The Engine of Customer Value

The goal of a company is to have the willingness to truly engage the customer in every step, from idea to delivery and into reflection. The thrusters within this engine include activities focused on learning about the current customers or potential customers via personas, capturing ideas from customers, getting continuous feedback from customers as the product is built, delivering to customers, receiving actual customer outcome data (in other words, sales or usage), and reflecting on the status of the customer value once it is in the marketplace to better understand the next steps of value. This is what I refer to as the CVD engine that runs your business (See Figure 2-1).

Figure 2-1. Customer-value-driven engine

To keep this engine running well, you need two important contributors—the engaged customer and the engaged employee. Engaged customers ensure you move in the direction of customer value. Engaged employees maintain the engine so the value is delivered with high velocity and quality. If all thrusters are firing well, the engine purrs, which increases the chances for a successful delivery of customer value. If one of the thrusters is sputtering or missing, it reduces the success of the engine and, hence, reduces the potential value being delivered to customers.

What you are also trying to avoid is having an engine whose horsepower is diverted to many weighty systems that have little to do with the delivery of customer value. Effectively, what you are looking for is building an engine where every unit of horsepower is focused primarily on delivering customer value.

Moving Away from Certainty

In many organizations, there is a need to act as if you are certain. In fact, the higher up you go in an organization, the compulsion of acting with certainty becomes greater and greater. Statements like “That’s why we pay you the big bucks” are used to imply that the higher you are in an organization, the more you are expected to know all the answers. Certainty is an anti-pattern in getting to customer value and the polar opposite of what is needed to fuel a CVD engine.

Some people think they must act with “pretend certainty” for the benefit of their careers. Others have convinced themselves of “arrogant certainty”; they believe they know the answer or solution but don’t provide any solid basis for this certainty. Unfortunately, this arrogance can be interpreted as confidence that can be dangerous to the success of a company. Nassim Nicolas Taleb¹ refers to this as “epistemic arrogance,” which highlights the difference between what someone actually knows and how much he thinks he knows. The excess implies arrogance.

What has allowed certainty within companies to thrive is that there is a distance between the upfront certainty and the time it takes to get to the final outcome. There lacks an accountability trail between certainty at the beginning and the actual results at the end. Often the difference is explained away by the incompetence of others who didn’t build or implement the solution correctly.

The truth is somewhere in between. Unfortunately, the concept of certainty is dangerous to an enterprise since it removes the opportunity of acknowledging the truth and allowing the enterprise to apply a “discovery” mindset toward customer value via customer feedback loops and more.

You also want to avoid the inverse, which is remaining in uncertainty due to analysis-paralysis. A way to avoid this is to apply work in an incremental manner with customer feedback loops to enable more effective and timely decision making. Customer feedback will provide you with the evidence for making better decisions. Applying an incremental mindset will enable you to make smaller bets that are easier to take and allow you to adapt sooner.

Adapting toward Value

A healthier and more realistic approach is to have leaders who understand that uncertainty is actually a smart starting position and then apply an approach that supports the gaining of certainty. The reality is that the earlier you are in the lifecycle of the work product, the less customer information and certainty you have. It is, therefore, incumbent upon you to have an approach that admits to limited information and certainty and then apply a discovery and fact-building approach toward customer value. This is why you must learn more about the customers and their needs for the new idea or feature you are building for them.

Challenging Assumptions

When ideas that are valuable to customers are identified, there are often some expressed and many unexpressed assumptions. It is important to tie assumptions to the idea that is perceived to be customer value and rigorously explore the assumptions. It is often faulty assumptions that lead you to believe something is perceived to be more valuable of an idea than it really is. This can lead to work that is actually of low value to the customer, closing off options for change too early or ignoring valuable customer feedback along the way.

Challenging the assumptions of perceived customer value helps you rationally discuss the progression of how you got to the conclusion of value. It separates what you think you know from what you actually know. By discussing the assumptions, major uncertainties at the time are uncovered. By highlighting these uncertainties, it provides you with information that helps you think about how to validate the assumptions. By having a conversation around assumptions, it helps those involved with an idea have a better understanding of possible customer value and the work ahead.

Earlier I discussed pretend and arrogant certainty. A good way to uncover where the certainty is coming from is to challenge the assumptions that lead to certainty thinking. It can be quite dangerous for an enterprise to ignore the signals of too much expressed certainty. This can lead a company to select lower-value work.

