measurement in a continuous world - jim highsmith

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Measurement in a Continuous World: How the modern organization takes it's own pulse Jim Highsmith Executive Consultant

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Page 1: Measurement in a Continuous World - Jim Highsmith

Measurement in a Continuous World: How the modern organization takes it's

own pulse

Jim Highsmith Executive Consultant

Page 2: Measurement in a Continuous World - Jim Highsmith

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1 2 3 4 5

Iterations

Stories Planned

RevisedCompleted

Velocity is Killing Agility! 2

Page 3: Measurement in a Continuous World - Jim Highsmith

A Measure of Success

Cutter Sr. Consultant Helen Pukszta

“I recently asked a colleague [CIO] whether he would prefer to deliver a project somewhat late and over-budget but rich with business benefits or one that is on-time and under-budget but of scant value to the business. He thought it was a tough call, and then went for the on-time scenario. Delivering on-time and within budget is part of his IT department’s performance metrics. Chasing after the elusive business value, over which he thought he had little control anyway, is not.”

Page 4: Measurement in a Continuous World - Jim Highsmith

Mixed Messages

Be Flexible Conform to

Plan

Page 5: Measurement in a Continuous World - Jim Highsmith

Dysfunctional Measurement Systems

Step 1: Measurement system installed.

Step 2: Performance tends to improve while people figure out the system.

Step 3: People, under pressure, focus on measurement goals rather than outcomes. (Always a disconnect between the desired outcome and the measurement. Example: (1) productivity; lines of code. (2) productivity; velocity

Step 4:

Time

Metric

Desired Outcome

Performance measurement

Source: Rob Austin, Measuring and Managing Performance in Organizations

Page 6: Measurement in a Continuous World - Jim Highsmith

Facing the Future

“Perhaps the most important question facing leaders today is this: How do you build an organization that performs flawlessly and evolves rapidly, one that delivers sterling results today and changes fast enough to be relevant tomorrow?”

Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage, Scott Keller & Colin Price (McKinsey & Co.)

Page 7: Measurement in a Continuous World - Jim Highsmith

Battleground of the Future

Enterprise (Adaptive

Leadership) Talent Customers

Shareholders/Financial Markets

Purpose

Do Agile Be Agile

Page 8: Measurement in a Continuous World - Jim Highsmith

How Important is Health (Being)?

¨  “Organizations that focused on performance AND health simultaneously

¨  were nearly twice as successful as those that focused on health alone,

¨  and nearly three times as successful as those that focused on performance alone.”

Page 9: Measurement in a Continuous World - Jim Highsmith

Extensive Beyond Performance Research

¨  Surveys: 600,000 respondents, 500 companies ¨  6,800 CEO’s & senior executives

¨  Reviews: 900 books & academic journals

¨  Personal interviews: 30 CEO’s

¨  Data from: >100 McKinsey clients

Page 10: Measurement in a Continuous World - Jim Highsmith

Multi-dimensional and Holistic

“Performance evaluation is a holistic assessment of delivery and behaviour.” TW Live Presentation, Bjarte Bogsnes, Vice President, Performance Management Development, Statoil; Chairman, Beyond Budgeting Round Table Europe

Page 11: Measurement in a Continuous World - Jim Highsmith

Multi-dimensional and Holistic

“You get a lot of negative behavior when you have narrow metrics that really don’t represent the complexity of the business. Instead we ask our associates to view performance holistically, versus focusing on a few specific variables.” --CEO of Gore, in What Matters Now, Gary Hamel

Page 12: Measurement in a Continuous World - Jim Highsmith
Page 13: Measurement in a Continuous World - Jim Highsmith

Creating a Value Focused Culture

¨  Inspire around a value-based vision ¨  Make Value Visible

¤ Define a common currency and language ¤  $ @ portfolio, value points @ feature level

¨  Craft a Value Framework ¤ Value drivers ¤  Portfolio, Projects, Release, Feature, Iteration

¨  Make Value Actionable ¤  Everyone accountable for value outcomes ¤ Assemble a lightweight toolkit

Page 14: Measurement in a Continuous World - Jim Highsmith

The Agile Triangle

Value (Releasable Product)

Quality (Reliable, Adaptable Product)

Constraints (cost, schedule, scope)

Page 15: Measurement in a Continuous World - Jim Highsmith

Enterprise Value Contributions

EVCs

Purpose

Ultimate Reason

Social Action

Learning & Adapting

Profitability

Faster to Market

Reduce WIP

Be Continuous

Increased Revenue

Open New Markets

Facebook Purpose: “To make the

world more open and connected.”

