What if Output can be raised to the nth power

For an industry, output is a measure of all the goods and services produced in a given period and sold either to consumers or to businesses outside that industry. Output can be the number of tons of steel or litres of Teriyaki Sauce produced in a year by a business or industry. The business output could also be measured by the revenues from sales of the product. Any economy produces a mind-boggling assortment of goods and services. According to a Forbes study, in 2022, Domino’s Pizza produced 1.5 Million pizzas on a daily average. Economic Reports claim Global steel production in 2022 reached 1.88 Billion Tons,?of which China alone produced 1.01 Billion Tons contributing to 54% of the Global steel market share. Even with such a high percentage share, China’s Steel production declined for two consecutive years. The International Cricket Council (ICC) announced that the ICC Men’s T20 World Cup 2022 saw 6.58 billion video views across all ICC platforms, surpassing the Men’s T20 World Cup 2021 record by 65% and making it the most digitally engaged ICC event ever. We know that it is helpful to have instead a single number that measures total output in an economy- that number is GDP or GNP and there are various mechanisms available to derive the GDP or GNP of an economy that is one of the measures of Output.

In the world of Agile, we keep hearing a few buzzwords. One of them is ‘Outcome’. We hear people say that teams should be ‘outcome-driven and not output driven’, or emphasize? ‘outcome over output’. I have seen teams and individuals having a difficult time understanding what it means to be outcome-driven, or how to be outcome-driven as a team. So let’s see what does being output-driven means, and is it bad to be output-driven? If yes, how is it bad? If it is bad, does it hold true always?

In the fast-paced landscape of personal and professional development, the focus has shifted from the sheer volume of work produced (output) to the lasting impact and value created (outcome). This paradigm shift is not just a theoretical concept but a tangible approach to achieving success in various domains. In a tech company undergoing a major software development project, the project manager initially focused on output metrics such as the number of lines of code written, tasks completed, and features implemented. The team was achieving high output, but the quality and relevance of the software were lacking. The company decided to shift its perspective to outcomes. Outcome-driven metrics included user satisfaction, reduction in bugs, and the software's ability to meet the end-user's needs effectively. By prioritizing these outcomes, the team reevaluated their development process, placing a greater emphasis on user feedback and iterative improvements. The result was not only a higher-quality product but also increased customer loyalty and positive word-of-mouth referrals.

Let's take another example- In the realm of education, an institution faces challenges with its admission process. The traditional focus was on the number of applications processed and admitted students (output). However, the institution realized that the ultimate outcome was not just to admit students but to ensure that they flourished academically and contributed positively to the community. The admission process was revamped to include holistic evaluations of applicants, considering not only academic achievements but also their intelligence quotients, behavioural traits, upbringing by parents or guardian ,extracurricular activities and personal qualities. This shift in focus led to a more diverse and engaged student body, improved academic performance, and a positive reputation for producing well-rounded graduates.

Likewise, imagine you are running a restaurant. Let’s see what our output, outcome and end result (i.e. impact) can be. We should always start with the end result wanted, as to what we want to happen.?Do you want higher revenue, and higher profit for your restaurant? This result is called impact. So let’s say in 2023 you wish to double the revenue of your restaurant. For this result to materialize what are the behavioural changes that need to happen in your customers? This will be your outcome. So, you think you do not have many regular customers right now, and you want to have more customers who come back periodically to celebrate with various friends and groups to dine in your restaurant. While leaving, you find a smile of satisfaction in them and they always rate your food, service, ambience, comfort, hospitality and overall at five stars. This is your outcome. Similarly, for the revenue to double you also feel you need to attract new customers, who generally walk by your restaurant without noticing it. This can be another outcome. Also, for the revenue to increase, you know that your takeaway orders have to increase, which means people ordering from other restaurants, now switch and order from your restaurant, and so on.

So, some of our desired outcomes can be:

1) Increase in the number of repeat customers.

2) Attract more new walk-in customers.

3) Increase the volume of takeaway delivery orders.

These will also involve behavioural changes that need to happen to your customers. Now, let's come to the Output. For each outcome, what are the different activities that you and your team would need to do? You list down those activities and the rate at which you complete those activities would be your output.

The activities can be:

§? Increase the number of repeat customers.

§? Enhance the quality and taste, prepare new dishes, have better service etc

§? Attract new walk-in customers

§? Make the restaurant entry board more attractive, advertise a few cuisine pictures, and maybe offer promotional discounts.

§? Increase the takeaway delivery orders

§? Tie up with food delivery apps, offer discounts, and advertise on relevant online websites.

The rate at which you complete the above activities would be your output.

Now, coming to the very important question. Why a team must be outcome-driven and not output-driven?

Output is the volume or rate at which you complete activities, tasks etc. This may be measured as the total number of releases made, total features delivered in a time span etc.

The outcome is a change in customer behaviour which drives an end result, i.e. drives a goal

The impact?is the end result wanted, the goal.

So, is measuring output a waste?