Shedding Enterprise Weight

As part of being a value-driven enterprise, it is important to remove any organizational processes or activities that do not directly link to customer value. The goal is building a customer-value engine that focuses on delivering customer value—not the weight of non-value added activities. This can be particularly challenging when those within the organization sub-optimize for internal processes or, more dangerously, for themselves.

It is important to gauge what your organization is optimizing for. As you look across your organization, do you see processes that are too heavy? I have seen groups whose functions are no longer central to the delivery of customer value yet continue to enforce their processes on others. I have seen multiple levels of management approval where only one (or none) should be necessary.

How many of you have witnessed situations where the customer feedback clearly told you that you were moving in the wrong direction of customer value, yet because of in-house governance and processes, feedback was inhibited or ignored and the original plan was followed anyway. Even when you spoke up, those “in-charge” choose to optimize for the process and not customer value. This is why the value “responding to change over following a plan” found in the Agile Manifesto is so important.

Do you see people who are focused primarily in building their own kingdom? Are you (or those within the organization) internally sub-optimizing for the preservation of the status quo, for ensuring bonuses, or for maintaining power positions rather than for satisfying the customer? Some people are so entrenched in their internally sub-optimized culture that they do not allow themselves to see the need to change until it is too late. However, they presumably have been allowed and even rewarded to continue this behavior, so changes are critical to this mindset.

When adapting Agile, there is often a lack of awareness of the amount of non-value-added work occurring. Value-added work is requested and validated by customers to produce working product. Non-value-added work is work not directly adding value as perceive by the customer. Some non-value-added work is even less valuable that others. While not all non-value-added work can be removed, attempts should be made to make it as lean as possible. As illustrated in Figure 2-2, when shedding weighty organizational process and non-value-added work, you can turn your cumbersome organization into a faster and leaner enterprise.

Figure 2-2. Shedding processes and non-value-added activities to be a faster and leaner enterprise

Management Closer to Customer Value

Every senior and C-level manager should be as close to customer value as the product owner, salespeople, marketing department, and development teams building products. I’ve been in some organizations where management and other significant company members have never seen the products their teams are building or met the customers those products are meant for. If a company has dozens of products, I’m not suggesting that leadership must be close to all of the products, but they should be very close to the top 5 or 10 products, including those where there is an investment toward innovation.

The key is narrowing the gap between the employees and customers. The two-degrees-of-separation rule can be an effective means to determine how far away an employee is from a customer. Two degrees of customer separation would be “you (as an employee) connected to an employee connected to the customer,” as illustrated in Figure 2-3.

Figure 2-3. Two degrees of customer separation

The further away an employee is from the customer, the less likely that employee understands what the customer considers valuable. Worse yet is the less employees understand customer value, the less likely they will consider customer value in their work and decision making. This can further lead to sub-optimizing toward their own work.

The goal is for all senior managers and C-level professionals to have witnessed the company products their teams are building or to have met the ­customers those products are meant for. This can be in the form of (and not limited to) attending product demonstrations as part of a sprint review, attending a ­customer advisory board, and visiting customers who are using products from the company.

Are You Optimized for a Culture of Customer Value?

Moving to a culture where customer value is paramount is an important step in achieving an enterprise that is truly Agile and the business benefits it can bring. Applying a CVD framework and its customer-value engine allows you to focus your company’s horsepower primarily on delivering customer value.

Focus on the meaning of having an engine for customer value, the benefits of the discovery mindset, the risks of certainty too early, the strategies to methodically gain certainty, the task of challenging assumptions to better understand the initial perceived value, the necessity of shedding those enterprise processes and non-value added activities that are weighing down the organization. And, last but not least, focus on getting management closer to the actual customer.

It takes a smart leader to recognize the need to change and a strong leader to make the changes needed for an enterprise to optimize for the customer. This will often mean creating an enterprise where everyone is now one or two degrees closer to the customer. It will require a hard look at the current talent of managers and individual contributors.

Are people sub-optimizing for themselves? Are they bringing pretend or arrogant certainty to their work? Are they engaged with activities that focus on customer value? Are they promoting or passively allowing non-value added activities to occur at the expense of focusing on customer value? Have they actually seen or operated the top products of the company?

The answers to these questions can help you understand the enterprise you have. Once you understand this, you can adapt toward the customer-value-driven enterprise you need.

For additional material, I suggest the following:

• The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries, Crown Business, September 12, 2011

• The Black Swan: The Impact of the Highly Improbably, Second Edition, by Nassim Nicolas Taleb, Random House, May 11, 2010