Enterprise Services Planning with Kanban Defining Key Performance Indicators April 29 th, 2015 Brought to you by:

Enterprise Services Planningwith Kanban

Defining Key Performance Indicators

April 29th, 2015

Brought to you by:

Agenda:

Introductions A Quick word from the Sponsor ESP with Kanban – Defining Key

Performance Indicators Audience Q&A

Some Housekeeping

Questions will be taken via Q&A box. Please enter your question in the Q&A box on the right side of your screen.

Questions will be taken grouped by topic in the order received

The webinar will be recorded. Slides and the recording will be made available after the meeting.

Introductions

David Anderson CEO, DJ

Anderson & Associates

Mahesh Singh Co-founder, SVP –

Product, Digité/ SwiftKanban

Today’s Speaker

Your Host

David Anderson

David Anderson is a thought leader and pioneer in the field of Lean/ Kanban for Software Development and managing effective software teams. He has over 25 years experience in the software industry starting with computer games in the early 1980’s. He has led software teams delivering great productivity and quality using innovative agile methods.

David has written 3 books, Agile Management for Software Engineering – Applying the Theory of Constraints for Business Results, and Kanban – Successful Evolutionary Change for your Technology Business. His latest book is Lessons in Agile Management.

David is of course the Chairman of LeanKanban, Inc. LeanKanban Inc. licenses trainers and training materials and organizes events around the world to promote adoption and high quality understanding of the Kanban Method and Enterprise Services Planning.

Last but not the least, David is an Advisor to Digité, Inc. and consults with us for overall product strategy, especially in the area of Lean/ Kanban.

Quick word from the Sponsor!

Digité, Inc. - Pioneer in Web-based Collaborative Products/ Solutions for Geographically Distributed Teams

Headquartered in Cupertino, CA Over 300,000 users in the Americas,

Europe, Asia/ Pacific Products that cover Lean/ Kanban, Agile

ALM, Project/ Portfolio Management SwiftKanban is our flagship Lean/ Kanban

product

SwiftKanban Visual Management – Software Development

SwiftKanban Visual Management – Marketing

SwiftKanban Visual Management – Planning the Thanksgiving Party!

SwiftKanban - Analytics

Key Customers11

http://www.virtusa.com/

http://www.techmahindra.com/index.htm

Over to David ….

[email protected] @leankanbanu Copyright Lean Kanban Inc.

Learn to care about what the customer cares

about

KPIs should shape improvements to service delivery

Enterprise Services PlanningDefining Key Performance Indicators


Lean Kanban North America 2015 conference


• Becoming Data-Driven• Objective Retrospectives• Forecasting• Enterprise Kanban & Lean Startup• Scrumban• Kanban Coaching• Blockers for Improvement• RBS Project Sizing• Kanban Academic Research …


Kanban experience reports

app and mobile development

Including…




Fitness for Purpose


Which system is fitter?

5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

Mean 17 days Mean 12 days


Measuring delivery against expectation

5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

-25 -20 -5 0 5 10 20 30 35 40 More0

2

4

6

8

10

12

System A

Frequency

Lead Time Expectation Spread (Days)

5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

-15 -10 -5 0 5 10 15 20 More05

1015202530354045

System B

Frequency

Lead Time Expectation Spread (Days)

Mean 17 days Mean 12 days

System B is clearly fitter!

System B delivers 5/7 within expectationsSystem A only delivers 3/7 within expectations


What makes a pizza delivery service“fit for purpose” ?


Meet Neeta - a project manager• Delivery time =

approximately 1 hour• Non-functional quality =

tasty & hot• Functional quality (order accuracy) =

doesn’t matter if small mistakes are made, geeks will eat any flavor of pizza

• Predictability =+/- 30 minutes is acceptable

• Safety =so long as health & safety in food preparation is good, it’s fine


Neeta is also a working mom!

• Delivery time =20 minutes

• Non-functional quality =doesn’t matter too much, it’s pizza!!!

• Functional quality (order accuracy) =it must be cheese pizza! No other flavor is acceptable! (even if you take the pepperoni off)

• Predictability =+/- 5 minutes maximum!!!

