KPI #4: Development Cost and Prioritization
In recent weeks, I’ve covered the first three key findings pulled from the analysis of the latest Global Study of Product Team Performance. Today, I’ll discuss the fourth (of six total) key performance indicator gleaned from this survey.
#4 Key Performance Indicator
Teams that Consider Development Cost as a Criterion for Requirements Prioritization Are More Likely to Under-Perform (i.e., negatively correlated)
54% of respondents stated that they use development cost as a factor in determining which high level requirement they pursue. Unfortunately, our data indicates that organizations doing so are likely to be poor performers.
We believe that product managers must consider development cost in calculating ROI. It should also be used in determining how to deliver the most bang for the buck to customers. However, study data shows that neither high performance teams, nor teams in organizations meeting their financial goals, take development cost into consideration at the time requirements are being prioritized.
When the backlog is effectively prioritized, there is no such negative correlation. Furthermore, there is also no standout positive correlation with any of the other requirements-prioritization criteria we asked about. These include revenue, profitability, customer importance, internal stakeholder influence, risk, and technical considerations (e.g. architecture, stability, scalability).
Break Down Work to Avoid Cost Concerns
It is critical that product managers and owners break down work into small enough chunks to ensure that high cost is not made an excuse for not delivering the highest customer value. The work breakdown can be by stories (Agile), minimum marketable features (MMFs), minimum viable products (MVPs), or experiments (lean-startup). The important point is that dividing the work, and thus the cost of the work, allows teams to deliver the highest value in the shortest time.
Next Post: #5 Key Performance Indicator
Be sure to check out my post next week when we will discuss the fifth key performance indicator drawn from the most recent Global Study of Product Team Performance.
Recap of the First Four Key Performance Indicators:
- High performing teams have a clear definition of “done”.
- Respondents unable to associate a product development methodology with product profitability are unlikely to be on a high performing team.
- Respondents who believe using Agile/Scrum leads to high product profitability tend to be in organizations that meet or exceed their financial goals.
- Teams that consider development cost as a criterion for requirements prioritization are more likely to under-perform (i.e., negatively correlated).