Lean Metrics How to measure and improve the flow of work. Chris Hefley, CEO of LeanKit. November 5 th, 2014

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2 Lean Metrics How to measure and improve the flow of work Chris Hefley, CEO of LeanKit November 5 th, 2014

3 Introduction to Lean Metrics What metrics should you measure? How to track them? What effect do they have on each other? What are your team s improvement goals? How to run improvement experiments?

4 Introductions

5 What are Lean Metrics? Flow Metrics WIP Blockers Queues Lead Time and Cycle Time Throughput Cumulative Flow Diagrams Quality Predictability Risk Cost of delay Forecasting and Monte Carlo simulations

6 Vanity Metrics and Proxy Variables A proxy variable is a quantified measure that substitutes for the real economic objective: life-cycle profits. By focusing on proxy variables, product developers delude themselves into thinking they understand their economics. They do not. It s only when we understand the mapping between proxy variables and life-cycle profits that we can really see the economic consequences of our choices. - Don Reinertsen in The Principles of Product Development Flow

7 Understanding the System Economics Push and Pull Commitment Point Queues Delivery Point Flow

8 Backlog Ready (6) Development Test (3) (3) In Process Done In Process Done Deploy Done F6 F12 F113 F94 F15 F88 F1 F2 F3 F4 D1 F5 The Backlog is WIP Unlimited Adding items to it represents a PUSH Commitment points Development and Test PULL work when they have capacity. They re WIP-limited, so that the system doesn t get overloaded Queues We deploy on a schedule (2x/month). The deploy queue is also WIP unlimited. This is another PUSH

9 Choosing What to Measure I always start by developing an understanding of the economics, identifying the queues, and then determining their costs. However, there are actually many places a company can start. Some companies start by reducing batch sizes in their processes, others by making work-in-process inventory visible with visual control boards, and others by implementing WIP constraints. In general it helps to pick something that is causing pain and to produce meaningful results quickly. This generates energy that can be harnessed to make broader changes. - Don Reinertsen

10 Flow Metrics WIP Blockers Queues Lead Time and Cycle Time Throughput Cumulative Flow Diagram

11 What is Work-In-Process? All materials and partly finished products that are at various stages of the process Value Demand that has been started, but is not yet providing value to the customer Copyright Net Objectives, Inc. All Rights Reserved 11

12 WIP and Queues Development Time 5 Days (~ 15%) Total Story Lead Time 30 days Blocked and Waiting Time 9 Days Testing Time 2 Days Waiting Time 3 Days Defect Rework 2 Days Waiting Time 8 Days Release / DevOps Time 1 Day By Troy Magennis, FocusedObjective.com used by permission

13 WIP and Queues Development Time 5 Days (~ 15%) Total Story Lead Time 30 days Blocked and Waiting Time 9 Days Testing Time 2 Days Waiting Time 3 Days Defect Rework 2 Days Waiting Time 8 Days Release / DevOps Time 1 Day By Troy Magennis, FocusedObjective.com used by permission

14 WIP and Queues Pre Work 30 days Story / Feature Inception 5 Days Waiting in Backlog 25 days Total Story Lead Time Active Development 30 days 30 days Post Work 10 days Waiting for Release Window 5 Days System Regression Testing & Staging 5 Days

15 WIP and Queues Pre Work 30 days Story / Feature Inception 5 Days Waiting in Backlog 25 days Total Story Lead Time 30 days Post Work 10 days 9 days (70 total) approx 13% Waiting for Release Window 5 Days System Regression Testing & Staging 5 Days Active Development 30 days

16 Managing Queues Work in Process Work in Process vs Work in Progress Often interchangeable In Progress all work on the board In Process currently working on Only make the distinction if required by your context See Measure overall WIP

17 Examples from a LeanKit case study with one of the world s largest private healthcare providers

18

19 Queues

20 Blockers How many items are blocked? How long do they stay blocked?

21

22 Little s Law

23 Lead Time Start Finish Start and Finish points are arbitrary So, we can talk about Customer Lead Time or Development Lead Time or QA Lead Time