Page 16: Measurement in a Continuous World - Jim Highsmith

Value Dials

¨  Purpose ¤  Reduction in specific target diseases (health care organization) ¤  % profit spent on social responsibility

¨  Financials ¤  Headcount Reduction (# of H/C reduced or avoided) x (Average burden rate for

region & job type)

¤  Headcount Turnover ¤  Risk Avoidance (Value of risk) x (Probability of occurrence)

¤  Time-To-Market (Value of increased market segment share) x (# weeks accelerated to market)

¨  Learning and Adapting ¤  New practices initiated this quarter

¤  …

Page 17: Measurement in a Continuous World - Jim Highsmith

Value Calculation Framework

Value Cost

Portfolio Financial Business Case (NPV/IRR) Portfolio T-Shirt Sizing

Project Same as aboveInception - Revised Cost Estimate

Iterative Development - Monthly Forecast

Capability Decision Making Sweet SpotWhere we want to start/continue to make better informed

Value Engineering Decisions

ROI = Value/CostFeature

Story MoSCoW or other prioritization method Story Points (3,5,8)

Value Cost

Portfolio Financial Business Case (NPV/IRR) Portfolio T-Shirt Sizing

Project Same as aboveInception - Revised Cost Estimate

Iterative Development - Monthly Forecast

Capability Decision Making Sweet SpotWhere we want to start/continue to make better informed

Value Engineering Decisions

ROI = Value/CostFeature

Story MoSCoW or other prioritization method Story Points (3,5,8)

Top Down –Allocation of

Value

Bottoms Up –Calculation of

Cost

We need to understand both Value and Cost at the Capability/Feature level.

Source: Pat Reed

Page 18: Measurement in a Continuous World - Jim Highsmith

Value Point Assignment and Allocation

NPV = $5 million “Sales Increase”

5,000 Value Points

…allocation of Value Points across Capabilities and Features…

Feature A

(35%)

NPV = $---K “Customer Experience”

250 Value Points

Feature B

(30%)

Feature C

(15%)

Feature D

(20%)

Feature A

(25%)

Feature B

(50%)

Feature C

(25%)

Feature A

(10%)

Feature B

(25%)

Feature C

(40%)

Feature D

(5%)

Feature E

(20%)

Feature A

(35%)

Feature B

(45%)

Feature C

(20%)

Feature A

(60%)

Feature B

(20%)

Feature C

(20%)

NPV = $---K “Other”

150 Value Points

Project A: NPV = $5 million

Value Points get allocated across all Capabilities and Features based upon their relationship to individual Business Value Dials

Capability A (25%)

Capability B (40%)

Capability C (35%)

Capability D (100%)

Capability D (100%)

Source: Pat Reed

Page 19: Measurement in a Continuous World - Jim Highsmith

Features with Value Points

As a sales associate, the ability to calculate the total amount of the sale.

C-5

As a sales executive, the ability to view all sales by product type, geographic region, and sales associate.

C-8

As a sales supervisor, the ability to Verify the adequacy of the Customer’s Credit Rating.

C-3 V-13

V-11

V-2

Feature Points are a calculation of cost. Value Points are an allocation of revenue.

Page 20: Measurement in a Continuous World - Jim Highsmith

Reporting Differently (Report courtesy Jeff DeLuca)

Physical Design

(33)

Apr 2001

JM

Hubbing

(20)

Apr 2001

JM

Satisfy Transport

Item

(16)

Feb 2001

JM

Route through Bearer System

(25)

Feb 2001

JM

Protected Route

(8)

Apr 2001

JM

Retest Trail Diversity

(18)

Apr 2001

CA

Save Trail Design

(10)

Apr 2001

PS

A-Z One Hop

(14)

Dec 2000

PS

A-Z 2 Hops

(21)

Dec 2000

PS

A-Z Multiple Hops

(22)

Dec 2000

PS

Establish Pathing

(19)

Dec 2000

PS

Comply with Diversity

Constraints

(13)

Mar 2001

PS

Establish Cost

(7)

Dec 2000

PS

Select Bearer System

(7)

Dec 2000

PS

Logical Bearer Systems

(13)

Apr 2001

PS

Establish Products and

Models

(9)

Oct 2000

JM

Explode Design Model

(19)

Feb 2001

JM

Establish Diversity Levels

(19)

Oct 2000

PS

Generate Constraints

(20)

Dec 2000

LT

Check Constraints for A Pathing Point

(13)

Jan 2001

LT

Capture Details

(17)

Dec 2000

PS

Generate and Track

Site Events

(16)

Apr 2001

JM

Generate and Resolve

Order Activities

(13)

Mar 2001

JM

Run Autodesign

(24)

Apr 2001

JM

Establish Product

(12)

Oct 2000

PS

Establish Product

Attributes

(15)

Nov 2000

PS

Establish Product

Attribute Groups

(12)

Nov 2000

PS

Establish Templates

(7)

Dec 2000

PS

Establish Autodesign Mapping

(6)

Dec 2000

PS

Protection

(4)

Mar 2001

PS

Autodesign Transport Shortfall

(14)

Apr 2001

JM

Establish Site

(11)

Oct 2000

LT

Establish Node

(14)

Oct 2000

LT

Establish Network Element

(9)

Oct 2000

LT

Establish Equipment

(15)

Dec 2000

LT

Establish Design Items For Models

(26)

Oct 2000

JM

KEY: Work In Progress Attention Full Completion Progress Bar

Establish Product Catalog (PC) Establish Network Arrangement (NW)

Establish Order (OM) Establish Diversity (DV) Establish Design Product (DP)

Inter-System Pathing (XP)

Intra-System Pathing (SP)

System Selection (SS)

Establish Trails (TR)

Establish User

(11)

Nov 2000

JM Users (UM)

Establish CIX Trail Design

(15)

Dec 2000

CA

Lookup CI Trail Design

(23)

Apr 2001

LT

100% 100%

100% 100% 100% 100%

100% 42%

100%

100%

100% 100% 100%

100%

100%

100% 100%

100%

100%

100% 89%

89% 1%

100% 100%

1%

0% 0%

Page 21: Measurement in a Continuous World - Jim Highsmith

Is Quality really

important?

Page 22: Measurement in a Continuous World - Jim Highsmith

Quality Issues (technical)

¨  Code quality ¨  Design quality ¨  Automated testing ¨  Technical debt reduction

¨  Blah, blah, blah is what your business partners hear!

Page 23: Measurement in a Continuous World - Jim Highsmith

Historical Dilemma

Features Quality

23

Business

Outcome Technical Outcome

Page 24: Measurement in a Continuous World - Jim Highsmith

What if? 24

Features ?

Business Outcome

Business Outcome

Page 25: Measurement in a Continuous World - Jim Highsmith

What if? 25

Features Cycle Time

Business Outcome

Business Outcome

Page 26: Measurement in a Continuous World - Jim Highsmith

The Consequences of Waterfall

Maintain Plan, Develop, Build, Test, Release

12+/- months Hundreds of features Serial Development

Weeks Few Features

Serial Development

Feedback from poor quality is long term

Consequences of low quality difficult to determine

Page 27: Measurement in a Continuous World - Jim Highsmith

Agile & Continuous Delivery

Milestone 1 R1 R2 R3 …

Feedback is immediate, a matter of weeks.

Consequences of low technical quality are easier to determine.

Goal Not Features, but

Continuous Stream of Value!

3-6 mths

Weekly Releases

Milestone 2 R1 R2 R3 …

3-6 mths

Milestone 3 R1 R2 R3 …

3-6 mths

Page 28: Measurement in a Continuous World - Jim Highsmith

Summary 28

¨  A single release instance (waterfall) encourages trading off quality for features.

¨  Aggregate releases over time encourage a business trade off of features or cycle time

¨  Aggregate releases show that high quality increases feature delivery and reduces cycle time

Page 29: Measurement in a Continuous World - Jim Highsmith

Cycle Times

¨  Feature/Story—release from backlog to deploy ¨  Release Frequency—how often features are

deployed

Page 30: Measurement in a Continuous World - Jim Highsmith
Page 31: Measurement in a Continuous World - Jim Highsmith

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Principle/ Practice

Management team embraced?

Not so hot

Barely started

Making progress

Extremely well

Adapting to Changes Exploring, not planning Engaging & inspiring staff Riding paradoxes

Do You Evaluate Yourself?

Page 32: Measurement in a Continuous World - Jim Highsmith

Do you do Management Retrospectives? 32

Page 33: Measurement in a Continuous World - Jim Highsmith

Sample 360 Profile (Agility Consulting)

Page 34: Measurement in a Continuous World - Jim Highsmith

Intangibles

Year Intangible % Tangible %

1982 38 62

1992 62 38

2000 85 15

Impact of Intangibles on Market Value How Leaders Build Value, Ulrich & Smallwood

Intangibles assets are not reflected on Balance Sheets. Intangibles are reflected in Market Capitalization.

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Page 35: Measurement in a Continuous World - Jim Highsmith

“The competitive advantage of the twenty-first century is increasingly derived from hard-to-copy intangible assets such as company culture and leadership effectiveness.” –Keller & Price

Page 36: Measurement in a Continuous World - Jim Highsmith

More Information

¨  White paper: “Adaptive Leadership: Accelerating Enterprise Agility,” Jim Highsmith, Available on www.thoughtWorks.com.

¨  My blog: www.jimhighsmith.com.

¨  Twitter: @jimhighsmith

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