Time and again we’ve talked about the importance of development teams for creating productive, high-performing digital business growth. Over the last decade, the shift to digital has seen businesses in every sector from manufacturing to retail ramping up their software development investments. With more players entering the field every day, there has never been a greater need for efficient and high-performance development capabilities.
For many executives in traditional industries, development departments can often end up becoming financial “black boxes” making them difficult to manage, and even harder to assess and optimize.
For leadership seeking better business performance through software development, it can be challenging to determine just what makes a development team successful. Often, it depends on a combination of empowering developers, creating environments conducive to innovation, and removing points of friction in the development process. The capacity to which organizations can support this is often referred to as “Developer Velocity.” (not to be confused with Velocity, as defined by Agile proponents).
Global leaders in management consulting, McKinsey and Company, refined a unique combination of features into a single measure of development capacity–the Developer Velocity Index (DVI). Their research has found a steady correlation between higher DVI and better ROI on software development initiatives.
So, what is the DVI, and how is it measured?
What is DVI?
McKinsey’s Developer Velocity Index differs from the popular Agile understanding of Velocity. Where Velocity in Agile terms reflects the amount of work accomplished within a given period, Developer Velocity refers to the capacity to drive transformative business performance through faster, more efficient software development and higher-quality outcomes.
The DVI is a compound metric derived from the analysis of individually identified performance drivers. These analyses are then grouped under three core areas:
This area is focused on measuring the availability and implementation of the tools, infrastructure, and system architecture that allow developers to carry out their work. High-performing companies support fast, efficient, and reliable software development by investing in the tech and tools their teams need. This, in turn, helps to reduce friction points in the development process. Conversely, software success can be hampered when outdated or inappropriately used tech and infrastructure create blockers and bottlenecks in development.
2. Work Practices
Team habits and development strategies can have a huge impact on the success of development teams. Work practices cover a range of cultural features from adherence to engineering best practices to the use of open or closed-source operational paradigms. All of these can impact the overall success of development efforts. Companies that feature strong security practices and prioritize technical debt management tend to realize higher DVI as well.
3. Organizational Enablement
Certain organizational features can contribute to building an environment that supports developer freedom, empowerment, and innovation. They typically include capacities for product management, company culture, organizational agility, and team management. Some of the greatest drivers of performance for software development tend to be strong organizational capacities for product and team management.
One of the key benefits of assessing DVI is determining both those features critical to better ROI as well as identifying those that may not contribute as much as expected. Of the 46 different features that contribute to the DVI, McKinsey’s research found four key drivers that were strongly correlated with improved business performance:
- Product management capabilities
- Developer tools
- Talent management
Why DVI matters
McKinsey and Company’s research found that higher DVI scores were strongly correlated with superior business performance. Companies in the top quartile of DVI scores showed 4 to 5 times faster growth than those in the bottom quartile. In comparison, between the second, third, and fourth quartiles the difference was far less pronounced. Top-quartile companies also showed a 60% higher total shareholder return and 20% greater operating margins. In terms of innovation, top-quartile organizations also outclassed their bottom-quartile peers by an average of 55%.
It should come as no surprise, that the companies in the top quartile, also scored higher on customer satisfaction, brand perception, and talent management–all features of successful and progressive organizations. While no two businesses are alike, pinpointing the key drivers of high DVI depends heavily on a few common strategies.
Improving your DVI
Top execs can sometimes be in the dark about which aspects of their organizational ecosystems are actually supporting development team productivity and innovation. As a result, many companies see weak returns on development investments. One way leaders can help software teams, and improve DVI, is by identifying which levers in their organization actively result in better performance and building on them. A 3-step approach to this involves identifying the scope of your investments, monitoring their ongoing performance, and defining actions to improve performance going forward.
While a lack of visibility can present a challenge, there are tools available that can help. Our clients, for example, use Foreworth’s comprehensive analytics and recommendations to gain a clear view of their software development processes. By covering key areas of the software development lifecycle, our platform also provides a well-rounded and detailed look at KPIs like:
- developer experience, productivity, and allocation
- technical debt management
- architectural integrity
- application security
- development investments
- code quality
What’s more, Foreworth’s automatically generated metrics and graphic visualizations provide insights into ongoing and historical trends for each of these areas in software development.
With these insights, monitoring the impact of investments over time becomes a simple matter. This in turn supports future decision-making and helps with tracking the outcomes of your investments.
No one size fits all
It’s important to bear in mind that in software development there is no “one-size fits all” solution. Depending on your industry, your product, and your development process, the investment strategies that work for one company, might not be what works to improve your DVI. Business leaders and their tech stakeholders must come together to agree on what information and insights are most beneficial for their specific situation. Facilitating this communication starts with building transparency, understanding, and trust. See how tracking your development’s metrics can help, here.