How to Maximise Value with ‘Evidence-Based Management’

‘Evidence-based’ is a term and decision making technique that originated in medicine in the 90s. Today, but, the principles apply to many more different disciplines. Like education, criminology, public policy, social work and within management. In his book Evidence-Based Management — How to Use Evidence to Make Better Organizational Decisions — Eric Barends demonstrates how these principles can be applied within every organisation.

How Evidenced-Based Management Fits An VUCA Environment.

Evidence-based management (EBM) is needed now more than ever in the VUCA world in which we now live. On the one hand, you’ll have to establish a clear direction now more than ever. At the same time, your processes need to allow for quick decision-making. This could feel like balancing on the weak cord.

Under this constant pressure, management tends to make decisions based on subjective metrics. Their own personal experience or -preferences. Or easy to measure indicators such as team velocity, code size or the number of hours spent on building a solution. “Unfortunately, that’s not such a reliable form of evidence,” Barends says. “Their information is often clouded by all kinds of biases and thinking errors.” Take velocity, for example, if teams deliver solutions fast but these do not help the end-users, then there is still no value delivered. Fast delivery of crap output doesn’t make you successful.

A widely used process framework like Scrum formulates it like this:

Scrum (n): A framework within which people can address complex adaptive problems, while productively and creatively delivering products or the highest possible value. — Scrumguide 2017

Our highest priority is to satisfy the customer through early and continuous delivery or valuable solutions. — Principles behind the Agile Manifesto

Deliver Value Continuously — guiding principles of Modern Agile

Two elements “delivery” and “value” are rooted at the core of every Scrum- or Agile related practice. Yet, we need guidance on how to state and measure these within an Agile environment.

Like mentioned before, we need to balance both a firm directional leadership and team autonomy to adapt to change fast.

“Evidence-Based Management (EBM) is an empirical approach. It gives organizations the ability to measure the value they deliver to customers. It provides the means by which they deliver that value, and it shows how to use those measures to guide improvements in both.”

EBM is measured over 4 Key-Value Areas (KVA) — Scrum.org

EBM distinguishes 4 different influences that together serve as measurement indicators and adjustment buttons to control Agility and business value.

It is important that these 4 elements are in balance with each other. Organisations can have their Current Value (CV) in order and deliver a valuable outcome to their stakeholders. (end-users, investors and employees). Yet, if they do not also work on an innovative solution (A2I) for the customer’s needs of tomorrow, that success is only of short duration.

At the same time, they must have a good picture of emerging value within the organization (UV). With this, they can execute targeted investments to ensure that this solution can be offered before their competitors do.(T2M). In the following paragraphs, I will further elaborate on these different Key Value Areas and their relationship to each other.

Current Value (CV)

Reveals the value that the product delivers to customers, today

Maximising the value delivered today is all about focusing on the here and now. How are we currently performing in areas such as customer satisfaction, employee engagement and investor profitability?

To remain alert on whether we are on the right course, we must have simple parameters for this in our weekly dashboards. This seems easier to do for ‘hard’ items such as revenues than for ‘softer’ items such as satisfaction. Yet this is quite possible. Think of a weekly short happiness survey among 50 random customers or a simple ‘how was your work today?’ button at the elevator.

With the first example, you give content to the values of focus and commitment towards your customers and stakeholders. Towards employees, you show respect for their opinion and openness about their engagement.

Time-to-Market (T2M)

Expresses the organization’s ability to quickly deliver new capabilities, services, or products

So, CV is about delivering maximum value today. For T2M the goals is to minimize the amount of time it takes for the organisation to deliver that value. Not just for that one feature release, but the ability to continue delivering that value at a sustainable pace.

Variables that you can measure in this ‘key-value area’ are things like:

- speed to perform experiments

- or speed to analyze and implement the outcomes.

Practices such as Usability- or A-B tests provide you with the necessary data to make adjustments. Also, make sure to eliminate bottlenecks that emerge in teams. For example, a teams regulars sprint retrospective can bring out great ideas to improve delivery speed. Activities such as CI/CD, marketing automation or reducing cycle time can contribute significantly to a faster time to market.

Daring to test hypotheses without certainty about the outcome requires courage and trust in the capacities of the (multidisciplinary) teams. However, take into account that the degree of adaptation that you achieve within your organisation by experimenting ensures that you reach the time to market that you need to remain relevant for your customers and stakeholders in the future.