• Safety =only mommy worries about that stuff!


To be “fit for purpose” there is a product component & a

service delivery componentWe need to offer a selection of

different recipes which are tasty & popular. However, we must also

deliver with speed & predictability

Lesson


Modern creative & knowledge worker businesses often

obsess with product definition & strategy

Operational excellence and service delivery excellence are often overlooked or treated as

inferior management skills

Lesson


Neeta has 2 identities –Mother and Project ManagerEach of Neeta’s identities

represents a different market segment for the pizza delivery

service

Traditional demographic & income group segmentation does

not accurately capture the context to understand

“fit for purpose”

Nor, for that matter, do personas. As Neeta

represents two segments not just one persona

Lesson


Fitness Criteria DriveEvolutionary Change


Fitness criteria are metrics that measure observable external outcomes


Evolutionary change has no defined end point

EvolvingProcess

Rollforward

Rollback

InitialProcess

Future process is emergent

EvaluateFitness

EvaluateFitness

EvaluateFitness

EvaluateFitness

EvaluateFitness

We don’t know the end-point but we do know our emergent

process is fitter!


Business Risks, Fitness Criteria & Classes of Service should all align


Select Key Performance Indicators Carefully!


Other Useful Metrics


Defining Fitness Criteria


Market Adoption Lifecycle Segmentation

Enthusiasts EarlyAdopters

EarlyMajority

LateMajority

Laggards

Rate

Of

Mark

et

Ad

op

tion

time

Moore’sChasm

LittleChasm

HipCool

BuggyCommunitydevelopment

NicheMarket

Features

Good func qualityAdequate non-func

quality

PermissionGiving

Early adopter

Exceptional func and non-func quality

CostEffectiveBroad Features

Exceptional func and non-func quality

Low Cost Easy Access Forced adoption Viewed as taxation

Fit for purpose Fit for purposeChanges over time


Customer Storytelling & Clustering

Tell stories about real customers, their motivation, what they buy and why. Cluster similar stories

Give each cluster a “nickname” e.g.

• “All ins”• “Aspirationals”• “Bet hedgers”• “Boy scouts”


You can’t just ask!

Neeta, how fast would you like your pizza delivered? How predictable do you need us to be with our delivery estimate?

Customers will tend to tell you they need better service and more features than they

really need!

Would you pay more for the things you say you need and want?

No, probably not!

Believe what customers actually do, do not

believe what they say they’ll do!

Actually behavior will vary from declared

intent!


Who knows your customers?


Pizza boy knows Neeta’s Story!

Staff who meet customers can be trained to learn what matters to them and why

Create ways to capture customer stories or directly

involve customer facing staff when defining customer segments fitness criteria


GT car manufacturer story

A well known manufacturer of GT cars determined customers were prepared to wait 21 months to take delivery

They learned this by letting delivery time slip to 27 months and receiving cancellations and customers switching to a rival

manufacturer

Determining fitness criteria thresholds by

reducing service levels until customer

complaints rise to dangerous levels isn’t a “safe to fail” approach!

Damaging your brand, your reputation and your profitability is a

strange way to discover how to be…

“fit for purpose!”


Retarding customer service until customers complain vehemently or take their business elsewhere could be damaging

• Undermines brand• Damages reputation• Loss of market share• Loss of revenue

Probing for threshold values by reducing service quality isn’t “safe to fail”

Is it “safe to fail”?

We need general guidance that allows us to probe for fitness criteria threshold values that is “safe to fail”

If we can’t ask, and we can’t allow service to decline until

complaints make the threshold evident, what can

we do?


Probing for Threshold Levels


Look for clusters or patterns of demand, or

patterns of similar expectations, or new

sources of demand that may represent an emerging segment

Probe with classes of service

Create a class of service to respond to the believed new segment

• Set service levels at or close to anticipated threshold levels


Probe with classes of service

Observe take up of class of service

• Is it over-used? (or abused?) If so tighten qualification criteria

• Is it under-used? Consider removing it

• Is it used but you fail to deliver to expectations? Do people complain? If no then consider removing it. You are over promising

Fixed delivery date class of service

emerged this way.

