Bill Beane, general manager of the Oakland Athletics had a problem: how to win in the Major leagues with a budget that’s smaller than that of nearly every other team. Conventional wisdom long held that big name, highly athletic hitters and young pitchers with rocket arms were the ticket to success.
But Beane and his staff, buoyed by data, believed that wins could be had by more affordable methods such as hitters with high on-base percentage and pitchers who get lots of ground outs.
Bill Beane believed all the collected wisdom of baseball insiders (including players, managers, coaches, scouts) over the past century is subjective and often flawed. By re-evaluating their strategy, the Oakland Athletics were competitive with larger teams such as the New York Yankees who spent three times as much on players that same season.
And here’s the thing, most of the collected wisdom of CEOs, CIOs, IT Directors and Managers is also subjective and often flawed. In our VFQ Education product, there is an excellent session called Rules of Thumb which explores this subject further. Today we focus on on-time, on budget delivery in the hope that will make us successful, desperately striving for efficiency and cutting costs through outsourcing. Yet industry evidence points to poor returns from IT projects.
So what three metrics could help us do what Bill Beane did, secret little numbers that most of the market does not use, but will give us superior performance.
Cost of Delay
Less than 3% of companies use this metric described by Don Reinertsen. In my experience, it is considerably less. Cost of delay is simply calculated by assessing the impact of not having something when you need it. It is an opportunity cost which may result in lost sales, lower market share or delayed benefits. Emergn have a thought paper on the subject which is well worth downloading.
Apple spend considerably less on R&D than Sony and Microsoft and yet Apple are famous for innovative products and soaring revenues. Whilst Sony announce losses and Microsoft rely on their traditional monopolies. Yet, per product, Apple spend far more than their competitors. The difference is WIP (Work in progress).
Companies have too much work in progress, desperately chasing efficiency and slaughtering effectiveness. Measure how many projects, requirements are being worked on at once and start limiting work in progress.
Cycle and Lead Time
How quickly can we correct what you are doing, and how quickly can you get a product/idea to market. Not just the time you spend developing, but also all the time spent capturing, authorising, funding, analysis, planning, and assigning resource. If you measure this in your company, you may be very surprised as to how long it takes to implement an idea.
Just these three simple metrics can turn your average performing IT department into a Moneyball team. Don’t just use these metrics at the team level (like some Agile teams do), also apply them at the portfolio level.