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    March 6, 2024

    Achieving Synergy: Uniting VSM and OKRs to Propel Business Value Realization

    In today’s dynamic landscape, leaders continue to strive to enhance organizational agility through the expanded use of Lean and Agile methodologies. As this move continues, the way teams measure progress must evolve. To monitor advancement, teams must establish strategic objectives that can be accurately measured. This blog post delves into the symbiotic relationship between two potent practices: Value Stream Management (VSM) and objectives and key results (OKRs). These two approaches are particularly valuable in scaled-agile environments. The synergy between these practices aids organizations in many ways, helping groups concentrate on mission-critical endeavors, achieve overarching business outcomes, enhance agility and velocity, and ensure value-driven predictability.

    OKRs and VSM: A coordinated approach to excellence

    To comprehend the synergies between VSM and OKRs, we must first examine each practice's individual objectives. Notably, VSM can inform OKR formulation, while OKRs reciprocally advance VSM objectives. Evident similarities form a strong foundation for mutual enhancement.

    Value Stream Management (VSM):

    • Defines end customer value for each product/service.
    • Identifies value-generating steps, while eliminating non-value-adding efforts.
    • Establishes optimizations that ensure smooth, value-centric product/service flow. 
    • Derives value from upstream activities.
    • Iteratively enhances and optimizes value creation until groups establish waste-free value delivery.

    Objectives and Key Results (OKRs):

    • Sets clear, value-related objectives within specific contexts or themes.
    • Quantifies progress or completion via measurable, variable, and credible key results.
    • Achieves milestones, advancing objectives in ways beneficial to overarching goals.
    • Cascades objectives into departments or functions, fostering ownership and improved outcomes.
    • Instigates organizational change by introducing quarterly OKRs, aligning actions with customer value.

    Mutual benefits: VSM and OKRs in action

    Encompassing lean and value stream KPIs, VSM metrics furnish leaders with comprehensive business intelligence. Insights can inform headcount changes, process and tooling adjustments, development cadence, and an array of metrics influencing efficiency, such as process time, cycle time, lead time, and throughput.

    This data-driven analysis from VSM aids organizations in charting their software and digital transformation journey. This journey maps the current state, and guides progress toward advanced development and delivery levels. Teams employ lean budgeting, which is centered on early customer satisfaction indicators. Lean budgeting diverges from traditional models by treating a business as a stable ensemble of products or services, which are enabled by cross-functional groups and continuous value streams.

    In organizations with mature Lean-Agile disciplines, OKRs empower teams to set, communicate, and monitor goals methodically. By intertwining organizational and team objectives with measurable outcomes, OKRs catalyze swift pivots and effective resource allocation. This strategic alignment across value streams, Agile release trains (ARTs), and teams ensures funds are channeled to high-impact areas that best address market demands.

    Contextual alignment: An imperative

    The synergies of OKRs and VSM are especially powerful in an organization practicing Lean and Agile. In these scenarios, you can define, link, and leverage OKRs at every level and build organizational coherence from them. It is interesting to note that OKRs help create context and at the same time they also need context to be implemented.

    There are several types of OKRs you can use. Here are three that stand out:

    • Outcome-based or portfolio OKRs
    • Output-based or feature OKRs
    • Program-based, or OKRs used by ARTs

    It’s important to understand the difference between the three so that you can implement them effectively alongside VSM. A common mistake that people make is to only follow a top-down approach with OKRs. Yet with OKRs, there is no one-size-fits-all approach. You have a template and you have the knowledge of how OKRs can benefit you. As I mentioned in my earlier blog post on VSM and metrics integration, starting small would be ideal.

    The other mistake is to look at activities rather than key results as a way to achieve objectives. The beauty about OKRs is that you can start anywhere in your software development or delivery setup, as long as you decide the intent or the context. For example, you need to determine whether your OKRs are outcomes-, output-, or program-based.  Here’s more on each of these OKR types:

    • Outcome-based or portfolio OKRs: Largely, outcomes would be a measurable change in users’ behavior. Crystallize your strategic themes and investment objectives around OKRs, and embed OKRs in every portfolio epic. OKRs owned by the portfolio should demonstrate how epics contribute to desired outcomes, and will help you with making investment decisions.
    • Output-based or feature OKRs: This OKR is targeted toward delivering a certain feature that makes an impact on the user’s behavior. Establishing OKRs for each feature provides great discipline, helping ensure teams articulate outcomes rather than solutions.
    • Program-based or ART-driven OKRs: ARTs sometimes set OKRs for high-priority initiatives, which provide laser focus to product management.

    We can go deeper into how OKRs can work for each of these contexts. But we’ll hold that discussion for later. For now, what is important to understand is that some OKRs will be about value in the form of measurable, customer impact. Other OKRs will be about improving flow by reducing lead time, reducing batch size, eliminating obstacles, or changing the organizational structure to make it easier to get work done. Finally, other OKRs will be about sustainable elements, such as people/team satisfaction, managing costs, reducing silos across different autonomous value streams, and so on.

    Five ways you can get OKRs right or wrong

    When implemented effectively, OKRs are transparent, with measurable key results and tangible milestones. OKRs allow everyone in the organization to see each other’s goals, from the CEO to the newest intern. This enables an entire company to align work around the same overall goals.

    Like any other new management practice, OKRs can be misunderstood, misused, and abused. To help you understand OKRs better, here’s a brief look at what OKRs are, and what they aren’t. 

    What OKRs are:

    • An ambitious aspiration
    • An alignment tool
    • A mix of contexts for different organizational functions
    • A strategy that cultivates the discipline to focus on strategic efforts, and say “no” or “not yet” to low-priority efforts
    • A simple-to-understand and sound strategy that can guide success, but that sets ambitious targets that won’t be met every time

    What OKRs aren’t:

    • A target
    • A measurement tool
    • Just a top-down approach
    • An annual task (OKRs should be planned quarterly)
    • The same as key performance indicators (KPIs) and management by objectives (MBOs)

    Conclusion

    Ultimately, harmonizing VSM and OKRs steers organizations towards holistic coherence and performance enhancement. This powerful combination enables organizations to achieve unparalleled agility, optimize value delivery, enhance customer value, and ensure effective resource allocation.

    If you want to learn more about our VSM platform, ValueOps by Broadcom, and how it can provide the critical metrics integration your teams need, be sure to contact the Broadcom ValueOps team today.

    Lance Knight

    Lance's one-of-a-kind experiences have helped him develop an array of skills across Sales, Sales Leadership, Sales Engineering, Customer Success, Agile Software Implementation, SCRUM, Interactive software application development, and continuous integration (DevOps). He has written books and white papers on developing...

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