High-performance companies
Organizations with a high engineering velocity outperform their competitors and disrupt markets. But what exactly are high-performance companies?
The Developer Velocity Index
In April 2020, McKinsey published their research about the Developer Velocity Index (DVI) (Srivastava S., Trehan K., Wagle D. & Wang J. (2020)). This is a study taken among 440 large organizations from 12 industries that considers 46 drivers across 13 capabilities. The drivers are not only engineering capabilities—they also contain working practices and organizational enablement such as the company culture. The study shows that the companies in the top quartile of the DVI outperform other companies in their market by four to five times, and not only on overall business performance. Companies in the top quartile score between 40 and 60% higher in the following areas:
- Innovation
- Customer satisfaction
- Brand perception
- Talent management
The study conducted interviews with more than 100 senior engineering leaders at 440 large organizations across 12 industries. The interview contained 46 drivers across 13 capabilities in 3 categories, outlined as follows:
- Technology: Architecture; infrastructure and cloud adoption; testing; tools
- Working practices: Engineering practices; security and compliance; open source adoption, agile team practices
- Organizational enablement: Team characteristics; product management; organizational agility; culture; talent management
The DVI, therefore, goes way beyond pure developer velocity. It analyzes the engineering velocity and all the factors that influence it and relates them to business outcomes such as revenue, shareholder returns, operating margin, and nonfinancial performance indicators such as innovation, customer satisfaction, and brand perception.
The state of DevOps
The findings align with the results from the DevOps Research and Assessment (DORA) State of DevOps report (https://www.devops-research.com/research.html#reports) but take them one step further by adding the business outcomes. The DevOps Report 2019 states how elite performers compare against low performers (Forsgren N., Smith D., Humble J. & Frazelle J. (2019)), as outlined here:
- Faster value delivery: They have a 106-times faster lead time (LT) from commit to deploy.
- Advanced stability and quality: They recover 2,604 times faster from incidents and have a 7-times lower change failure rate (CFR).
- Higher throughput: They do 208 times more frequent code deployments.
High-performance companies not only excel in throughput and stability but are also more innovative, have higher customer satisfaction, and greater business performance, (see Figure 1.3).
Figure 1.3 – High-performance companies
Focusing on the measures that highlight the capabilities that set apart high-performance companies from medium and low performers, you can make your transformation visible and provide management with metrics that hopefully matter more to them than lines of code or estimation-based velocity.