Outcomes Matter in an Agile World

The primary outcome of Agile is achieving better business results. This is why outcome based measures are much more aligned with Agile then output measures. Output measures focuses on how much you delivered, while outcome measures focus on the results of what you deliver.  It is the results (aka, the outcomes) that matter. 

Outcome based measures are drivers to help you understand business success.  You may still need some output measures to help you on your way.  Just ensure that they are relevant to help you determine if you are reaching the outcomes you are looking for.  The output could be the delivery of a release or the number of releases.  The outcome is how many customers either bought or used the product release.  Often times people focus on outputs because they tend to be easier to measure or are a carry-over from a more traditional mindset.  

The danger of focusing on outputs is that you may have a high number of outputs with a low number of outcomes.  Outcomes are what drive business success. As illustrated in the chart, it appears that the output of the 4th quarter is best.  However, if you look at the outcomes chart, the 3rd quarter is better with revenues of $80,000 instead of only $20,000 from the 4th quarter. While the output of four releases sounds good, $20,000 is not favorable to good business results. Outcomes  ask you to measure different things, with a particular focus on customer value.

In addition, an outcome focus changes our perspective from internal to a customer or external focus.  This helps us better understand what we are aiming for in the customer value-driven world we need to establish. So next time you are considering measures of success, just remember that outcomes matter!

Agile Success Measures to answer the question "How do I know when I'm Agile"?

I often get asked, “How do I know when my company is Agile? ” While I have various answers, it led me to construct an Agile measurement framework that helps you guide your Agile transformation toward success.  

    

I start by asking, “What outcomes an organization would like to see when they go Agile?”  Agile asks that you consider your outcome instead of output as a measure of success.  I would suggest that being Agile should only occur if your outcome is some type of better business results.  In other words, Agile shouldn't be the outcome of being Agile.  The good news is that organizations are looking for better business results.  This could be in the form of shorter lead times, reduced whip, or an increase in revenue.  Sometimes it can be all three. It is important to understand that outcomes are lagging metrics.   Now that we have highlighted the importance of outcomes, let’s add two ingredients to give us perspective and help us build the framework.

For the first ingredient, I will take a page from the book Being Agile in Chapter 2 “Crossing the Agile Chasm”.  When we discuss Agile adoption, we are talking about a change to the organizational culture.  This is because adopting Agile is more than learning skills or understanding a procedure.  It is about adopting a set of values and principles that require change in people’s behavior and the culture of an organization.  This mindset and culture change involves the most time for an organization to adjust.  According to Paul S. Adler and Aaron Shenhar, “Adapting your Technological Base: The Organizational Challenge”, a culture change is measured in years.   

For the second ingredient, I will take a page out of the article Agile Lagging to Leading Metric Path.  This article highlights that an Agile lagging to leading metric path recommends that for every outcome (aka, lagging indicator), you supplement it with corresponding leading indicators that provide you with visibility during an Agile transformation.  Capturing the leading indicators helps you steer toward a successful Agile transformation.  The leading indicators are effectively feedback loops that help you understand if you are leading toward your outcome.

Now that we have the two key ingredients, the goal is constructing an Agile lagging to leading metric path that recognizes that change takes time and provides us with feedback to adapt toward a more successful Agile transformation.   Lets start with the outcome.  For my Agile transformation, the key outcome is that we are seeing better business results for our products, translated into increased revenue for our business.  From this, I need to consider what leading indicators help guide me toward better business results.   From my Agile transformation experience, I will suggest that the two broad leading indicators are adopting Agile mechanics and embracing the Agile mindset.   This is illustrated within this lagging to leading framework.

This illustrates several conventions.  The first is that from an Agile perspective, in order to get to better business results, we must educate folks on the Agile mechanics and Agile mindset.  As we do this, we gain feedback so that we can adapt the Agile journey to ensure more success in our Agile transformation and achieve the better business results we are looking for.  The second is that applying Agile mechanics tends to be easier and takes less time since it involves learning skills and understanding procedures.  Adopting an Agile mindset takes more time since it requires changes in people’s behavior and the adaption of the organizational culture.  The end result (outcome or lagging metric) is that we hope to see better business results by first implementing Agile mechanics and adapting to an Agile mindset. 

The last task at hand is to create measures within each indicator to gauge progress.  For the Agile mechanics, capturing a training metric is helpful.  In order for people to mechanically adopt Agile, they need some form of education in their role (e.g., Scrum Master, Product Owner, etc.) and education in the process (e.g., Scrum, Kanban, etc.).  Then you can assess if the mechanics are being applied.  If education doesn’t occur or the mechanics aren’t being followed, this can impact your success.

For the Agile mindset indicator, you need to gauge if there is a shift in ways of working. You can assess if the Scrum Master is exemplifying servant leadership, you can gauge if management are allowing for self-organization, you can assess if the team believes in the Agile values and principles, and you can determine if the product owner and organization are adapting to customer needs based on actual feedback and to delivering early and often.  You should also gauge if the team is incrementally improving the mechanics, meaning are they applying the retrospective for the team to improve their ways of working. If the behaviors behind the Agile mindset are not occurring, how do you expect to be Agile?   This is why they are all leading indicators to getting better business results. 

I hope this article may provide you with a framework to help you more effectively gauge “How do we know when we are Agile?”.  It highlights that if you are looking for the business benefits that Agile can bring, then establishing an Agile measurement framework based on lagging to leading indicators can help guide you achieve a more successful Agile transformation. It is then up to you to identify what is your outcome, then your leading indicators to know if you are heading in the right direction.  Many end their journey with adopting Agile mechanics without adapting their culture toward an Agile mindset.  Stopping at the mechanics is why many organizations fail at Agile.  Hopefully this framework can help you see the bigger picture toward Agile success and the business benefits it can bring.  

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.  Those, however, tend to be output related. 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 you should first start with understanding your 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 a lagging measure, it is beneficial to have corresponding leading measures or indicators that provide you with visibility during creation 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 (or indicators), 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.