Agile IQ®: Transformation Academy ™

Stage Four

Agile IQ® Score: 131-165

What is "stage four"?

Companies at this stage of their transformation journey are in the Ha stage of Shu Ha Ri. A Stage Four team has an Agile IQ of 131-165.

Stage Four suggests that most of the company is taking part in agile teams. Most companies have shifted from “ways of working” in teams to agile product management operating models.

Relative to other organisations, Stage Four indicates your overall agile capability maturity is likely very high.

Forecast cost savings

$20M+

Average time to release value

Up to 5 days

Average time to pivot to change

Up to 7 days

Forecast psychological safety

High

It typically takes a company 3-5 years to reach Stage Four. Only 10% of digital transformations reach Stage Four.

Stage Four organisations are high performers. Their teams regularly show consistent high throughput at a high level of quality and sustainable pace. It shouldn’t be unusual for their teams to double their throughput when the type of work is consistent over a few months.

Archetypal behaviours

In Stage Four, many of the teams in the company have strong agile behaviours. The ones that start to focus on optimising flow will help decrease the company's ability to pivot to disruptive change. Cost savings in Stage Four companies for agile adoption can reach $20M+ per year.

Management by objectives	move to	Lean practices and measuring value
Reporting on objectives and tasks	move to	Reporting on value-based metrics based on the impact and outcome investments have to customers and the conmpany

Key to growth

Your Agile IQ® score suggests that while there is some agile growth across your company, there may still be some competing priorities holding you back.

Flow	actions for growth	Use value stream maps to understand bottlenecks in the flow of value to customers and take actions to remove them.
Waste	actions for growth	Aggressively assess whether processes and practices add value to customers and, if not, how they can be removed.
Metrics	actions for growth	Heavy use of value metrics will see a focus on why investment is being made and a focus on its impact over a "tick and flick" approach to delivery of features.

What to avoid

Data on the fastest path to growth, based on other companies' successes and lessons learned, is key to avoid the traps of transformation

Groupthink	avoid	Groupthink is a real danger for teams that rapidly reach this stage. They internalise their sense of superiority and end up slipping back to Stage Two if they aren't kept an eye on.
"But we deliver!"	avoid	"But we deliver, leave us alone" is a common sign that teams have only implemented agile as a fixed process over a way to continously improve. They might 'appear' to be a Stage Four team, but they're likely to be hiding deeper behavioural problems.

Diagnosing agile and delivery problems

By the time an enterprise and its teams move into Stage Four, the focus should be on understanding the whole product and the effectiveness of its operating model.

Issues most often occur in Stage Four when:

Managers focus on reports on the status of tasks and deliverables and not on the capability that is needed to create product impacts and outcomes. Their focus should be on what investment in capability is needed to create optimal outcomes for the product’s operating model.
Teams have rapidly advanced to Stage Four and have confidence in their ability to deliver, but still have very little experience. These teams over inflate their achievements and tend to revert back to Stage Two or Three. The first sign is when transparency of delivery starts to decrease and teams resent scrutiny.
The environment and operating model isn’t being optimised by leadership. Teams can only influence and improve what is in their control. Much of the value stream is only in the control of leaders and managers to improve. If there is no focus on improving the value stream, companies and their teams may never advance beyond Stage Three or low Stage Four.

Where to focus

Flow Metrics and the Value Stream

Integrate WIP, Cycle Time, Throughput, and Work Item Age in experiments of how to improve Time to Market and Ability to Innovate.

Value Metrics (EBM)

Value-based metrics help shift thinking from activity to the impact and outcome of investment in both the product and teams capability to deliver. Value-based metrics must be tied to goals, not deliveravbles or tasks.

Decentralised decision-making

Escalating decisions to leadership takes time. Trusted teams should be empowered to make significant decisions within established guardrails.

Key to improvement

Adding flow metrics with a focus on the value stream in particular have the following impact:

Reductions in WIP dramatically improve time to market.
Transparency of the state of delivery and the real impacts of handovers and bottlenecks increases dramatically.

Flow metrics empower leaders to create highly targetted improvement actions to improve the effectiveness of their agile operating model.

Action #1: Add Flow Metrics

Four flow metrics are essential to improve an understand the state of items in a work system:

The amount of work in-progress (WIP) – the higher this is, the slower all of the work progresses.
Cycle time – the time an item spends in a particular step of the team’s workflow.
Lead time – the total time from idea to delivery to customers.
Work item age – how long an item has remained with the team, particularly how long has it sat in the Product Backlog.

Scaled Agile Programs and Agile Release Trains (ARTs)

Flow metrics are one of the most effective tools to understand how long Features take from idea through to deployment. They are a key metric for executives, managers and agile leaders to understand the flow of work through a value stream.

ARTs benefist from flow metrics include:

Clarity of the bottlenecks and their impact in delivery of value.
Understanding the impact of “handovers” in the value stream, including how they increase delivery time.
Improving forecasts for how long Features take to deliver.

Teams and Flow

Teams benefits from understanding and using flow metrics:

Improve understanding of the impact of waiting time.
Improving flow speeds time to delivery.
Improving flow improves ability to pivot to change.

