Evaluating software development through financial and business outcomes
Core Idea: Effective measurement of software development should focus on tangible business impact expressed in dollars saved, generated, or protected rather than proxy activity metrics.
Key Elements
-
Business impact measurement approaches:
- Revenue generated through new capabilities
- Costs saved through efficiency or automation
- Revenue protected through risk reduction or compliance
- Market share gained through competitive advantage
- Customer satisfaction improvements leading to retention
-
Implementation challenges:
- Attribution is often difficult in complex systems
- Time lag between development and business outcomes
- Multiple contributing factors to any business result
- Qualitative benefits that resist quantification
Proxy Metrics
- When direct business impact is hard to measure, appropriate proxies include:
- Customer usage metrics for new features
- Reduction in support tickets
- System performance improvements
- User satisfaction scores
- Time-to-market for new capabilities
Comparison with Activity Metrics
- Activity metrics (points, tickets, etc.) focus on output rather than outcomes
- Business impact metrics connect work to organizational goals
- Team-level metrics better represent value than individual metrics
- System-level metrics capture emergent properties and interactions
Implementation Approach
- Start with clear definition of intended business outcomes
- Establish baseline measurements before development
- Create feedback loops to connect development decisions to outcomes
- Celebrate business impact achievements as a team
- Use measurements for learning rather than control
Additional Connections
- Broader Context: Value Stream Mapping (tracing activities to outcomes)
- Applications: OKRs in Software Development (objective measurement frameworks)
- See Also: Team Productivity vs Individual Metrics (contrasting approach)
References
- North, Dan. "The Worst Programmer I Know" (blog article)
- Humble, J., O'Reilly, B. "Lean Enterprise: How High Performance Organizations Innovate at Scale"
#business-impact #metrics #value-measurement #software-development #outcomes
Connections:
Sources: