Measuring ROI of Agile Transformation
Have you experienced a lot of hype about using Agile and subsequent challenges in justifying the outcome achieved due to Agile adoption? In many organizations, Agile transformation starts with a lot of inflated expectations and if those are not handled properly then it would result in major disappointment for the stakeholders involved. Hence it is important to handle Agile Transformation in a structured manner and with appropriate ways to capture its impact on organizational objectives.
It is extremely critical for any organization to be clear about the reasons why it is planning to adopt Agile. Without a clear business case, the Agile adoption might lose its focus and might result in a pseudo-Agile environment (referred as ‘Scrum-but’).
Following parameters can be considered for developing a Business Case for adopting Agile:
It is important for any organization to define the parameters on which it would calculate and review its return on investment. Only with clear and precise parameters, Return on Investment (ROI) of Agile Transformation can be identified. The organization can also use collaboration tools like Innovation Games to identify the current pains areas, which can be used while defining parameters.
Following are some of the parameters that can be considered for ROI:
- Change in project delivery timelines
- Value delivered to the customer
- Improvement of team efficiency
- Reduction of waste
- Payback period
As the first step of any Agile transformation, an organization needs to understand where it currently stands from Agile readiness perspective. This helps the organization to know its current state, how well it is prepared to go for Agile, what are gaps it needs to bridge and investment required before it can move to Agile.
Once the teams start implementing Agile, one of the important assessments that they should conduct is Agile current state assessment. This assessment would help them understand how a team is placed on different aspects like Product Ownership, Release Planning, Iteration Planning, Development Practices, Quality Assurance Practices, and Team Cohesiveness etc. This would help the team to identify the gaps in its current implementation of Agile and team can identify a plan to bridge these gaps. The teams should conduct this assessment together (so that they have collective feedback and awareness about improvement aspects) every quarter.
It is essential for an organization to ensure that its Agile adoption is moving in the correct direction and team is not falling into the trough of disillusionment. A project can fall into valley of disillusionment, if it ends up focusing on just the practices but not focusing Agile principals and thus resulting in fractured Agile implementation. An Agile project should have a defined governance model so that the required stakeholders are aware of the progress being achieved since Agile adoption has started.
Based on our analysis, we have observed that these are some of the key attributes used by different individuals/organizations for identifying ROI of Agile:
- Value delivered to the end user/customer
- Achievement of Business Goals
- Reduction in Cycle Time
- Reduction of costs, defects, waste, delays in the organization
- “Break-even point” i.e. the point where the value generated covers the costs incurred on Agile transformation
Agile project management does provide value to the end users if applied correctly. It is important for an organization to define its objectives for adopting Agile very clearly and should measure progress on these objectives periodically. Implementation of Agile methodology with a strong focus on Agile values/principles would definitely provide the desired outcome and can result in greater satisfaction for a customer as well as other stakeholders.