Enterprise Services Planning: Defining Key Performance Indicators

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<p>PowerPoint Presentation</p> <p>Learn to care about what the customer cares aboutKPIs should shape improvements to service deliveryEnterprise Services PlanningDefining Key Performance IndicatorsPresenterDavid J. Anderson</p> <p>Swift KanbanWebinar29 April 2015sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Lean Kanban North America 2015 conferenceBack to our rootsImplementing Kanban</p> <p>Looking to the futureEnterprise Services Planning</p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.2 Days of Learning SessionsChoose Your Day WorkshopsRisk Profiling David J AndersonCost of Delay Don ReinertsenProject Management with Kanban Cynefin 101 for Portfolio Kanban Simple Probabilistic Forecastingand more!Becoming Data-DrivenObjective RetrospectivesForecastingEnterprise Kanban &amp; Lean StartupScrumbanKanban CoachingBlockers for ImprovementRBS Project SizingKanban Academic Research </p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Kanban experience reportsUltimate SoftwareBazaarVoice web recommendations</p> <p>app and mobile development</p> <p>Includingsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Fitness for Purposesales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Which system is fitter?We dont know!</p> <p>System B is faster but without understanding customer expectations, both may be fit enoughMean 17 daysMean 12 dayssales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Measuring delivery against expectationMean 17 daysMean 12 daysSystem B is clearly fitter!</p> <p>System B delivers 5/7 within expectationsSystem A only delivers 3/7 within expectationssales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.What makes a pizza delivery servicefit for purpose ?Fitness criteria are metrics that measure things customers value when selecting a service again &amp; againDelivery timeQualityPredictabilitySafety (or conformance to regulatory requirements)</p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Fitness criteria are metrics that measure things customer or other external stakeholders value such as delivery time, quality, predictability, conformance to regulatory requirements or metrics that value actual outcomes such as customer satisfaction or employee satisfaction</p> <p>10Meet Neeta - a project managerNeetas team are working late (again)Neeta needs to feed them with pizzaWhat attributes do her team care about in a pizza delivery service?</p> <p>Delivery time =approximately 1 hourNon-functional quality =tasty &amp; hotFunctional quality (order accuracy) =doesnt matter if small mistakes are made, geeks will eat any flavor of pizzaPredictability =+/- 30 minutes is acceptableSafety =so long as health &amp; safety in food preparation is good, its finesales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Fitness criteria are metrics that measure things customer or other external stakeholders value such as delivery time, quality, predictability, conformance to regulatory requirements or metrics that value actual outcomes such as customer satisfaction or employee satisfaction</p> <p>11</p> <p>Neeta is also a working mom!Neeta gets home late. Her kids are really hungry and even though she shouldnt she decides to order pizza for themWhat makes a pizza delivery service acceptable to her kids age 4, 6, 9 &amp; 11 years?Delivery time =20 minutesNon-functional quality =doesnt matter too much, its pizza!!!Functional quality (order accuracy) =it must be cheese pizza! No other flavor is acceptable! (even if you take the pepperoni off)Predictability =+/- 5 minutes maximum!!!Safety =only mommy worries about that stuff!sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Fitness criteria are metrics that measure things customer or other external stakeholders value such as delivery time, quality, predictability, conformance to regulatory requirements or metrics that value actual outcomes such as customer satisfaction or employee satisfaction</p> <p>12</p> <p>To be fit for purpose there is a product component &amp; a service delivery componentWe need to offer a selection of different recipes which are tasty &amp; popular. However, we must also deliver with speed &amp; predictabilityLessonsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>Modern creative &amp; knowledge worker businesses often obsess with product definition &amp; strategyOperational excellence and service delivery excellence are often overlooked or treated as inferior management skillsLessonsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>Neeta has 2 identities Mother and Project ManagerEach of Neetas identities represents a different market segment for the pizza delivery serviceTraditional demographic &amp; income group segmentation does not accurately capture the context to understandfit for purposeNor, for that matter, do personas. As Neeta represents two segments not just one personaLessonsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Exercise Understanding Fitness for PurposePick a service with which you are familiarConsider what makes it fit for purpose?Which attributes make you select the service, again and again?What are your expectations for each attribute?Why?What (business) risks drive your expectations?</p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.16Fitness Criteria DriveEvolutionary Changesales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Fitness criteria are metrics that measure observable external outcomesFitness criteria are metrics that measure things customers or other external stakeholders valueDelivery timeQualityPredictabilitySafety (conformance to regulatory requirements)or metrics that qualitatively assess actual outcomes such ascustomer satisfactionemployee satisfaction</p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Fitness criteria are metrics that measure things customer or other external stakeholders value such as delivery time, quality, predictability, conformance to regulatory requirements or metrics that value actual outcomes such as customer satisfaction or employee satisfaction</p> <p>18Evolutionary change has no defined end pointEvolvingProcessRollforwardRollbackInitialProcessFuture process is emergentEvaluateFitnessEvaluateFitnessEvaluateFitnessEvaluateFitnessEvaluateFitnessWe dont know the end-point but we do know our emergent process is fitter!sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Traditional change is an A to B process. A is where you are now. B is a destination. B is either defined (from a methodology definition) or designed (by tailoring a framework).To get from A to B, a change agency* will guide a transition initiative to install destination B into the organization.