The Goal-Question-Metric Approach: Setting Metrics for Business Success

Agile transformations have emerged as a beacon of adaptability, helping organizations thrive amidst uncertainty. However, ensuring a successful transformation is a challenging feat. Given the multiple moving parts within the organization, it can be hard to track the true impact of the change and evaluate if it is bringing in the desired impact. Therefore, it is crucial to acknowledge that formulating and measuring the right metrics is vital for a transformation that guides organizations toward their goal. This is what Data-driven Agility aims to do.

Do you still need to become familiar with data-driven agility? Understand the basics of Data-driven Agility and learn how to set the right metrics to measure if you're on track toward your goals. We highly recommend reading through these articles to master using these metrics to your advantage. 

This article highlights the inclusive and co-creative process of formulating metrics, emphasizing the GQM (Goal-Question-Metric) method. We will also address utilizing these metrics to inspect and adapt for better business results.

The GQM Method: A Roadmap to Effective Metrics

At the heart of effective metrics formulation lies the GQM (Goal-Question-Metric) method. This structured approach ensures that metrics are not just arbitrary data points but are aligned with organizational goals. Here's how it works:

1. Define Clear Goals: Set clear goals for your organization. What are you trying to achieve? Define these objectives in a brief and clearly expressed manner. Goals address customer needs or what it takes to run a healthy organization. Moreover, they should relate to your strategy. 
   
   Many organizations tend to overlook the importance of this step. However, that can lead the transformation astray, as without a clearly defined goal serving as a north star, it can be very easy to lose sight of what is important amidst a chaotic transformation process.
2. Ask the Right Questions: Based on your goals, formulate specific questions that will help you assess progress and performance. These questions should be actionable and relevant to your organization.
3. Select Appropriate Metrics: Once you have your questions, identify the metrics that will provide answers to these questions. Ensure that these metrics are measurable and aligned with your goals. Effective metrics fall into the categories of Customer/Business-focused Metrics, Health Metrics, or Improvement Metrics (Read more here). Note that alignment with your goal is key here. If you offer a companion app to help your users start using your product, then a 6-month retention rate might not be the most relevant metric to measure.
4. Implement and Monitor: With your metrics in place, implement them within your agile processes. Continuously monitor and analyze the data to gain insights and drive improvements.

An Example of GQM Method: Increase Market Share

Problem and Corresponding Goal: 

We need to improve our market share considerably. Our slow pace in delivery features has led many of our customers to switch to a competitor, leading to a decline in our market share.

Therefore, our goal is to increase our market share.

• Question 1: How is our market share developing/declining?
  Reasoning: With this metric, we can fully comprehend how “bad” the situation actually is and whether it is improving by our corrective actions.
  Metric 1: Market Share Trend – What is the percentage of the market, measured in terms of either units or revenue, that is captured by us now? It is crucial to measure this trend over time - how are we performing on a month-on-month (MoM) or quarterly trend or yearly trend (QoQ or YoY).
• Question 2: What is the pace of feature delivery for our customers?
  Reasoning: Since our sluggish pace is the primary reason we are losing market share, we need to understand what the current level of performance is to track improvement or degradation in our performance and how it compares to our customers’ needs. 
  Metric 2a: Release Frequency – Measure how often our organization successfully releases to the market.
  Metric 2b: Lead Time – Measure the time it takes to deliver committed features to the customer. 
• Question 3: How fast does the organization resolve impediments?
  Reasoning: We seem slow in removing obstacles that prevent our teams from accelerating. Therefore, we start measuring our impediment resolution capability. We assume it will make our slow decision-making painfully transparent.
  Metric 3: Impediment Resolution Time - Measure the average and longest time it takes for an impediment to be resolved.
• Question 4: To what extent do we fulfill our customers' expectations?
  Reasoning: Our ratings are decreasing, and sentiment analysis of our reviews shows the users are missing some functionalities that competitors do offer. This leads to potential customers not buying our product and hence losing the market share of the competitors.
  Metric 4: Rating and Reviews – What is our users' experience regarding our product and services? (could be the rating on your e-commerce platform or a retailer or derived based on an unbiased customer survey)

You could consider adding additional questions. We have chosen to prioritize readability by avoiding an excessive number of questions in this article.

In this example:

• The Goal is to increase market share.
• The Questions are derived from the goal. Additionally, they define the goal as completely as possible, lending it plausibility and the transformation a starting point.
• The Metrics are defined to be able to answer those questions. Using the GQM method, the organization establishes a clear connection between its goal, specific questions, and relevant metrics. This ensures that the chosen metrics align with the organization's objective of decreasing time-to-market. 

What's Next?

We now have defined valuable metrics that allow you to reach your goals. Regular inspection of those metrics will facilitate the conversation around potential improvements. You can use events like Lean Daily Management, Obeya Performance Review, or Quarterly Business Review meetings.

When running your business, metrics are more than just data. They serve as tools that guide your organization to success. By adopting the GQM method to define metrics, linking them to your goals, and inspecting and adapting periodically, you can ensure that your metrics remain relevant and effective for your organization.

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