Ability to Innovate (A2I)

Expresses the ability of a product development organization to deliver new capabilities that might better meet customer needs

The focus of A2I is towards the future. The goal is to maximise the organisation’s ability to deliver new capabilities and innovative solutions. Organisations should continually re-evaluate their A2I. Questions that help that evaluation are the ones like “What prevents the organization from delivering new value?” or “What prevents customers or users from benefiting from that innovation?”

Measurements to put in place when improving your A2I are metrics like:

- Trend analysis on technical debt. (having to spend time on refactoring and cleaning dirty code is holding you back to spend time on creating new value)

- but also metrics on context switching for attending meetings. Or creating reports that don’t add value but interrupt people doing their work.

For teams having the ability to work committed and focused on future value will raise the organisation’s ability to innovate along with it.

Unrealised Value (UV)

Suggests the potential future value that could be realized if the organization could perfectly meet the needs of all potential customers

In this Key Value Area we look at the value a service or product is delivering over time in the different steps of their solution maturity. Like Jurgen Appelo is referring to in his most recent publication Start-up, Scale-up, Screw up.

In this book he describes the evolution of a product along time. An offer in its formation phase may not deliver a lot of value now, but can have great potential to do so in the coming years. Sametime, if a product is at the end of its life cycle in its conservation stage the time to maximise its value is only short. Focussing on cost + effort minimisation and profit maximisation could be the best strategy here. Metrics like Market share or Customer satisfaction could help you to steer this parameter.

Having these measurements in place creates the transparency that will allow you to make the right decision. Doing so based on inspection of it and adapt.

Empirical improvement based on Evidence-Based Management

Measuring and keeping your Key-Value Areas in balance can help you increase your business agility. It does by showing you immediately where your improvement options are. (transparency) It allows you to continuously learn (inspection). The value that comes from your measurements gives you direction where to focus your improvement on (adaption)

To shape this continuous learning cycle you can follow the next steps to put EBM in place:

• Quantify Value in Key Value Metrics that apply for your organisation.
• Measure these Key Value Metrics to create a baseline and be able to follow the trends.
• Select Key Value Areas to improve based on the Key Value Metrics. Choose the ones that you expect to improve the most while spending the least of effort. Begin with low hanging fruit.
• Conduct experiments in practice to improve targeted KVAs. Also here, think big but act small! Better to make a limited improvement with a small experiment you can build and measure in two weeks than conduct an experiment that lasts for two months before you get your hypothesis confirmed or rejected.
• Evaluate results and use the learned lessons as fuel for your next improvement.

The Value of an Evidenced-Based Framework For Your Organization.

Evidence-based management has a broad and holistic view of maximizing both value and delivery in an Agile environment.

Current Value is often the major key metric an organisation focusses on. Understandable since an organisation that creates no value bottom of the line, will not be in the market for long. No profit, no work, no (happy) employees, customers or financiers.

However, to be able to continue to deliver that value in the longer term, the other 3 KVAs are essential. That is why you also have to keep investing in improving the time-to-market of your solutions.

This goes further than faster delivery. Working harder to go faster is rarely sustainable. Sometimes you have to work slow and thoughtful in the short term to be more successful in fast delivery on the long run.

Your ability to innovate is crucial to have services and products that you can bring to market fast. And believe me, that doesn’t have to be a huge disruptive innovation. Many successful organisations are so successful because they have the capacity to innovate bit by bit. In every small release of a new version, they improve customer satisfaction. On an hourly basis, Netflix updates its product. No big bangs, nothing what a customer usually notices when he opens the app. But they innovate in an endless and continuous flow.

Time to Market (T2M) and Ability to Innovate (A2I) have more focus towards the outside. Attention to the internal amount of Unrealized Value (UV) ensures that new Current Value (CV) will be available again in the future.

Improving organisational performance is a cyclical iterative process. This means working on small improvements and experiments that can be performed and measured quickly. This ensures an endless cycle of continuous improvement and lasting relevance for your organisation. Both in terms of delivery and in terms of value.

Acknowledgments to Scrum.org for creating and sharing the EBM framework backgrounds and Eric Barends for his inspiration on the subject.