How to monitor business goals with value stream management

In OKR, Value Stream Management by Lance Knight

Originally published on TechBeacon

Even as organizations and their teams work to stay abreast of meaningful improvement practices, many are still missing a big piece of the puzzle—tying software initiatives to business outcomes.

Software system optimization from a technical perspective is a worthwhile accomplishment overall, but benchmarking its value can be elusive. This is problematic, since these efforts must further business objectives for corporate executives (and bean counters) to quantify the bottom-line value.

How can management substantiate the assertion that software improvement promotes desired business outcomes? By incorporating objectives and key results (OKRs). Recognized as a cornerstone of goal-setting frameworks for defining and tracking objectives and their outcomes, OKRs can help your software teams align their work with what the C-suite cares most about: outcomes.

This connection helps management make critical decisions and establish priorities regarding which updates, change requests, and other software activities are most important. It also informs value stream management (VSM), taking it from a granular, metrics-focused effort to a holistic opportunity by tying value stream activities to business outcomes.

Here’s what you need to know.

The evolution of OKRs

The concept of outcome monitoring, and OKRs specifically, arose from ideas developed by famed management consultant Peter Drucker in the 1950s. Widely considered the father of modern management theory, Drucker wrote Management by Objectives, which outlined a process for defining objectives that are tracked from goals to achievements. (Drucker was one of the software world’s early VIPs; he is also credited with developing agilism, the precursor to the agile methodology.)

More recently, the concept of OKRs came to prominence in John Doerr‘s book, Measure What Matters: How Google, Bono and the Gates Foundation Rock the World with OKRs. (Intel’s Andy Grove is credited with developing the concept of OKRs. He taught it to John Doerr, who codified it.)

The book centers on how organizational benchmarking and improvement tied to business outcomes can propel explosive growth. While it isn’t specific to software, its message resonates with business owners who increasingly depend on reliable software to conduct business. Furthermore, its insight underpins the model for incorporating OKRs with VSM.

A model for using OKRs

Here’s a business-focused example of how OKRs can inform and enhance software development initiatives.

Company objective: Grow by 30% over the next five years

  • Management has identified a mix of new products and services forecast to increase demand and thereby accelerate growth.
  • Software engineering will be engaged for these rollouts, because virtually all the new offerings will require either adding or expanding software systems.
  • The software engineering team has made recommendations for software improvements or additions to expand capacity and increase efficiency. It has suggested integrating the effort with a VSM “refresh” to eliminate waste that has crept into current software processes.

Executive/finance department objective: Maintain tight control of costs 

The idea is to excise as much fat and from the effort as possible, to maintain a favorable cost/benefit ratio.

  • Leadership evaluates every aspect of the project to ensure the price tag of growing the business doesn’t exceed the value of the growth.
  • Some activities, such as sales development and marketing, are considered routine operating expenses for the project and automatically incorporated into the budget.
  • Management views improving/updating software systems to support the growth as a questionable necessity. Finance recommends taking a wait-and-see attitude.

Software management objective: Validate the worth of the software improvements

Validate to both corporate management and finance-department decision makers the worth of the software system improvements, both initially and over the life of the project. At the same time, further quantify VSM based on their definition of “business value.” 

To achieve both of these goals, software teams will need to develop a model that maps software activities to business outcomes via OKRs.

The software team performs a sequence of activities

These include:

  • Breaking the software improvement/optimization activities into their individual tasks, which become the epics and feature stories for the software process flow.
  • Associating all the elements within that flow, from epics to defect remediation, with a relevant OKR.
  • Extracting and visualizing metrics from software projects and framing them in terms of business outcome achievement.
  • Helping management perform quantitative analysis on the mapping effort, associated with business outcomes.
  • Working with management on prioritization of those tasks for which OKRs indicate the highest business value. (Schedule items with lower or longer payback for later or put them on hold.)
  • Gaining approval for the agreed-upon projects.

Although this example is speculative, I have personally witnessed results that were this good or better. Had the core components of the software initiative not been tied to OKRs, those software project teams couldn’t have provided the data that let management validate the updates and improvements and prioritize them based on budget.

Keep things moving

This example is just one of a limitless number of scenarios where tying OKRs to software development—and preferably to VSM directly—validates software initiatives while giving business leaders vital clarity for decision making. The integration of OKRs with software delivery flow is no longer a bonus. It has become a necessity.

Software systems are no longer a “niche” business enabler. Most successful companies are software companies, and excellence in software has become a recognized competitive differentiator. Given the number of mission-critical legacy systems that are still running (and often need to be integrated with much faster, nimbler systems), OKRs will only become more important over time.

To deliver the greatest value and propel digital transformation, software activities must be tied to business outcomes. OKRs are the engine that propels that effort.

With OKRs in play, software shifts from being a supporting player—a collection of features and functions—to becoming a driver of success. It supports the high-level business outcomes that the C-suite cares most about.