The value of ‘Evidence-Based Management’ in an Agile environment
Agility is great, but not a free ride! Evidence needs to back up on its promises!
Marty de Jonge
‘Evidence-based’ is a term and decision technique that originated in medicine in the 90s. Today, however, the principles apply to many more different disciplines, such as education, criminology, public policy, social work and within management. For example, in his book Evidence-Based Management — How to Use Evidence to Make Better Organizational Decisions — Eric Barends demonstrates how these principles can be applied within companies and organisations.
How Evidenced-Based Management Fits An Agile Environment.
Evidence-based management (EBM) is needed now more than ever in the VUCA world in which we now live. On the one hand, it is about establishing a clear direction and at the same time facilitating a process that allows for quick decision-making. This could feel like balancing on the weak cord. Under this constant pressure, management tends to make decisions based on their own personal experience or easily measurable indicators such as team velocity, code size or the number of hours spent on building a solution. “Unfortunately, that’s not such a reliable form of evidence,” Barends says. “Their information is often clouded by all kinds of biases and thinking errors.”
Take velocity, for example, if teams deliver solutions very quickly but these do not help the end-users, then there is still no value delivered.
Scrum (n): A framework within which people can address complex adaptive problems, while productively and creatively delivering products or the highest possible value. — Scrumguide 2017
Our highest priority is to satisfy the customer through early and continuous delivery or valuable solutions. — Principles behind the Agile Manifesto
Deliver Value Continuously — guiding principles of Modern Agile
Since the two elements “delivery” and “value” are rooted at the core of every Scrum- or Agile related practice, we, therefore, need guidance on how to indicate and measure these within an Agile environment. At the same time ensuring that the aforementioned firm directional leadership and team autonomy are both safeguarded and in balance.
“Evidence-Based Management (EBM) is an empirical approach that provides organizations with the ability to measure the value they deliver to customers and the means by which they deliver that value, and to use those measures to guide improvements in both.”
EBM distinguishes 4 different influences that together serve as measurement indicators and adjustment buttons to control Agility and business value.
It is important that these 4 elements are in balance with each other. Organisations can have their Current Value (CV) in order with which they deliver a valuable outcome to end-users, investors and employees. However, if they do not simultaneously work on an innovative solution (A2I) for the customer/market needs of tomorrow, that success is only of short duration. The same applies to the fact that they must have a good picture of emerging value within the organization (UV) and execute targeted investments in it to ensure that this solution can be offered before the competitor does so(T2M). In the following paragraphs I will further elaborate on these different Key Value Areas and their relationship to each other.
Current Value (CV)
Reveals the value that the product delivers to customers, today
Maximising the value delivered today is all about focusing on the here and now. How are we currently performing in areas such as customer satisfaction, employee engagement and investor profitability?
In order to remain alert on whether we are on the right course, we must have simple parameters for this in our weekly dashboards. This seems easier to do for ‘hard’ items such as revenues than for ‘softer’ items such as satisfaction. Yet this is quite possible. Think of a weekly short happiness survey among 50 random customers or a simple ‘how was your work today?’ button at the elevator.
With this you can give content to the values of focus and commitment towards to your customers and stakeholders, towards employees you show respect for their opinion and openness about their engagement.
Expresses the organization’s ability to quickly deliver new capabilities, services, or products
Whereas CV is about delivering maximum value today, at T2M the goals it is about minimizing the amount of time it takes for the organisation to deliver that value. Not just for that one feature release, but the ability to continue delivering that value at a sustainable pace.
Variables that you can measure in this ‘key-value area’ are things like, speed to perform experiments, analyze and implement the outcomes. Practices such as Usability- or A-B tests can quickly provide you with the necessary data to make adjustments. But also consider the capacity to eliminate bottlenecks that emerge in Scrum teams from, for example, the Retrospective to improve delivery speed. Activities such as CI/CD, marketing automation or reducing cycle time can contribute significantly to a faster time to market.
