How Can Product Managers Shift Their Focus from Output (Velocity) to Outcomes (Value)?

Measuring progress and ensuring alignment with business objectives is paramount. While velocity—a metric that tracks the amount of work completed within a sprint—is often employed as a measure of team productivity, it’s essential to recognize its limitations and adopt a more comprehensive approach to assess the true value that a product delivers. Focusing solely on velocity can obscure the broader picture of product success, leading to misalignment with business goals, a sacrifice in quality, and potential burnout among team members.

The Pitfalls of Velocity

Velocity is a tempting metric for product managers because it provides a straightforward way to quantify progress. However, its simplicity can also be its downfall when used in isolation.

1. Misalignment with Business Goals: Velocity is primarily a measure of output—the quantity of work done—but it doesn’t inherently account for whether that work aligns with the strategic objectives of the business. A team may have a high velocity, completing many features quickly, but if these features do not contribute to the company’s goals, the value of that work is questionable. For instance, if the product’s strategic goal is to improve user retention, but the high-velocity work is focused on cosmetic changes that don’t enhance user experience, the product manager may miss the mark in delivering true value.
2. Quantity Over Quality: An overemphasis on velocity can lead to a focus on speed rather than quality. Teams might prioritize completing more story points in a sprint, even if it means cutting corners or accumulating technical debt. This approach can lead to compromised user experiences, increased maintenance costs, and a product that may require significant rework in the future. In the long run, this can erode user trust and hinder the product’s ability to scale.
3. Ignoring User Value: Velocity doesn’t directly measure the impact of work on users. A feature might have a high story point estimate because it’s complex and time-consuming to implement, but if it doesn’t solve a significant user problem or provide meaningful value, its completion is less impactful. Conversely, a small, low-effort change that significantly enhances user experience may be undervalued if velocity is the primary focus.
4. Team Burnout: Constant pressure to maintain or increase velocity can lead to burnout among team members. The pursuit of high velocity often comes at the cost of long hours, reduced morale, and diminished work-life balance. Over time, this can decrease productivity, lead to higher turnover rates, and ultimately impact the quality of the product.

A Holistic Approach to Measuring Product Value

To accurately assess product value, product managers need to move beyond velocity and consider a broader range of metrics that provide a more comprehensive view of the product’s impact on users, the business, and the development team.

Customer-Centric Metrics

Customer-centric metrics focus on the user’s experience and satisfaction with the product. These metrics help ensure that the product meets user needs and delivers real value.

1. Customer Satisfaction (CSAT): CSAT measures how satisfied users are with the product. It’s typically gathered through surveys where users rate their satisfaction on a scale. High CSAT scores indicate that the product is meeting user expectations, while low scores can signal areas for improvement.
2. Net Promoter Score (NPS): NPS is a key metric that indicates how likely users are to recommend the product to others. It is calculated based on responses to the question, “How likely are you to recommend this product to a friend or colleague?” High NPS scores suggest strong user loyalty and satisfaction, while low scores can highlight issues that need to be addressed.
3. User Engagement: Metrics such as daily active users (DAU), monthly active users (MAU), and session duration provide insights into how frequently and deeply users are engaging with the product. High engagement levels often correlate with a product that users find valuable and integral to their daily lives.
4. User Retention: Retention metrics track the ability of the product to keep users over time. A high retention rate indicates that users continue to find value in the product, while a low retention rate may suggest that the product isn’t meeting user needs or that there are better alternatives available.
5. Customer Lifetime Value (CLTV): CLTV calculates the total revenue a customer is expected to generate over their lifetime as a user of the product. It is a crucial metric for understanding the long-term financial value of a customer and for making informed decisions about customer acquisition and retention strategies.

Business-Oriented Metrics

Business-oriented metrics align the product’s performance with the broader goals of the organization. These metrics help ensure that the product contributes to the company’s financial success and market position.

1. Revenue and Conversion: Revenue metrics track the financial performance of the product, including total revenue, average revenue per user (ARPU), and conversion rates from free to paid tiers. These metrics are essential for understanding the product’s contribution to the company’s bottom line.
2. Time to Market: Time to market measures how quickly the product or a new feature can be delivered to users. While speed is important, it should be balanced with quality and user value. A quick time to market can provide a competitive advantage, but it must be done without sacrificing the product’s integrity.
3. Market Share: Market share indicates the product’s position relative to competitors. A growing market share suggests that the product is gaining traction and resonating with users in the market. Conversely, a declining market share may indicate that competitors are offering more appealing alternatives.

Team-Focused Metrics

Team-focused metrics evaluate the health, morale, and effectiveness of the development team. A motivated and well-functioning team is essential for sustained product success.

1. Team Morale and Collaboration: High team morale is often linked to better collaboration, creativity, and problem-solving. Regularly assessing team morale through surveys or one-on-one meetings can help identify issues early and address them before they affect productivity or quality.
2. Innovation and Creativity: A product team’s ability to innovate and come up with creative solutions is crucial for staying competitive. Encouraging a culture of experimentation and allowing time for creative exploration can lead to breakthrough innovations that significantly enhance product value.
3. Knowledge Sharing and Learning: Continuous learning and knowledge sharing within the team contribute to ongoing improvement and adaptation. This can be measured by tracking participation in training sessions, knowledge-sharing meetings, and the adoption of new tools or practices that enhance team performance.

Beyond Quantitative Measures: The Importance of Qualitative Insights

While quantitative metrics provide valuable data points, they don’t tell the whole story. Qualitative insights offer a deeper understanding of user experiences, team dynamics, and the broader market context in which the product operates.

1. User Feedback: Gathering feedback through user interviews, surveys, and usability testing helps product managers understand user experiences, needs, and pain points. Qualitative feedback can provide context to quantitative metrics and help prioritize features that deliver the most value to users.
2. Alignment with Company Vision: The product should not only meet user needs but also align with the company’s overall goals, values, and mission. This alignment ensures that the product contributes to the company’s long-term success and reputation. For example, if a company values sustainability, the product should reflect this by minimizing environmental impact or promoting sustainable practices.
3. Adaptability: In today’s fast-paced market, the ability to adapt is a significant source of value. Product managers should be prepared to pivot the product based on changing market conditions, user feedback, and technological advancements. A flexible roadmap and an agile mindset are key to maintaining relevance and delivering ongoing value.
4. Ethical Considerations: As products increasingly impact society, ethical considerations have become more important than ever. Product managers must ensure that the product is developed and used responsibly, considering factors such as privacy, security, and social impact. Ethical lapses can lead to user distrust, legal issues, and long-term damage to the brand.
5. Innovation and Differentiation: In a crowded market, a product’s ability to stand out from competitors is crucial. Product managers should evaluate how well the product differentiates itself through unique features, superior user experience, or innovative technology. Differentiation can create a competitive edge and attract users who are looking for something new or better than existing options.
6. Long-Term Sustainability: Beyond short-term wins, product managers need to consider the product’s potential for continued growth and success in the long term. This includes assessing the scalability of the product, the stability of its user base, and its ability to evolve with changing market demands.

The Role of Product Managers in Measuring Value

Product managers play a pivotal role in ensuring that the right metrics are tracked and analyzed to measure product value effectively. Their responsibilities include:

1. Establishing Clear Objectives: Product managers must define the product’s goals and align metrics with those objectives. Clear objectives provide direction and help prioritize efforts that contribute to the product’s success.
2. Prioritizing Metrics: Not all metrics are created equal. Product managers need to focus on the metrics that are most relevant to the product’s success and the company’s strategic goals. This might mean prioritizing user engagement and retention over velocity or focusing on customer satisfaction rather than time to market.
3. Data-Driven Decision-Making: Product managers should use data to identify trends, highlight areas for improvement, and make informed decisions. By regularly reviewing metrics, product managers can adjust the product strategy to better meet user needs and business objectives.
4. Effective Communication: Product managers must communicate insights and findings with stakeholders to ensure alignment and support. This involves translating complex data into understandable insights and providing context for why certain metrics are prioritized.
5. Continuous Learning and Adaptation: The product landscape is constantly evolving, and product managers must stay updated on industry trends, best practices, and new measurement techniques. Continuous learning and adaptation are essential

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The views expressed in this article are solely those of the author and do not necessarily reflect the opinions of any current or former employer.

References

Practical Product Management for Product Owners: Creating Winning Products with the Professional Product Owner Stances: Lukassen, Chris, Schuurman, Robbin: 9780137947003: Books - Amazon.ca. (2024). Amazon.ca. https://www.amazon.ca/Advanced-Agile-Product-Management-Stances/dp/0137947003

https://www.atlassian.com/agile/project-management/velocity-scrum

https://asana.com/resources/sprint-velocity