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Want Successful Digital Transformation? Follow these 7 Metrics for Highest Digital ROI

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Manoj Agrawal

In this article | Oct 29, 2021

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Agile Enabling Organizations for Better Digital ROI

Customer feedback loop establishes a relation between development and operation, and permeates “DevOps” practices in the lifecycle of software development i.e., from building, testing, releasing, deployment, operation, and monitoring. The nature of DevOps to deliver faster and align with customer satisfaction triggered the software development methodologies and practices, which became the underlying principle of the Agile methodology of software development. 

The agile development process is a well-known methodology and choice of developers to create an environment of continuous delivery. A high level of collaboration, flexible and iterative environment is a need for delivering new features faster in an agile framework. Agile methodology focuses on continuous integration, rapid development, and continuous delivery with an incremental approach. With the emergence of the agile manifesto in 2001, 12 principles and 4 values were introduced to concrete the idea of flexibility in the development team, lessen time-to-market and increase customer retention. 

Recent Web Conference Proceeding “The Future of Connectedness: Technology Priorities for an Agile Enterprise” by “Tech Supplier”, examined the technology priorities for an agile enterprise. It focused on how organizations must adapt according to market conditions as they move towards digital transformation (DX) by keeping people, processes, and things connected. 

Creating Business Values is Footwork for ROI of Agile Transformation

The stakeholders involved in the software development cycle, expect agile transformation to be smooth in terms of returns but more often it ends in disappointment because it starts with highly inflated expectations. For better ROI (Return on Investment) it is extremely critical for organizations to think about the need to adopt agile development and agile framework. Based on clear and precise parameters companies should decide to adopt a framework for agile transformation.

According to the recently published 15th Annual State of Agile Report, which reflects the recent 2020 growth in adoption of agile software development increasing from 37% in 2020 to 86% in 2021. The highest priority in agile transformation is customer satisfaction through the continuous delivery of crucial products and services.

Creating Business Values is Footwork for ROI of Agile Transformation

Besides, the study showed what benefits the companies saw with agile adoption:

  • Enhances ability to manage changing priorities- 70%
  • Improves business alignment- 66%.
  • Increases productivity- 60%
  • Enhances software qualities- 45%
  • Accelerating software maintainability- 35%

For the expected ROI of agile, companies must focus more on “Higher Efficiency” & “Higher Quality” and business value needs to be defined in terms of ROI. Efficiency covers different aspects and deciding on what parameters it has to be judged like if it is to grow efficiency, watch on results of the product; if it’s less time-to-market, compare the time to release with competitors, and more. But what determines successful business is revenue metrics while maintaining the variables i.e., “Cost Reduction- Increase in Return”. Companies when focus on taking immediate action on customer feedback and providing what they would appreciate more, gain higher returns while maintaining the same cost. The variation can be changed i.e., “Cost Reduction- Constant Return” or “Constant Cost- Increased Return”. 

Which 7 Crucial ROI Metrics of Agile will Measure Digital  Transformation?

Merely choosing the agile transformation and undergoing,  doesn’t guarantee successful return and customer satisfaction. As companies undergo transformation considering people, processes, tools, and technologies, they analyze the results and with proper practice and discipline, good return is achievable. 

In April 2020, “Planview” was recognized as a Leader in the Gartner Magic Quadrant for Enterprise Agile Planning Tools. 

ROI of Agile Transformation can be measured once the team has been trained for agile methodology and practices. Following are the metrics to determine the ROI of successful agile transformation:

1. Cycle Time: An important metric to determine ROI in agile software development is cycle time that determines how work is flowing into and through the system as it is calculated from progress time to completed state. It has direct meaning with the stakeholders. A lower cycle time represents greater efficiency, decreased costs and shows less time spent for completion, this increases productivity and ROI.

2.Agile Maturity: Assessment of agile maturity is an important metric and there are plenty of agile maturity models for checking agility over time. To check maturity, companies can define maturity levels:

  • Initial Level: To check whether everyone is aligned with agile practices.
  • Commenced: To justify development and testing.
  • Measured Level: Measuring code quality and other metrics.
  • Optimizing Level: To test the continuous integration and deployment. 

3. Business Value: The comprehensive methodology to quantify the cost and benefit of adopting agile methods is included in business value. It is the roadmap to link industry standards such as project management, systems, and software, that identifies a set of critical factors for succeeding in agile. The complete estimation of cost, benefits, returns, the net present value of agile methods, etc. 

For good ROI, the business value sees intersection in 3 key areas:

  • What can your company implement successfully and sustainably?
  • What do customers want and what do they take?
  • What teams are excited to develop?

 7 Crucial ROI Metrics of Agile will Measure Digital Transformation

4. Predictability: For clients, the paramount chief is predictability and also a key factor to determine ROI, improved quality, and lower cost of investment. Companies want to keep promises about continuous delivery, testing, and remediating code in each sprint. For better ROI, teams must have stable predictable programs especially when there are multiple dependencies between teams.

5. Velocity: This implies an increase in team output at the same cost which can be measured per sprint delivered. Hence, it increases the amount of work done at the same cost as before and gives the view, how agile transformation is impacting your ROI. Velocity takes into consideration the following:

  • How much work was done by the team to complete the past sprint?
  • How long did it take for the team to get work done?
    Hence it gives the formula to calculate how fast the team is working to get work done.

6. Customer Happiness: Developers gain and lose customers based on how quickly they can respond to changing customer’s demands. Using Agile, keeps clients engaged, as their feedback is requested during projects. With each fast and frequent release of the software, effective working features are immediately visible to customers, enabling developers to consistently bring a quality product to the market. Companies continue to make incremental changes every few weeks that have a cumulative effect and, over time, a significant ROI for customers. This measure of happiness is a telltale sign of how successful the transition is and how effective it is for your organization.  

7. NPS (Net Promoter Score): The customer feedback metric is a way to keep an eye on customer loyalty through first-hand feedback that will be correlative and effective to revenue growth. NPS is a performance metric that determines how happy clients are or how happy they are with products and services. NPS is actually a rationale for improved ROI as customers recommend your product or service.  

Going Agile has the power to reshape your business productivity and maximize business growth opportunities. Once Agile is adopted, measuring the impact of the transition to Agile should evolve. Over time Organizations will do well initially to collect process-related metrics like throughput, cycle time, etc. to determine the ROI of Agile transformation.

Quantifying Objectives and Sharing Vision Are Value Stream For ROI

A Fair bit of Trial and Resolving Error will Discover Right Business Metrics

To be successful at scale, organizations must harness the knowledge of their Agile teams and apply it at scale, incorporate feedback loops, iterate and coordinate work to overcome the complex structure and the key to this is, shared vision

The best way to be successful is to have the development team work closely with someone who has a business perspective. Often, when an Agile transformation does not go as planned, it is due to reasons that are more difficult to measure like cultural lags or lack of leadership commitment. The ROI provides critical information that sheds light on some of these challenges and provides real-world metrics that can help organizations chart a course for success. 

Organizations need to start identifying and addressing some of the challenges like cultural, procedural, or even technical that prevent them from achieving true success with Agile at scale. Organizations will benefit from initially collecting process-related metrics, such as throughput, cycle time, etc. These will help identify what others are doing, the problems related, and with a lot of trials and resolving error that will eventually discover the right business metrics to determine the ROI of Agile transformation.

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