*either an internal SEPG or external consultants</p> <p>19Business Risks, Fitness Criteria &amp; Classes of Service should all alignBusiness risks are things which are uncertain that affect the performance of our business such as nature of demand, consistency of supply, delivery predictability, seasonal windows of opportunity, time value of moneyClasses of service offered should align with business risksMetrics used to evaluate service delivery capability should be fitness criteria that are derived from specific business risksFor example, opportunity cost of delay requires us to measure lead time and understand sensitivity to schedule uncertaintysales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Select Key Performance Indicators Carefully!KPIs should be fitness criteria metrics with threshold values that represent good enough the level where the service delivery is fit for purposeKPIs should assess service delivery capability and indicate fitness for purpose. In doing so, a KPI indicates your likelihood of success of surviving and thriving - by adequately satisfying your customers?KPIs should be recognizable by your customers as something meaningful!If your customer doesnt recognize the metric it isnt a key performance indicator, it is some other kind of metricsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Other Useful MetricsSome other metrics are usefulThose which guide improvementsThose which indicate general healthIs your metric evaluating and guiding a specific change to improve fitness of your business such as an initiative to improve vendor response times?Or, is it a general business health indicator such as liquidity?If neither of these, then it is a metric that you almost certainly dont need! It should be removed!sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Defining Fitness Criteriasales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Market Adoption Lifecycle Segmentation</p> <p>EnthusiastsEarlyAdoptersEarlyMajorityLateMajorityLaggardsRateOfMarketAdoptiontimeMooresChasmLittleChasmHipCool BuggyCommunitydevelopment NicheMarketFeatures</p> <p>Good func qualityAdequate non-func quality PermissionGivingEarly adopter</p> <p>Exceptional func and non-func qualityCostEffectiveBroad Features</p> <p>Exceptional func and non-func qualityLow Cost Easy Access Forced adoption Viewed as taxationFit for purposeFit for purposeChanges over timesales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>Customer Storytelling &amp; Clustering</p> <p>Tell stories about real customers, their motivation, what they buy and why. Cluster similar storiesGive each cluster a nickname e.g.All insAspirationalsBet hedgersBoy scoutssales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>You cant just ask!</p> <p>Neeta, how fast would you like your pizza delivered? How predictable do you need us to be with our delivery estimate?Customers will tend to tell you they need better service and more features than they really need!Would you pay more for the things you say you need and want?No, probably not!Believe what customers actually do, do not believe what they say theyll do!</p> <p>Actually behavior will vary from declared intent!sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Who knows your customers?Front line staffThose who take and those who deliver ordersThose who provide customer careOften the lowest paid staff in a businessOften the highest turnover, shortest tenured positionsAnd yet, they have the vital information that enables the business to survive, thrive and compete</p> <p>sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>Pizza boy knows Neetas Story!</p> <p>Staff who meet customers can be trained to learn what matters to them and whyCreate ways to capture customer stories or directly involve customer facing staff when defining customer segments fitness criteriasales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>GT car manufacturer story</p> <p>A well known manufacturer of GT cars determined customers were prepared to wait 21 months to take deliveryThey learned this by letting delivery time slip to 27 months and receiving cancellations and customers switching to a rival manufacturerDetermining fitness criteria thresholds by reducing service levels until customer complaints rise to dangerous levels isnt a safe to fail approach!Damaging your brand, your reputation and your profitability is a strange way to discover how to be</p> <p>fit for purpose!sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>Retarding customer service until customers complain vehemently or take their business elsewhere could be damaging</p> <p>Undermines brandDamages reputationLoss of market shareLoss of revenue</p> <p>Probing for threshold values by reducing service quality isnt safe to failIs it safe to fail?</p> <p>We need general guidance that allows us to probe for fitness criteria threshold values that is safe to failIf we cant ask, and we cant allow service to decline until complaints make the threshold evident, what can we do?sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Probing for Threshold Levelssales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Look for clusters or patterns of demand, or patterns of similar expectations, or new sources of demand that may represent an emerging segmentProbe with classes of service</p> <p>Create a class of service to respond to the believed new segment</p> <p>Set service levels at or close to anticipated threshold levelssales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Probe with classes of service</p> <p>Observe take up of class of service</p> <p>Is it over-used? (or abused?) If so tighten qualification criteriaIs it under-used? Consider removing itIs it used but you fail to deliver to expectations? Do people complain? If no then consider removing it. You are over promisingFixed delivery date class of service emerged this way.</p> <p>Initially abused by marketing, eligibility criteria were tightened up.sales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Telecom Equipment Example</p> <p>A platform maintenance department at a telecom equipment manufacturer receives demand only from internal application departments Each request is tagged with the originating telco operator for whom the request is being implemented. Each operator is given a lane on the kanban boardsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Telecom Equipment Example</p> <p>Imagine 3 American telco operators with different strategic positions</p> <p>Verizon value quality mostSprint value time-to-marketVoicestream/T-Mobile USA values low costNow design and offer 3 classes of service</p> <p>High quality, tight done criteria for each stepShort lead time pull priority, looser done criteriaLow cost junior staff, lowest priority compared to other worksales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Different lanes, different risksDoneFHECAIEngin-eeringReadyDeploy-mentReadyGDGYPBMN10P1ABOngoingDevelopmentTestingDoneVerificationAcceptance1010Verizon1010SprintT-Mobile10DEDA</p> <p>Each lane represents a different source of demand but also different fitness criteria and threshold valuesDifferent classes of service and different pull criteria policies are defined for each lane providing service levels tuned to the fitness for purpose expectations of each customersales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>To have confidence you are offering a service that is fit for purpose, you must offer different classes of serviceTo serve more than one market segment adequately, you must offer a selection of classes of serviceLessonsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>Classes of service should align to market segments and fitness criteria (or stakeholders needs)LessonKPIs cannot be general! They need to be tied to customer expectations. Different segments have different expectations. Hence, different threshold levels of the KPIsales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.Classifying Metricssales@leankanban.com @leankanbanuCopyright Lean Kanban Inc.</p> <p>85% at10 daysMean5 days98% at25 days</p> <p>Change RequestsProduction Defects85% at60 daysMean...</p>

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