Key Performance Indicators (KPIs)

Summary

  • KPIs are a way to measure the impact of development initiatives on business outcomes
  • A way to measure the value of development initiatives
  • KPI Driver Trees – or Value Driver Trees – are a good way to visualize the linkages between business objectives (Increase Revenue/Decrease Costs/Reduce Risks), the strategy to achieve those objectives (Increase # Visitors/Increase Revenue Per Visitor), and the actual work (feature development) needed to implement that strategy.

Here is a simplified example for an e-Commerce business. (There would be additional trees for other business objectives like Reduce Costs, Reduce Risk and so on):

KPI Driver Tree
KPI Driver Tree

The impact of all new proposed work (features) should be measurable via one or more of the KPIs on the right side of the chart. For example, in planning a release, or perhaps at a SAFe PI Planning event, we generally compile a list of product features, which are then ranked by business value. The basic question stakeholders want answered is: Why do we want to build this specific set of features, or what is their value, or what will be impact on key business metrics. One straightforward way of answering that question is to identify which KPIs each feature is intended to drive.  In this way we can control which strategy levers we wish to push in order to achieve specific Business Outcomes.

Let’s say we want to improve a business outcome such as Increase Revenue. We might adopt a strategy of driving more visitors to the web site and at the same time improving the Conversion Rate once we have them there. To tackle the latter we could build features that deliver more high resolution images of the product from multiple angles. We could also create functionality for customer reviews of the product, or improving the way existing customer reviews are presented. Both of these features are designed to make it easier for a site visitor to make a purchase decision, and this can be measured by the Conversion Rate KPI. The impact (or value) of those  specific features on business outcomes is now measurable.

Features enable business value.

Features Enable Business Value

Next, once we have our planning done, and have estimates for each feature, we can take a look at where we are actually prioritizing our effort versus the strategy or objectives we are seeking to accomplish. For example (numbers are story points) – this is the kind of data I’d like to see at a PI Planning event. In the case of SAFe PI Planning, setting PI Objectives is straightforward: The High Resolution Images feature contributes to the objective of increasing the Conversion Rate. It is clear that this work directly enables business value, and it does so in a measurable way via a directly connected KPI.

Investment Priorities

Over time we can track the impact our efforts are having on our business performance, for example:

Managing Business Outcomes

Make it agile by building in a feedback loop (checking and adjusting). Adjustments in strategy can be made by working on specific KPIs in order to shift focus where necessary.

Ideally the most important KPIs for your business would be presented on a single dashboard that provides a full picture with meaningful and actionable insights. Use dashboards to help visualize progress on achieving business objectives, and to guide adjustments in strategy.

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