Managing digital product teams for outcomes rather than output

With lean thinking rapidly spreading across the entire world of technology, many companies are beginning to run into a clash of processes and media when they try to put these ideas into practice. As they develop a high-level understanding of lean, managers of IT organizations seem to focus on the methodology's number one mission: increasing the quality of products and services while ensuring respect for people. Often, however, that attention quickly turns into a rather different problem: how to deliver more error-free code with greater speed.

As Josh Seiden and I discuss in our new book "Sense & Respond", there are several problems with this way of thinking. For one thing, it treats the absence of errors as the only measure of quality for the software being shipped. Second, building on a traditional manufacturing mindset, managers assume that delivering more code is somehow better for the customer and the business. In reality, both perspectives are flawed.

When a company manufactures a physical product, it knows exactly which materials go into making that product. It knows how much they cost. It knows what the product will look like when it comes off the assembly line and can reasonably assume what customers will do with that product. In that context, where little is unknown, producing more things faster and with fewer defects is a perfectly legitimate way of thinking. Software, however, requires a different approach.

The amount of software rarely determines its value to the customer or the business. Software (especially when fueled by a DevOps culture of continuous deployment, integration and automated testing) is something continuous. In other words, it never ends. Every byte of code we produce must be maintained in the future, which allows for significant creativity when it comes to writing it. Ultimately, software can take many forms that stay static only for short periods of time. This increases the uncertainty and complexity of the software systems we build. Finally, there is the human factor: our customers keep surprising us with the ways they use the digital products and services we create. In fact, many of the features we take for granted today were not originally planned. Instead, they emerged from continuous use and were adopted by the companies that created them. Although this also happens in the manufacture of physical products, the main difference is the pace at which this evolution occurs: as soon as software reaches customers' hands, companies are already able to update and improve it. This is not possible with physical products, because purchase cycles are longer - which leads to long feedback cycles.

This uncertainty in digital product teams makes focusing on output - sets of features delivered by a specific deadline - a mistake. Instead, digital product teams must focus on outcomes.

Outcomes are measures of customer behavior that affect our business. They are quantifiable and highly measurable using analytics tools. Customer behavior shows whether or not we have found the ideal combination of code, copy and design to make our products successful. If these behaviors reflect an imperfect workflow in our software system, we have the ability to adjust very quickly.

Measuring and managing teams with a focus on outcomes moves us away from trying to quantify and reward the output of features. Digital product teams are building complex systems that need to be constantly managed, optimized, pruned and refined. The number of features they ship is irrelevant. The impact of their code on customers is a much better indicator of customer value. This is the "sense" part of the work. Did we deliver something customers love or not?

Because digital systems evolve continuously, in the same way as physical products, digital teams need to stay close to the customer. They need continuous feedback on whether the code they are deploying is positively impacting customer behavior or hindering their ability to complete the desired task. Teams can then use these measures - these outcomes - to determine how well their current work is doing and whether it is still the right path to follow. In other words, managing with a focus on outcomes exposes waste quickly and helps the team understand where and how to reduce it. Outcomes keep teams from building digital products and services their customers do not want. This is the "respond" part of the work. Once we understand how our latest efforts affect customer behavior, we can understand how to proceed.

In addition, managing teams with a focus on outcomes gives leaders a clear and objective prioritization process. Teams that have outcomes as the measure of their success (for example, increasing retention of our service by 50%) can now use those success criteria as a filter for their work. When forced to choose between competing priorities or corporate political agendas, the team can ask: "how does this idea help us reach our retention goal?" or "does this idea have a better chance of helping us reach our goal than the other one?".

Certainly, makers of physical products also focus on outcomes, such as retention. If you bought a Toyota from me five years ago, I very much want your next car to be another Toyota. That said, with purchase cycles typically much longer than those of digital systems and the ability to update physical products limited to the pace at which we can adjust our assembly line flows, digital teams have a distinct advantage here.

They also now have an easier way to objectively say "no" or "not now" to projects that stray from their core mission. The continuous nature of software means that insight can start flowing very quickly - right after the first release -, revealing whether or not the idea chosen by the team really has the potential to change customer behavior the way they hoped. If so, they continue down that optimization path until the ROI of their efforts is no longer meaningful to the business. However, if their early results refute their original assumptions, the team can change course quickly, reducing the time and effort wasted on features or optimizations that do not affect customer behavior.

Outcomes humanize our products. They tell us how well our vision for the customer experience aligns with the market. They also reveal the complexity and the inherent unknowns of each initiative. This is particularly important in the digital world, since the level of uncertainty in each product or service can be very high. We may not be able to optimize our digital projects for output, but we certainly can - and should - optimize them for continuous learning and improvement, based on how our customers react to every piece of code we put in their hands.