There are several reasons why organizations may embark on an agile transformation. Perhaps they want to improve their responsiveness to new technologies and customer tastes. Or maybe they are looking to enhance their interdepartmental collaboration. Or maybe even optimize resource allocation. There are several reasons to embark on an agile transformation.
Regardless of the reason, once this journey begins, how can you assess if these new working methods impact business outcomes in the way we intend? When initiating an agile transformation that alters the organization, it becomes essential to understand the effects of these changes on results. Are they enhancing the organization's performance and delivering the desired value? This is the essence of Data-driven Agility.
In this article, we will introduce three categories of metrics that offer insight into how your transformation influences your business. These metrics can be grouped into three distinct categories:
- Customer/Business-focused metrics: Do our products and services meet the demands of both our customers and the business? These metrics center on outcomes and are often referred to as lagging indicators.
- Health metrics: These metrics are monitoring metrics that predict favorable or unfavorable future outcomes. They are also known as leading indicators.
- Improvement metrics: These metrics concentrate on gauging the effects of initiated improvements. They have a target value to achieve over time. Once the target goal is reached, the metric can be either discontinued or converted into a health metric.
These are discussed in more detail under Deep-dive into Metric Categories.
Please Note: During an agile transformation, we also assess the extent to which new competencies and capabilities have been integrated into the organization. Nevertheless, the ultimate focus remains on business drivers and achievements. Consequently, this article does not delve into those transformation metrics. Examples include "Do all Scrum teams have a Product Owner?" and "Is customer feedback collected during the sprint review?"
What to Measure?
Let's explore what metrics need measurement. Measuring success is only meaningful when there is clarity on what success looks like. Hence, having a clear vision of your business goals is the first and arguably crucial step in ensuring success. The alignment of business goals and these metrics is imperative to fully capitalize on Data-driven agility.
For instance, in a highly competitive landscape where customers demand innovative products, it's logical to establish a set of innovation-related metrics. For instance, is the new product successfully penetrating the market (customer/business-focused metric)? Is 20% of our backlogs related to innovation (health metric), or is it more dedicated to iterative optimizations?
Business goals define your success. Metrics serve as indicators of whether you're achieving success (customer/business-focused metrics), progressing towards it (health metrics), or accomplishing targeted improvements (improvement metrics).
Are we on track with our transformation?
First thing first, we need to define the appropriate set of metrics. This set can be deduced by posing questions relevant to your business goals. This methodology is known as the Goal-Question-Metric method (GQM).
For example, suppose your goal is to shorten time-to-market. In that case, relevant questions might include "What time do customers expect from us based on competitors?" or "What is currently preventing us from delivering products on time?" Subsequently, you can now define metrics that provide answers to these questions. For instance:
- The question: "What time do customers expect from us based on competitors?”
The metric that answers the question: Average time from committed customer request to delivered customer request, measured in days or the time a customer waits for his bid to be delivered. It’s also good to note that this metric is related to a common transformation goal - “improve customer satisfaction.”
- The question: “What is currently preventing us from delivering products on time?" The metric that answers the question: All issues identified during a value stream mapping session, particularly disruptive ones leading to process improvements and corresponding improvement metrics.
An upcoming article will cover detailed guidelines for formulating an appropriate metric set.
Deep-dive into Metric Categories
We will now delve into the metrics categories and provide detailed examples for each.
Customer/Business-focused metrics measure elements that attract customers to your services or products. What differentiates your offerings from others, prompting customers to choose you over alternatives?
For instance, if customer demand is dropping, one of your first concerns would be digging deep into what aspects are lacking in the service they receive. Measuring the criteria customers use when selecting your service or product is crucial. Almost no customer wants extended waiting periods for request fulfillment. Therefore, measuring Lead Time becomes pivotal as it gauges how quickly a company can introduce a new product to the market. A shorter time-to-market reflects the efficiency with which the organization can respond to shifting customer needs and preferences. The customer type and corresponding metrics hinge on your initial transformation goals, often leading to a handful of metrics in this category.
Health metrics serve as monitoring indicators. They operate within a defined range, and constant observation is needed to maintain them. One example is the Cost of Delivery. An excessive value outside the acceptable range warns that the business may not be healthy, while an extremely low value is realistic and crucial for a robust business. Health metrics function as guardrails - they ensure that improvements made to business-focused metrics uphold health metrics within the desired parameters and, consequently, maintain a healthy organization.
The specific health metrics of an organization depend on several factors. However, typical examples of health metrics include (Code) Quality, Customer Satisfaction, and Employee Engagement.
Improvement metrics are the final category within the Data-driven Agility framework. As the name suggests, the focus on measuring aims to enhance the metrics in the first and second categories. These temporary metrics are introduced solely for advancing a specific health metric and can be discarded once their goal has been achieved. Alternatively, an improvement metric might evolve into a health metric upon fulfilling its intended purpose. Improvement metrics are tied to at least one business-focused metric. This implies that achieving the goal of an improvement metric is anticipated to positively impact the corresponding business-focused metric. An example of an improvement metric can be the retention of talented employees to remain a healthy business in the coming years with increasing competition.
Other factors in determining the right metrics:
Beyond the primary metrics highlighted above, several other factors should be considered when identifying relevant organizational metrics. These factors hinge on transformation goals, the nature of the business, as well as external and internal circumstances. By considering these factors, organizations can attain a more comprehensive grasp of their agility and pinpoint areas necessitating improvement.
Xebia can guide you in identifying the most relevant metrics to concentrate on. Furthermore, Xebia can assist in leveraging these metrics to determine which business areas need improvement and orchestrate intervention to guarantee future growth.
Formulating meaningful metrics requires a holistic approach that accounts for various factors. By systematically tracking these metrics over time, organizations can glean valuable insights into how the transformation contributes to their business triumphs, the ability to respond to changing market dynamics, and the ability to make essential adjustments to outperform the competition. Ultimately, the objective is to forge a thriving organization capable of excelling in a perpetually changing business landscape.