24 Cycle Time Request Received Start Work Finish Often used interchangeably with Lead time You may consider Cycle time to begin at the commitment point Again, be sure to clarify what you mean when using these terms

25 Takt Time Finish takt takt takt Takt Time = the time that elapses between two units being delivered Rarely used in Kanban for knowledge work

26 Backlog Ready (6) Development Test (3) (3) In Process Done In Process Done Deploy Done F6 F1 F12 F113 F2 F3 Commitment points F94 F4 F15 D1 F88 F5

27 Throughput Throughput = Average number of units processed per time unit

28 Little s Law, again

29 Little s Law Example WIP = 32 cards Throughput (average) = 1.25 cards/day Cycle Time = 32/1.25 = 25.6 days Now say WIP starts going up, to 40 cards Cycle Time = 40/1.25 = 32 days Little s law allows us to roughly predict the effect of allowing additional WIP into the system What if WIP goes down? Cycle Time = 20 cards/1.25 cards/day = 16 days

30 Lead and Cycle Time Charts Average Cycle Time by Card Type

31 Lead and Cycle Time Charts 35 days Statistical Process Control (SPC) Chart

32 Examples from a LeanKit case study with one of the world s largest private healthcare providers

33

34 Cumulative Flow Diagrams

35 Process Flow Simulator flower.agilesparks.com agilesparks.com

36

37

38

39

40

41

42

43 Cumulative Flow Diagrams

44

45

46

47 Little s Law, again

48 Quality Defects Regressions (i.e. Cards moving backwards) Failure Demand

49

50

51

52 Predictability 68% 95% 99%

53 Cost of Delay Is a month of delay worth one million dollars or one thousand dollars? Approximately 85 percent of product developers cannot answer this simple question. Don Reinertsen

54 Cost of Delay Curves

55 Risk

56 Estimating the Right Things I m not defending the obvious waste of being asked to estimate work that is going to proceed regardless of the time and cost taken to complete; there is little rational reason to waste time putting together these estimates. Instead of estimating all the things that should go right, we should be estimating the things that may go wrong. Troy Magennis FocusedObjective.com

57 Monte Carlo Simulation

58 Staff, Work, Risks, Process, Defect Rate, etc. A model of the project and Team Date Forecast Budget Forecast Date Certainty Risk Impact Cost Certainty Risk Impact Staff Analysis Skill Balance Best Utilization Retention Risk Historical Data or Expert Judgment Simulation Engine A Monte-Carlo simulation can present you with a range of possible outcomes and their likelihood. And the levers you can pull to change the outcomes. Sensitivity Analysis Experiment / Update Loop Change Model and Test Hypothesis Factors to manage next Factors worth investigating FocusedObjective.com

59 Q&A Can you use this approach for measuring any kind of project? How to make the best use of Class of Service? How to measure lead time when there are issues waiting on a response or action from customers? How do you measure delays between steps? If a card is moved backwards does that impact the metrics? How to measure business value for ROI of a Lean & Agile initiative when the business doesn't know its value?

60

61 Measuring Workflow with LeanKit

62 What to Use When Chart Cumulative Flow Diagram Cycle Time Card Distribution Efficiency Process Control Use this to Visualize flow of work, including throughput and completion time to see bottlenecks Track the average time a work item takes to be processed through the system Manage capacity allocation by seeing the distribution of cards by lane, priority, type, user, or class of service See how much of your work is sitting in Ready, In Process, or Done states Understand the variability of cycle times for work items moving through the process and monitor changes

63 Learning Resources How to Get Started with Continuous Improvement: How to use analytics in LeanKit Board-Analytics

64 Books

65 Games Agile Sparks Process Flow Simulator GetKanban game, online edition from corporatekanban.com

66 Software FocusedObjective.com Monte-Carlo Simulations for Kanban and Scrum LeanKit! LeanKit s new reporting engine will be based on OEM-ing Tableau

67 Thank you!

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