Sunday, April 13, 2014

Agile Lagging to Leading Metric Path

Even in an Agile environment there is a benefit to applying measures to understand progress.  It can be tempting to apply the same iron triangle input metrics (based on cost, schedule, and scope) that may have been used in a more traditional mindset to Agile projects and initiatives.  Instead, I suggest removing all of those metrics and start with a clean slate.  On the clean slate, first consider your outcomes.

An Agile mindset asks that you consider an outcome instead of output as a measure of success.  This means we should first start with understanding our desired outcomes for an initiative or project.  Within a business context of building products, one measure of success is an increase in revenue. Having a customer revenue metric helps you understand whether the products being built are increasing revenue upon release. While capturing revenue is a good starting point, it is a “lagging” indicator meaning you don’t recognize the evidence of revenue movement until after the release is in production and has been in the marketplace for a period of time.

To supplement lagging measures, it is beneficial  to have corresponding leading measures or indicators that provide you with visibility during development to gauge if you are moving the product into a position of increased revenue. I call this framework the Lagging to Leading Metric Path.  This visibility is important because it provides input for making decisions as you move forward. Making the right decision leads to improved results. As you consider measures, think about how they help you gain visibility and information for decisions in building a product that helps you lead toward an increase in revenue.
For a hopeful increase in customer revenue, what leading metrics can we put in place to ensure we are moving in the right direction?  Let’s say in this case that increased revenue is the hopeful lagging metric based on expected customer sales.  Examples of leading measures or indicators to achieve an outcome of this lagging metric for increased customer revenue include:
  • Customers attending Sprint Review: a leading metric where you capture how many customers are actually attending the sprint review and how much feedback they give. This indicates engagement and interest. 
  • Customer satisfaction from Sprint Review: a leading metric is capturing customer satisfaction from the functionality they viewed within the sprint review.  This indicates levels of satisfaction with the functionality as the product is being built. 
  • Customer satisfaction of product usage: an indicator of the most recent release highlighting a level of satisfaction on the usage of the current product including commentary.   

When applying Agile to product development, the outcome that matters most are often represented by lagging metrics.  Therefore you will need leading indicators to ensure you are moving in the right direction, to provide visibility, and to help you with decision-making.   Within your own context, consider constructing a lagging to leading metric path so that you know you are moving in the right direction during your Agile journey.

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Note: the lagging to leading metric path really isn't specific to Agile and I would suggest applying this to an initiative or project aligning with any mindset, process, method, or practice of delivering value.

To read more about establishing an Agile Lagging to Leading Metric Path and Agile Measures of Success, consider reading Chapter 14 of Being Agile

5 comments:

  1. Mario,
    Interesting article… however, I wonder how strong a connection exists between customer participation in Sprint Reviews, etc. and revenue. Particularly, the challenge I see is that if the participant in the Sprint Review is a “customer” then, almost by definition, the revenue has already been obtained, and thus this process doesn’t necessarily lead to new or additional revenue.

    So while customer participation in Sprint Reviews should certainly help improve customer satisfaction and defend against the customer defecting to a competitor (which is most definitely a worthy goal), I’m not sure whether there really exists a direct, casual relationship between these leading and lagging indicators as you describe. I guess it could help in upselling additional products/services/licenses, and thus lead to more revenue… but is that always the case?

    Certainly, I can see an indirect consequence, where satisfied customers recommend your company’s products/services to other prospects, and thereby help attain more revenue. But that connection is perhaps less tenuous than is implied here.

    What do you think?

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    Replies
    1. Hi Luis, Actually in most of my sprint review events, having the customer attend is rarely a commitment to buy but a feedback loop to ensure I'm building in the right direction of the value. I do ask the question that if you like it enough, would you buy it to ensure I'm in the right direction of revenue (ergo why its a leading indicator).

      The key with a Lagging to Leading metric path is for you to determine your outcome (lagging) and what leading indicators would work best for your product/service/other to ensure it leads to the outcome you are looking for.

      Thanks for your thoughts!

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  2. An abnormal increase in number of change requests may be a leading indicator that we have not been understanding requirements correctly.

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  3. The tool avoids the rating system approach and rather looks at three measurements area. This approach has allowed for the flexibility to ensure the steps are flexible of writing term paper but also specific on certain criteria that would be expected along the journey.

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