I know, daring to test hypotheses without certainty about the outcome requires courage and trust in the capacities of the (multidisciplinary) teams. Just also take into account that the degree of adaptation that you achieve within your organisation in this way ensures that you reach the time to market that you need to remain relevant for your customers and stakeholders in the future.
Ability to Innovate (A2I)
Expresses the ability of a product development organization to deliver new capabilities that might better meet customer needs
The focus of A2I is towards the future. The goal is to maximise the organisation’s ability to deliver new capabilities and innovative solutions. Organisations should continually re-evaluate their A2I. Questions that help that evaluation are the ones like “What prevents the organization from delivering new value?” or “What prevents customers or users from benefiting from that innovation?”
Measurements to put in place when improving your A2I are metrics like trend analysis on technical debt (having to spend time on refactoring and cleaning dirty code is holding you back to spend time on creating new value) but also metrics on context switching for attending meetings and creating reports that don’t add value but interrupt people doing their work.
For teams having the ability to work committed and focused on future value will raise the organisation’s ability to innovate along with it.
Unrealised Value (UV)
Suggests the potential future value that could be realized if the organization could perfectly meet the needs of all potential customers
In this Key Value Area we look at the value a service or product is delivering over time in the different steps of their solution maturity. Like Jurgen Appelo is referring to in his most recent publication about the evolvement of a product along time, an offer in its formation phase may not deliver a lot of value now, but can have great potential to do so in the coming years. Sametime, if a product is at the end of its life cycle in its conservation stage the time to maximise its value is only short and focussing on cost + effort minimisation and profit maximisation could be the best strategy. Metrics like Market share or Customer satisfaction could help you steering this parameter.
Having these measurements in place create the needed transparency that will allow you to make the right decision based on inspection of it and adapt accordingly.
Empirical improvement based on Evidence-Based Management
Measuring and keeping your Key Value Areas in balance can help you increase your business agility because it shows you immediately where your improvement options are. (transparency)
It allows you to continuously learn (inspection) and the value that comes from your measurements gives you direction where to focus your improvement on (adaption)
To shape this continuous learning cycle you can follow the next steps to implement EBM:
- Quantify Value in Key Value Metrics that apply for your organisation.
- Measure these Key Value Metrics to create a baseline and be able to follow the trends.
- Select Key Value Areas to improve based on the Key Value Metrics. Choose the ones that you expect to improve the most while spending the least of effort. Begin with low hanging fruit.
- Conduct practice experiments to improve targeted KVAs. Also here, think big but act small! Better to make a limited improvement with a small experiment you can build and measure in two weeks than conduct an experiment that lasts for two months before you get your hypothesis confirmed or rejected.
- Evaluate results and use the learned lessons as fuel for your next improvement.
The Value of an Evidenced-Based Framework in Your Organization.
Evidence-based management has a broad and holistic view of maximizing both value and delivery in an Agile environment.
Current Value is often the most important thing for an organisation. Understandable since an organisation that creates no value at the bottom of the line will not be in the market for long. No profit, no work, no (happy) employees, customers or financiers.
However, in order to be able to continue to deliver that value in the longer term, the other 3 KVAs are essential. That is why you also have to keep investing in improving the time-to-market of your solutions.
However, this goes further than faster delivery. Working harder to go faster is rarely sustainable. Sometimes you have to work slowly and thoughtfully in the short term to be more successful in fast delivery in the longer term.
Your ability to innovate is crucial to have services and products that you want to bring to market quickly. And that doesn’t have to be a huge disruptive innovation. Many successful organisations are just as successful because they have the capacity to innovate a little bit in every small release of a new version.
Where Time to Market (T2M) and Ability to Innovate (A2I) have more focus towards the outside, attention to the internal amount of Unrealized Value (UV) ensures that new Current Value (CV) will be available again in the future.
Improving organisational performance is a cyclical iterative process. By working on small improvements and experiments that can be performed and measured quickly, you ensure an endless cycle of continuous improvement and lasting relevance of your organisation. Both in terms of delivery and in terms of value.
Marty de Jonge
As an agnostic change agent, I am constantly amazed at what happens in organizations and learn every day. Enthusiastic writer and always open for discussion.