Evidence-Based Management: The Four Key Value Areas in Scrum

When we talk about evidence-based management in Scrum, we’re focusing on making decisions grounded in data rather than gut feeling. A core element of this approach involves evaluating our work through four key value areas. These areas ensure a holistic view, covering different aspects of the system instead of focusing narrowly on specific metrics. This allows for a more strategic understanding and avoids suboptimal optimizations.

What Are the Four Key Value Areas?

The four key value areas outlined in Scrum’s evidence-based management guide are categorized into two groups:

1. Market Value - Focused on the external perception and value of our product in the market.

2. Organizational Capability - Concentrated on internal capabilities and efficiency.

Each of these categories contains two key value areas, offering a comprehensive view of both product and organizational performance.

Market Value: Understanding Customer Needs and Market Potential

Market value is about measuring how our product fares in the market. It includes two key value areas:

1. Current Value

Current value is all about understanding the present performance of our product. It measures the value we are providing right now, focusing on customer satisfaction and usage patterns.

Key Metrics to Measure Current Value:

• Telemetry Data: Real-time or near-real-time data that shows which features customers use, how often they use them, and which segments of customers interact with these features.

• Customer Satisfaction Scores: These can be gathered through surveys or feedback forms, though they tend to be lagging indicators.

• Revenue Metrics: Such as Revenue Per Employee or overall Revenue Growth, which indicate the financial health derived from the current product.

💡 Pro Tip: If you’re a product manager, make sure to leverage telemetry data. It’s more immediate and can offer insights into how users are engaging with your product.

2. Unrealized Value

Unrealized value represents the potential opportunities that haven’t been captured yet. This can include new features, market segments, or entire product lines. It’s about envisioning what could be rather than what is.

How to Identify Unrealized Value:

• Product Backlog Analysis: Review items that have not yet been developed and analyze their potential impact.

• Market and Competitor Analysis: Look for gaps in your competitors’ offerings and industry trends.

• New Market Exploration: Think about expanding your product into untapped markets, offering new capabilities, or attracting new customer segments.

🧠 Example: Think of a TV series. Typically, a brand-new show can capture a larger audience than an additional season of an existing one. The same applies to products: new features can attract more users than merely adding to existing ones.

Organizational Capability: Building a Strong Foundation for Success

The second category is organizational capability, focusing on how efficiently and effectively we operate internally. This is particularly crucial for engineering teams and product development.

3. Ability to Innovate

This value area is about how well the organization can create new features and improve existing ones. It measures whether the team is bogged down by technical debt or able to spend time on innovation.

Metrics for Ability to Innovate:

• Technical Debt Ratio: High technical debt can severely limit innovation.

• Innovation Rate: Percentage of time spent on new functionality versus maintenance.

• Time Spent on Code Merges: Especially relevant for organizations with multiple branches.

📌 Real-World Insight: A few years back, I worked with a company managing 90 teams across 13 locations. With such a large setup, merging branches and getting a unified product was a significant challenge. The process consumed substantial time and effort, which hindered innovation. Reducing these complexities can boost your ability to innovate.

4. Time to Market

Time to Market is about how quickly you can deliver changes or new features into production. A fast time to market means you can adapt swiftly to feedback, fix issues quickly, and capitalize on new opportunities.

Key Metrics for Time to Market:

• Cycle Time: The time it takes from code commit to deployment.

• Release Frequency: How often you release new versions or updates.

• Lead Time for Changes: How quickly a requested change reaches users.

🚀 Example: Facebook is known for its impressive 12.5-minute cycle from developer code commit to production, which includes all testing. This speed allows them to adapt quickly to user needs.

Balancing Innovation and Stability: Why Both Matter

Achieving the right balance between innovation and stability is crucial for long-term success. While it’s essential to keep introducing new features, maintaining a stable product is just as important.

Strategies for Effective Balance:

• Reduce Technical Debt: Use tools like SonarQube to identify and manage code flaws, which can help free up time for innovation.

• Focus on Quick Wins: Prioritize smaller, impactful features that can be quickly released to maintain user engagement.

• Adopt Hypothesis-Driven Development: Test new ideas and features with real users to validate their potential impact.

🛠 Personal Experience: In maintaining the Azure DevOps Migration Tools, I implemented a fully automated CI/CD pipeline. The build time was 12 minutes, which initially slowed down my process. Shortening this feedback loop allowed me to iterate faster and deliver features more efficiently.

Why Evidence-Based Management Matters

Implementing evidence-based management helps organizations:

• Make Informed Decisions: Use data rather than assumptions to drive strategic choices.

• Enhance Customer Satisfaction: Understand and address user needs based on real-time data.

• Improve Team Efficiency: Identify bottlenecks in processes and address them effectively.

In an environment where both internal capability and market adaptability are vital, the four key value areas of evidence-based management provide a framework for sustainable success.

Wrapping Up: The Four Key Value Areas in Action

To summarize, the four key value areas of evidence-based management include:

1. Current Value: Focus on existing product performance and user satisfaction.

2. Unrealized Value: Explore untapped opportunities for growth and market expansion.

3. Ability to Innovate: Manage technical debt and prioritize time for new development.

4. Time to Market: Speed up delivery cycles and adapt quickly to changes.

By measuring and optimizing these areas, teams can strike a balance between innovation and stability, ultimately ensuring a robust and sustainable approach to product development.

👉 Take Action Today: Start tracking metrics in each of these areas to ensure that your team is aligned with evidence-based management principles. Embrace data-driven decision-making, and you’ll be well on your way to creating products that truly resonate with your customers.

By adopting this evidence-based approach, we can transform how we deliver value, both internally and to our customers. It’s not just about what we build—it’s about how we measure, adapt, and grow.