Not really, If the team has established the right connection or has aligned their activities to the outcomes, then they may measure the output so as to make sure their experiments yield the right outcome. When the team fails, they learn from the failures and improve a step further.

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Is being outcome-driven always useful?

Outcome-driven work is suitable in a complex, unpredictable world because you never know if the work you are doing, or the output you are producing will provide value towards the Goal or Impact you have set. However, if you are working in a predictable situation wherein you are confident that the output would be valuable then you could be output-driven for instance, in manufacturing industries making certain parts of a machine, in an automotive assembly line making cars or maybe in a maintenance project in software engineering. In a world driven by productivity and efficiency, the terms "output" and "outcome" often find themselves at the centre of discussions surrounding success and accomplishment. While both are essential components of any endeavour, placing a higher emphasis on outcomes rather than mere outputs can lead to more meaningful and sustainable success. Prioritizing outcomes is crucial in various aspects of life, from personal to professional or social upliftment.

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Delivering outputs, achieving outcomes

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It is important to understand the difference in these terms not just for clarity, but because outputs are much easier to measure than outcomes.

Output refers to the tangible or measurable results of a specific process, activity, or project. It is the raw product of one's efforts and actions. Outputs?are nearly always quantitative, with data available to show whether these have been delivered. Outputs are easy to report on and validate and often include deliverables such as products or services which can be measured in terms of quality and quantity. There is no grey area. Outputs are the tangible or direct results of a process, task or activity.?

On the other hand, the outcome goes beyond the mere deliverables and focuses on the real-world impact or value generated by those deliverables. Outcome is about the ultimate effect or consequence of the outputs. Outcomes?are more challenging to verify because they are both?tangible yet intangible, and qualitative yet quantitative. Outcomes measure the long-term effects of a process, task or activity and may not be directly evident. Whether your outcomes have been achieved will rely, to a great extent, on the perception of the people who receive the service. Perceptions are not easy to measure or report on, but it is essential you find a way to do so.

Some of the examples of Outputs vs. Outcomes are as below.

Output:?Signing up 25000 new subscribers to a YouTube channel. Outcome:?Building a loyal customer base and increasing brand awareness

Output:?Processing 250 customer service calls in a day Outcome:?Achieving high customer satisfaction ratings and repeat business

Output:?Producing 2000 units of a product Outcome:?Achieving a 10% increase in market share compared to the previous fiscal.

In each example, the output yields a specific positive result (Outcome) for the business, such as:

• Building a loyal customer base.
• Improving customer satisfaction Index.
• Increasing market share.

Not all outcomes end up positive, however, making measuring them essential — so you can restyle to turn the negative outcome into a positive one.

Remember that outputs simply show you the ?end and the curtain drops. If your organization has achieved all stated outputs, but you haven’t achieved the desired outcome, then you need to review the outputs to make sure they are correct.

Have you heard of the watermelon effect?

In the world of IT Service Management (ITSM), the phrase "watermelon effect" refers to situations in which performance metrics seem green on the outside (much like the skin of a watermelon), but are actually red or troublesome on the inside. It frequently happens when underlying problems are hidden by measuring key performance indicators (KPIs). Though underlying issues may not be apparent, they do exist. High customer satisfaction ratings, seemingly positive reports, and green indicators on dashboards might all be warning signs. But a deep look exposes the real, potentially dangerous, situation. Yes, this is a typical problem. Many firms find it difficult to match the performance of their ITSM procedures with surface-level KPIs. It is imperative to monitor regularly, ideally in real time. Waiting for evaluations that are scheduled could lead to problems getting worse and heighten the watermelon effect. So, measuring the achievement of your outputs alone, without measuring outcomes, can produce the “watermelon effect”. All reports and dashboards are showing green, but when you delve deeper, reports on the achievements of your outcomes are all red- your customers are not happy.

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So, there are ways how you can avoid the watermelon effect by expressing these outputs in the language that the business understands—showing exactly how they contribute to the business outcomes. Rather than telling the business that you achieved 99% service availability, the report should pop up that customers were able to make 60,000 successful transactions per day. This provides a clear business context and shows the value that IT outputs deliver.

How companies can understand outcomes and outputs

Currently I’ve been working with an engineering business that has been upgrading from paper-based services to a new digital platform, using ERPs, Timeboxing, Salesforce and HRMS. Many of the managers have been working there for 15 years or more, so they find it difficult to translate the work they do currently to the? new services.

The team was often thinking in terms of the outputs they currently produce, and then attempting to migrate to the digital platform. Changing this thinking was essential. I asked the team to articulate the business outcomes they need to achieve—this completely changed the direction of this and subsequent workshops. With the desired business outcomes clearly stated, the team was able to let go of historic outputs and define new outputs that would enable their business outcomes to be achieved. This realization was transformational towards a new way of working. Now, when the team gets stuck in discussions on the process, they pull back to stated outcomes. This focuses them on the outputs they require, stepping away from old processes in order to build new processes. For me as a Business Coach, having them execute by respecting the difference between outcomes and outputs was a real ‘aha’ moment. I see the same flash of understanding when I explain this to colleagues and customers,? within the offices, plants, warehouses and in the larger business.

