Re-Read Saturday, Project to Product, Week 6, Chapter 5: Connecting to Business Results

As the previous chapters have highlighted, we can measure the flow items that enter and exit a value stream. There are a number of suitcase words (words that have many ideas packed in them) such as value streams and flow items. Chapter 5 of Project to Product connects flow items and metrics to business results. The integrated view is where the real power of the model is found (but only if you bite the bullet and understand the value streams in the organization).

Kersten identifies four business results:

Value,
Costs,
Quality, and
Happiness.

Value is the mantra of agile. The word is used in an almost magical manner because the term is not well defined nor is it well understood. Regardless, we all know we want to provide value and more value is always better. Part of the issue is the lack of focus on the whole value chain. Determining the value of components of a value often results in using proxy measures followed by local optimization. Each product-facing value stream needs a single unambiguous and measurable definition of value. In a commercial firm, revenue is a straightforward measure of value. A measure of value for a not-for-profit, such as the Community Resource Services (CRS) in my hometown, may be clients served. One resource to help when defining the value of IT is The Business Value of IT. Remember having to revert to proxies is a sign that you do not have a good handle on the value stream you are measuring. All of the definition is for naught if the organization’s accounting approach can not connect the value stream directly to the value stream being measured. This sounds like it would be something every product company (physical or software) would know, however, it is rare. The holistic use of the flow framework requires rethinking the whole organization.

All of the costs of building and delivering a product or service must be measured to understand the relationship between flow and net value. All of the caveats about knowing the value stream and coordinating the accounting systems hold true for the cost discussion. I often find that entrenched account approaches in organizations make this step difficult. Because it is difficult to get anyone excited about rearranging all of the accounts, organizations often develop elaborate workarounds and proxy measurement approaches all under the banner of being pragmatic. The cost and pain of this type of approach lead to abandonment (again under the banner of being pragmatic — did I ever mention that I think the word pragmatic is code for half-assed).

Kertsten points out “2017 State of DevOps Report identified a correlation between quality metrics, such as escaped defects with IT and organizational performance.” I have been involved with measuring quality many times in my career and have found the escaped (or delivered) defects a very useful tool. This metric is much easier to gather and explain if the organization has a value stream or product mindset. Project account whether value, cost, or quality devolves into a competition to claim the revenue, defect the cost and blame the last release for the defects — NOT VALUABLE.

The last business measure, business outcome, is employee happiness. Kersten leverages a Net Promoter approach and measures along the value stream not along departmental lines which often cross-cut value streams. Happy individuals deliver more value (probably at lower cost and higher quality — makes sense, but I have not seen solid repeatable research on the topic).

Linking flow metrics to measures of the business is very powerful. If you have a handle on the impact of flow, it provides teams and leaders with the tools to understand how their behavior impacts things that really matter, unambiguously. We talk about managing with data – value streams and the combination of flow metrics, flow items, and business results delivers an integrated model. Getting there where the rubber hits the road.

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