Actions for Scrum Masters

Kanban is a critical tool to capture flow metrics. Ensure metrics are captured throughout the Sprint and used in Retrospectives to:

Understand the impact of improvement actions – how much did the flow metrics move?
Decide on whether to continue with existing improvement actions or experiment with new actions.

Focus on Agile IQ® improvement actions that impact:

Self-organisation – improving the management and delivery of products by understanding flow metrics.

Actions for Leaders

Map and actively manage the valuestream

Work with Scrum Masters on mapping the value stream, its steps, inventory, and cycle time. When the value stream map has been created, assess:

Where are the bottlenecks?
What steps and handovers should be removed and how?
How much investment of time is needed to address the flow issues?
What is the expected impact when the flow issue is addressed?

Help create an environment of psychological safety

When teams are impacted by impediments but don’t have the influence or power to address them, their Scrum Masters should escalate these issues to management. This helps improve transparency of the factors that impede flow and increase delivery time.

If teams don’t feel safe to highlight these issues, leaders have no visibility of what is impacting delivery speed.

Reinforce the team’s focus on accountability for delivery, but also that they have the support to raise issues knowing they have the support of leadership.

Action #2: Evidence Based Management (EBM)

Organisations measure many different kinds of things. Broadly speaking, measures fall into three categories:

Activities. These are things that people in the organization do, such as perform work, go to meetings, have discussions, write code, create reports, attend conferences.
Outputs. These are things that the organisation produces, such as product releases (including features), reports, defect reports, and product reviews.
Outcomes. These are desirable things that a customer or user of a product
experiences. They represent some new or improved capability that the customer or user was not able to achieve before. Examples include being able to travel to a destination faster than before, or being able to earn or save more money than before. Outcomes can also be negative, as in the case where the value a customer or user experiences declines from previous experiences, for example when a service they previously relied upon is no longer available.

The problem most organisations face, which is often reflected in the things they measure, is that measuring activities and outputs is easy, while measuring outcomes is difficult. Organisations may gather a lot of data with insufficient information about their ability to deliver value. However, delivering valuable outcomes to customers is essential if organisations are to reach their goals. For example, working more hours (activities) and delivering more features (outputs) does not necessarily lead to improved customer experiences (outcomes).

EBM Focuses on Four Key Value Areas

EBM provides a set of perspectives on value and the organisation’s ability to deliver value. These perspectives are called Key Value Areas (KVAs). These areas examine the goals of the organization (Unrealised Value), the current state of the organization relative to those goals (Current Value), the responsiveness of the organisation in delivering value (Time-to-Market), and the effectiveness of the organisation in delivering value (Ability-to-Innovate). Focusing on these four dimensions enables organisations to better understand where they are and where they need to go.

Focus on Agile IQ® improvement actions that impact:

Metrics driven/Value focussed – using EBM for value-based metrics.

Action #3: Decentralised decision-making

Decentralised decision-making is any process where the decision-making authority is distributed throughout teams over executives and middle managers. Decentralisation, if handled correctly, can be powerful. The key is to empower employees to establish autonomy when making business decisions. However, doing this can introduce challenges for leaders and teams.

Decentralised decision-making has the following impacts:

Reduces delays which improves delivery speed.
Improves product development flow and throughput.
Facilitates faster feedback and more innovative solutions.
Higher levels of team empowerment increase team morale and cohesiveness.

What to centralise?

Not all decisions should be decentralised. Some decisions are strategic, have far-reaching impact, and are outside the scope, knowledge, or responsibilities of the teams. In addition, leaders are still accountable for outcomes. They also have the market knowledge, longer-range perspectives, and understanding of the business and financial landscape necessary to steer the enterprise.

Some decisions, then, should be centralised. Generally, they share the following characteristics:

Infrequent – Made infrequently, these decisions typically are not urgent, and deeper consideration is appropriate (ex., product strategy, international expansion).
Long-lasting – Once made, these decisions are unlikely to change at least in the short term (e.g., commitment to a standard technology platform, commitment to organizational realignment around Value Streams).
Provide significant economies of scale – These choices deliver large and broad economic benefits (e.g., a common way of working, standard development languages, standard tooling, offshoring).

What to decentralise?

Most decisions do not reach the threshold of strategic importance. All other decisions should be decentralised. Characteristics of these types of decisions include:

Frequent – The problems addressed by decentralised decisions are recurrent and common (e.g., Team and Program Backlog prioritisation, real-time Agile Release Train scoping, response to defects and emerging issues).
Time-critical – Delaying these types of decisions comes with a high cost of delay (e.g., point releases, customer emergencies, dependencies with other teams).
Require local information – These decisions need specific local context, whether it be technology, organisation, or specific customer or market impact (e.g., shipping a release to a specific customer, resolve a significant design problem, self-organisation of individuals and teams to an emerging challenge).

Stage Four Learning Areas

Practices

References.

Scrum.org (2020). Evidence-Based Management Guide. Measuring value to enable improvement and agility. Online at: https://www.scrum.org/resources/evidence-based-management-guide

Scaled Agile Framework (2022) Principle #9 – Decentralised decision-making. Online at: https://www.scaledagileframework.com/decentralize-decision-making/