Initially abused by marketing, eligibility

criteria were tightened up.


Telecom Equipment Example

A platform maintenance department at a

telecom equipment manufacturer receives

demand only from internal application

departments…

… Each request is tagged with the originating telco operator for whom the request is being implemented. Each operator is given a lane on the kanban board


Telecom Equipment Example

Imagine 3 American telco operators with different strategic positions…

• Verizon value quality most• Sprint value time-to-market• Voicestream/T-Mobile USA values low

cost

Now design and offer 3 classes of service…

• High quality, tight “done” criteria for each step

• Short lead time – pull priority, looser “done” criteria

• Low cost – junior staff, lowest priority compared to other work


Different lanes, different risks

Done

F

H

E

C

A

I

Engin-eeringReady

Deploy-mentReady

G

D

GY

PBMN

10 ∞

P1AB

Ongoing

Development Testing

Done VerificationAcceptance10 10

Verizon 10

10

Sprint

T-Mobile

10

DE

DA

Each lane represents a different source of demand but also different fitness criteria and threshold values

Different classes of service and different pull criteria policies are defined for each lane providing service levels tuned to the “fitness for purpose” expectations of each customer


To have confidence you are offering a service that is “fit for purpose”, you must offer different classes of service

To serve more than one market segment adequately, you must offer a selection of classes of

service

Lesson


Classes of service should align to market segments and

fitness criteria (or stakeholders needs)

Lesson

KPIs cannot be general! They need to be tied to customer expectations. Different segments have different

expectations. Hence, different threshold levels of the KPI


Classifying Metrics


85% at10 days

Mean5 days

98% at25 days

Change R

equest

s

Pro

duct

ion D

efe

cts

85% at60 days

Mean 50 days

98% at150 days

Median 45 days

Lead Time Distribution is a KPI


Blocker Cluster Data Guides Improvements

http://www.klausleopold.com/2013/09/blocker-clusters-problems-are-not.html


Avg. Lead Time

Avg. Delivery Rate

WIP

Poolof

Ideas

ReadyTo

Deliver

Cumulative Flow is a General Health Indicator


TestReady

Flow Efficiency is a General Health Indicator

F

H E

C A

I

GD

GYPBDE

MN

P1

AB

Customer Lead Time

Waiting Waiting WaitingWorking

IdeasDev

Ready

5Ongoing

Development Testing

Done3 35

UATReleaseReady

∞ ∞

Flow efficiency % = Work Time x 100%

Lead Time

Working WaitingWorking


Liquidity is a General Health Indicator

The volume of pull transactions in a kanban system defines its liquidity


Volatility is a General Health Indicator

The derivative of liquidity shows us kanban system volatility


Wrap Up


ESP Training Modules


ESP Training


Thank you!


About

David Anderson is an innovator in management for 21st Century professional services businesses. He leads a training, consulting, publishing and event planning company dedicated to developing, promoting and implementing new management thinking & methods…

David has 30+ years experience in the high technology industry starting with computer games in the early 1980’s. He has led software organizations delivering superior productivity and quality using innovative methods at large companies such as Sprint and Motorola.

David defined Enterprise Services Planning and originated the Kanban Method an adaptive approach to improved service delivery. His latest book, published in June 2012, is, Lessons in Agile Management – On the Road to Kanban.

David is also Chairman of Lean Kanban Inc., a business operating globally, dedicated to providing quality training & events that bring Kanban and Enterprise Services Planning to a broad audience of professionals around the world.


Thank You!

David J Anderson Digité/ [email protected] [email protected]

@dja_djaa @swiftkanban

www.swiftkanban.com

Janice Linden-Reed

[email protected] Mahesh Singh

[email protected]

Wes Harris @maheshsingh

[email protected]

www.leankanban.com

mailto:[email protected]


http://www.swiftkanban.com/





http://www.ccpace.com/

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Enterprise Services Planning with Kanban Defining Key Performance Indicators April 29 th, 2015 Brought to you by: