SMART heuristic tool applies in helping us make a choice. Further, we have the personal principles, or what we collectively hold as the society. The good is what pleases us and not questioned by those around us.
2. Side B of the Life Iron Triangle: How fast it takes to achieve the Goals
Time is another factor when making choices. A faster approach might affect the other elements which are quality and cost. Of all the available alternatives, then choose the one that will lead us where we want to get to and within the budget.
Further, it is important to be guided by personal principles and what is viewed as the best route by the society around us.
3. Side C of the Life Iron Triangle: The Cheapest Option to arrive at the Goal
Here is where we determine the total cost we have to pay to achieve the goal. How affordable is the approach? At the same time, we have to ensure the quality of what we achieve is within the definition of a good goal and in line with the desired time frame for achieving the goal. So how do these three affect our choices?
We have an old proverb which says that choices have consequences. The same applies even when applied in the real-life situations. If you want something done in the fastest approach and in high standard, you might have to overlook the cost. This is because you have to pay more for the high-quality deliverable.
Secondly, if you want delivery to be high quality and at the lowest cost, then you need to forego the time taken as it is likely to be longer than anticipated.
Lastly, if you make a cheap choice and fast as possible, quality is not guaranteed. Basically, you need to trade off the choices you make to make sure you have the best.
The Iron Triangle of Investments
Another area where the Iron Triangle theory holds is in investments. When an investor wants to determine a private investment opportunity, they can follow the iron triangle of investments. The investments iron triangle has three elements.
These include Liquidity, the Returns, and Safety. Let us assume that you want to invest in bonds, real estate, or stocks. Using the Iron Triangle to make a decision, you will classify these investments into different classes using the elements as a guide.
1. First Choice: High Liquidity, High Returns, and High Risk
The first side of the investment iron triangle presents you with a possibility to invest where you will get high returns, high liquidity, and higher risk. Then if you have an appetite for such investment you can settle on buying stocks.
2. Second Choice: High Liquidity, Low Returns, and Low Risk,
On the second side of the triangle, we have investments with high liquidity, low risk, and low returns. A good example is the bonds. These are bought mostly by individuals with low-risk appetite and looking for high liquidity and who are okay with low returns.
3 . Third Choice: Low Liquidity, High Returns, Low Risk
Lastly, we have those looking to invest and get high returns but at low liquidity and have a low-risk appetite. The real estate industry comprises of these individuals.
Essentially, these three factors are what investors should look at when deciding on the investment to make.
Generally, the application of Iron Triangle illustrates that of all the choices we have; it is all about striking a balance. In project management, you have to balance between the three elements. For the economists, you can only make choices depending on the limiting factors. In life, what you want has to be well balanced to satisfy everyday needs. Lastly, in investments, it is all about liquidity, risk appetite, and the returns.