“Coach, we’re not ready”, was what we kept saying, just a bunch of lowly high school rookie swimmers on our bus ride to the season’s first meet, the regional swimming invitationals. “Our times aren’t any good, we miss turns all the time, our goggles keep falling off on our starts”.
We had tons of reasons but, underlying it all, was our fear of total embarrassment and failure. Our coach’s response, with his usual sly smile, was simply, “When we arrive, shut up and get in the water!”
What myself and my fellow rookies didn’t understand then, and for some time, was that our coach was a natural at Zone Management. At least that’s one parallel I draw now having read Geoffrey Moore’s Zone to Win: Organizing to Compete in the Age of Disruption.
Zone Management is a lot about focus and understanding how to organize and manage an enterprise from both offensive and defensive positions, in order to thrive and survive in a highly competitive world. As explained in the book there are four primary zones:
- Performance Zone – this is where the core brand and services of an enterprise are managed. This zone is responsible for at least 90% of revenue and profits. The focus is on attaining mission critical revenues of the top line. Innovation in this zone must be sustaining and supporting the performance of the operating model.
- Productivity Zone – this zone encompasses shared services and functions that do not have direct accountability to revenue such as HR, Marketing, and customer service functions. This zone supports the Performance Zone by optimizing the bottom line. It applies innovation that focuses on improving productivity, ensuring regulatory compliance, and efficiency in operations.
- Incubation Zone – this zone incubates a portfolio of potential next wave of emerging categories of opportunities for growth. This zone will manage a portfolio of ideas at the same time. Rapid development for trials enables fast feedback and learnings.
- Transformation Zone – in this zone, a promising candidate for transformation to the Performance Zone from the Incubation Zone will become the number one focus for the enterprise. Only one candidate should exist in the Transformation Zone at a time. It will be scaled to assume at least 10% of the revenue of the enterprise and is expected to become a game-changer for the company.
So back to my swim coach. Why did he not hesitate to enroll his yet-to-develop rookie swimmers in the first competition? Here’s how he thought about our team from a Zone Management perspective:
- Performance Zone – these were his elite swimmers and divers. They were the primary score point makers, mostly juniors and seniors seasoned with competitive experience and good at their strokes.
- Productivity Zone – these were his relay fillers, second, and third lane options, good but not great. They were necessary to support the performance swimmers on relays or as pacers in individual races, and score some backup points.
- Incubation Zone – that was us, the rookies. We were his “projects”. We were there for him to try in races, watch our mistakes, teach, and keep trying on different strokes, distances, and relays. As raw as we were, he needed us as a resource for potential future elite swimmers.
- Transformation Zone – this was the zone where one swimmer could emerge from the early efforts among the rookies, to take a spot with the Performance Zone swimmers. For instance, among the rookies in the first season, one of us turned out to be a natural at backstroke. He was promoted to the first team medley relay and positively impacted their winning percentage significantly.
So why this story?
Well, first off, there are probably a lot of us that experienced something along these lines in team development, whether in sports or other activities. And, when we had a methodical coach or leader, the development of our next winning team was very much like Zone Management.
Also, when we look at an enterprise through the lens of Zone Management, we see that there are four distinct operational modes, each with different drivers, different outcome targets, and different emphasis on why and how to innovate. As such, applying metrics will be different for each zone.
And finally, here’s the thing, pretty much the first thing you will hear when you try to introduce your plan of how your organization is going to position itself to compete in this ever-changing and disruptive market, is “We’re not ready!”.
Sorry to be blunt but we need to use the coach’s line “Shut up and get in the water”!
Applying Flow Metrics to Zone Management
Now that we have a glimpse into understanding how powerful Zone Management is as an enabler for maximizing the competitive advantage, performance, and transformation of an organization, let’s understand how data-driven Value Stream Management (VSM) in software delivery amplifies Zone Management.
VSM focuses on increasing the flow of business value from customer request to customer delivery. It’s a systematic approach to measuring and improving flow across your software product value streams. And, the measurement is accomplished using the lean and prescriptive set of value stream metrics known as Flow Metrics, as well as the Flow Distribution measure, from the Flow Framework®:
- Flow Time – the end-to-end time from customer request to customer acceptance
- Flow Velocity – the throughput of the system
- Flow Efficiency – the percentage of active vs wait time while work was in progress
- Flow Load – the load on the system, Work in Progress
- Flow Distribution – the observed proportion of feature, defect, risk, and debt work.
Measuring Each Zone
With respect to Zone Management, it’s important to recognize that each Zone has a distinct set of goals and culture for how best to measure and improve flow. Let’s look at each:
Measuring and improving flow in the Performance Zone is all about balance and making the number. This is not the Zone to experiment with radical changes. Our swim coach would never try a fundamental change in stroke or turns for swimmers in his performance zone. Likewise, products that generate the revenue of the enterprise need to maintain balance while hitting targets. Measurement in the Performance Zone should focus upon:
- Flow Distribution that reflects investments in Risk and Debt as well as Features and Defects to help ensure product longevity and security.
- Flow Velocity and Flow Time measures that are predictable to ensure that customer needs are always met in a timely manner and customer retention is high.
- Flow Efficiency that is inspected regularly to eliminate non-value added processing.
- Flow Load, and in particular the insight of Neglected WIP, that is managed to assure capacity keeps up with demand.
Measuring and improving flow in the Productivity Zone is all about unlocking hidden value. A main challenge in the Productivity Zone is to recognize opportunities locked within that are keys to generate value. Just like the second string swimmers who practiced hard and unlocked a secondary wave of scoring power. Measurement in the Productivity Zone should focus on finding hidden value and eliminating waste by:
- Utilizing Flow Load and Flow Efficiency to make waste visible.
- Performing frequent, small, and incremental improvement experiments to eliminate constraining bottlenecks of flow.
- Assuring Flow Distribution matches the priorities of leadership.
- Sharing the Flow Metrics among peer teams in the Productivity Zone and with the Performance Zone to enable collaboration cross-function flow.
Measuring and improving flow in the Incubation Zone is all about speed to learning. In the Incubation Zone, there are a number of pilot activities occurring. Often compared to a Venture portfolio, the Incubation Zone must move quickly to prove or disprove a hypothesis of value. Kind of like the lowly rookie swimmers, somebody could turn out to be a natural. Measurement in the Incubation Zone should focus upon:
- Flow Times need to be short. Fast flow and feedback must occur in a matter of days and weeks, not months and quarters.
- Flow Distribution will have a high degree of Feature composition. The emphasis is on building and field testing new ideas to get feedback as quickly as possible. Features are the key evaluation criteria.
- Flow Efficiency and Flow Load are only consequential if determined that the Flow Time is too long. If that occurs then these metrics must be inspected to find and eliminate bottlenecks and waste. For instance, if development activities are throttled by a lack of resources.
- Likewise, Flow Velocity in the Incubation Zone is less critical. The amount of features is not as important as obtaining feedback from potential customers of key features.
Measuring and improving flow in the Transformation Zone is all about growth. The single product that is carried from the Incubation Zone through to the Performance Zone, like my backstroke teammate, is the big bet of the organization. This product appears to have the characteristics to grow rapidly to account for 10% or more of the company’s revenues. Measurement in the Transformation Zone should focus upon:
- Flow Load becomes more critical in the Transformation Zone because there will be a tendency to accept a lot of new ideas and customer requests into the value stream as growth occurs. Key to leadership and management of the new product will be the ability to prioritize work and assure that WIP does not exceed the run rate capacity of the value stream.
- Flow times need to be short in order to adapt as new customer scenarios arise. It is especially important to have fast flow time of defects for quick resolution.
- Flow velocity will provide insight into how well the value stream is responding to new work or not. If trending down it will be critical to quickly understand the root cause bottlenecks and introduce improvement experiments.
- Flow Distribution should indicate a good balance of new feature work and defect resolution that reflect leadership and market insights for both attracting new customers and retaining early adopters.
- Flow Efficiency trends should be monitored primarily with concern toward downward trends should there be constraints, such as inadequate testing capacity, that cause work to wait, and Flow Efficiency to drop.
Sink or Swim
Continuous improvement takes guts and courage. It’s always tempting to stick with what we know, to allow the status quo to swaddle us. But as we’ve seen in the last year, the status quo isn’t working. And if you’re not on the right side of change, change will happen to you. Don’t make “We’re not ready” your final words. Now is the time to get in the water. With the right frameworks and mindset to track your evolution, based on measuring and improving small gains across key areas of your software portfolio, you won’t sink. In fact, it’s likely that you’ll find that you and your teams are suddenly in the fast lane, on your way to a gold medal or two.
Moore on Zone Management
Hear more on Zone Management metrics on this episode of Mik + One with Peter D. Moore, a business and digital technology strategy advisor specializing in helping companies manage for exponential revenue, margin and net income growth.
In this episode, Dr. Mik Kersteen and Peter discuss:
- In the influence of the Zone Management Model on Project to Product
- The role of different cultures and leadership in specific zones
- The need for specific metrics and targets for each zone
- The big evolution in IT skill sets to fill the talent gap
- How the Flow Framework can be applied to all zones to balance innovation with performance
