The best-performing businesses are customer-obsessed — and it’s paying off. That’s according to research shared by Bobby Cameron, a Vice President and Principal Analyst serving CIOs at Forrester®.
Technology is transforming in parallel with a firm’s level of customer obsession because traditional approaches to running IT simply can’t keep up with the rapid pace of business transformation.
Hence, most businesses are seeking to transform from traditional operating models (order takers, 59%) into more modern models (partners, 33%), but only 8% are worthy of the title “future-fit.”
In a recent webinar with Tasktop CEO and Project to Product author, Dr. Mik Kersten, Bobby described how value stream management (VSM) is proving a core tenet of operating IT with increasing effectiveness.
Committed to customers but constrained by silos
Mature IT organizations are adaptive and resilient — able to keep their brand promise despite massive and constant change. These organizations have completed the shift from a project operating model to a product-operating model and have highly connected value streams that can rapidly respond to emerging opportunities. They’re tightly connected to the business and work from dynamic backlogs with short feedback loops to understand what’s working, and what’s not.
Unfortunately, less mature technology organizations can’t move this quickly. Many executives and leaders want to embrace customer obsession but find themselves hampered by the systems and silos they’ve had in place for years:
- Requirements are fixed and cannot be changed
- Governance is too rigid
- Systems are too complex
- Dependencies require too much coordination
Unsurprisingly, when put under the microscope, the flow of value to customers is constrained in multiple places (and rarely in the development teams):
- Heavy annual planning and business approval cycles
- Infrequent and highly governed release windows
- Siloed processes like UAT or certification
So, what’s the solution?
“To make the shift to customer obsession, you have to establish long-lived products and the value streams supporting them,” says Mik. The technology landscape has to support insights and fast decision-making, with meaningful value metrics, fast feedback loops, and backlogs linked to business strategy.
“Value streams reach in across the complexity that we live in — the flow of activities across all departments and ecosystems — and enable us to focus and drive value,” says Bobby. “We can’t operate in these isolated groups.”
Shifting the focus from cost efficiency to value effectiveness
While cost reduction is always important (and even more so to future-fit organizations), Mik cautions that investments in platforms, cloud, agile at scale, automation, and DevOps cannot be done for efficiency’s sake alone. “In value stream thinking, we optimize with the end in mind, with a customer goal in mind. We’re always working backward from those customer goals. Cost doesn’t go away, but it’s no longer the driver,” says Mik. You must shift the focus from cost efficiency to value effectiveness.
If time-to-value is your north star, your steps toward achieving that goal will naturally lead to improved efficiency. “If we optimize for customer outcomes by reducing time to delivery, we are probably optimizing costs too,” says Mik. But the reverse is not necessarily true.
If you are singularly focused on cost reduction, you will make very different architecture choices that will likely reduce costs AND capacity. You will quickly discover you haven’t recouped your costs at all, because you’ve driven no business growth to improve profitability.
Here’s an example: If you shift to cloud for cost reasons alone, you’ll find you don’t have enough customers using your new cloud services to cover the higher cost profile. You’ll basically be paying more for the same customer outcomes. More mature organizations shift to the cloud to optimize workload performance for their customers and increase flexibility, and to that end, adopt three or more cloud stacks.
How to measure value streams and business effectiveness
In the shift from project to product, businesses are using the notion of value streams to realign the technology organization for fast flow. Value streams are measured using Flow Metrics. Visualizing the trend of Flow Metrics is key to understanding the vital signs of our delivery organizations.
With value stream management tools, like Planview Viz®, you measure Flow Time and look at your bottlenecks. “Long wait times are the kisses of death and where we can see silos in a value stream,” says Mik. He told the story of an organization that was extremely successful in Agile and DevOps but did not apply the same principles of flow to User Acceptance Testing (UAT). As a result, they missed multiple release windows to deploy to their new cloud platform in certain regions. Every missed window costs tens of millions of dollars.
The desired customer outcomes, which in many organizations are expressed as OKRs, need to cascade all the way down to the people on these value streams, so they can define their roadmaps and prioritize the right backlog items. In addition, the Flow Metrics will help inform the business decisions about which capabilities to develop and when, based on real performance and capacity insights — not intuition.
Bobby summarized the takeaways for technology executives and CIOs: “In order to support increasingly complex and rapid change, value stream management is a core piece of organizations’ shift from managing individual projects and tech stacks to managing products that are value-oriented views, … bringing together all the parts that have to change in order to deliver the results.”