In both business and project management, the concepts of output & outcome need attention. These help you to measure not only the result — but the impact as well. In fact, Impact is the ultimate and at the Top of the List.

In short, outputs are an important measure of progress and productivity, but focusing solely on them can be dangerous. When you?combine the outputs with the outcomes, businesses can ensure that they are aligned with their goals and working towards long-term, sustainable growth.

Why measuring outcomes is essential for success?

By focusing on outcomes, businesses are able to ensure their efforts are achieving the desired results rather than only producing a certain number of products or services.

For example: Increasing traffic to your website by 20% may feel like something to celebrate, but it doesn't necessarily mean success if there is no corresponding increase in sales or lead generation. Instead, measuring the increased sales or lead generation (outcome) can determine whether their 20% increase in traffic (outputs) is making a meaningful impact.

By tracking outcomes, you can?decipher what is working for you and what is not. This will enable you to make informed decisions to adjust your strategies accordingly. When you do this, it allows you to make the most of your resources and maximize your progress.

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How Outcomes can help you make better decisions?

Outcomes can help you make better decisions by giving you a clearer picture of the impact and guiding you towards more effective strategies.

Here are some ways outcomes can lead to better decision-making:

• Highlighting areas for improvement-?Outcomes help you identify areas where you are struggling to achieve your desired results. By?measurement & analysis of outcomes, you can pinpoint areas that need improvement and implement changes accordingly.
• Measuring success-?Outcomes provide a clear and measurable picture of the success or failure of a process or project, allowing you to determine whether your efforts are achieving the desired results.
• Encouraging innovation-?Outcomes can inspire new thinking, approaches and solutions to challenges and problems. By analyzing outcomes, you can identify new opportunities to innovate and improve your business.
• Strengthening decision-making-?By providing a clear picture of the impact of your actions, outcomes give you the information necessary to make more informed and effective decisions.

In essence, outcomes provide a clear understanding of the impact of your actions and enhance your decision-making capability. They guide you towards better strategies and solutions, allowing you to improve your business and achieve your goals more effectively.

How to shift your focus from Outputs to Outcomes?

Making the shift from measuring outputs to outcomes appears to be a challenging process, but it doesn’t have to be. Here are some ways to make the transition:

Aligning actions with goals, focussing on customer needs

By focusing on outcomes, you ensure that your actions and decisions are aligned with your goals and mission. This can help you avoid wasted effort and resources on activities that do not contribute to achieving desired outcomes.

Example:?Instead of setting a goal to produce 1,000 units of a product in a given time period, set an outcome to?increase net profit by 10% every quarter and for the Fiscal.

Keep your customers' needs at the forefront of your business decisions, by understanding their needs and preferences, leading to better outcomes such as increased customer satisfaction. By collecting data and analyzing these in various metrics as a measure of your progress toward the desired outcomes, you can embrace data-analytics-driven decisions and track your performance,??

Example:?If your desired outcome is to improve customer satisfaction, you can use third-party survey tools like SurveyMonkey, Jotform or Zoho and collect feedback dynamically on customers' experiences ?and satisfaction scores.?Rather than producing more products, invest in product research, Value Management and market intelligence, Insights to identify features that will better meet your desired outcome. When you shift your focus from outputs to outcomes, you're able to ensure that your business is aligned with its goals and mission while delivering value to your customers.

In order to find the right outcomes, the key starting question is: “What are the customer behaviours that drive business results?”.

Joshua Seiden, the strategy consultant, coach, author and speaker who has worked with clients including Johnson & Johnson,? JP Morgan Chase, SAP, American Express, Fidelity and 3M puts out three “magic questions” to ask when creating Outcomes :

a)“What are the user and customer behaviours that drive business results?”

(Where do I want to go? This is the outcome we want to create) ie objective

b)” How can we get people to do more of these behaviours?”

(These are the features, policy changes, promotions, etc. that we’ll do to try to create the outcomes.)

c) “How do we know that we’re right?”

?(What do I need to do to achieve those results-This uncovers the dynamics of the system, key initiatives as well as the tests and metrics we’ll use to measure our progress)

Taking a look at some examples of outcome measures makes them much easier to understand. There are a few commonly used functional outcome measures such as Website traffic growth, Repeat customer percentages , the number of leads per month, overall customer satisfaction ratings, annual revenue growth, market share growth ?or employee satisfaction scores. There are outcome measures examples for every industry. When assessing what outcomes your company is looking to achieve, it’s best to look for performance outcome measure examples that are most relevant to your business and vendor partnership. Let’s apply the right outcome measurement tools, analytics, methods and processes together while we change our world.

You must watch this video https://www.youtube.com/watch?v=AbzVjVdQUx8

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