Est. reading time: 7 minutes
Author: Steph Locke
Businesses with the highest developer velocity experience the highest revenue growth, according to new research by Microsoft and McKinsey. Read on to understand the factors impacting developer velocity and how you can start building a strategy to improve this vital area of technology in your business.
Developer velocity is the ability to drive transformative business performance through software development. Manufacturers embracing digital technologies need to be aware of the factors driving developer velocity as it will help them focus their efforts, so they get more out of their investments in staff and time.
Companies in the top quartile of the Developer Velocity Index (DVI) outperform others in the market by four to five times. Top-quartile companies also have 60 percent higher total shareholder returns and 20 percent higher operating margins.
The companies getting it right also tend to rank higher in innovation, customer satisfaction, brand perception, and talent management so it’s clearly not just a back-office, hidden department type of initiative.
So what are the key factors to success? As always, the answers are people, processes, and tools!
Culture eats strategy for breakfast
How your company works and grows together is the biggest impactor of developer velocity. The top four areas of focus are:
- Psychological safety: an environment that supports staff in being able to experiment and learn
- Collaboration and knowledge sharing: an environment in which working together and distributing knowledge rather than hoarding it
- Continuous improvement culture: an engrained practice of being better today than we were yesterday
- Servant leadership: managers are there to assist their team in scaling rather than overseeing them
A product-oriented structure for delivering business value was the second biggest factor impacting high developer velocity after psychological safety.
Product management is an organizational function that guides every step of a product’s lifecycle: from development, to positioning and pricing, by focusing on the product and its customers first and foremost. To build the best possible product, product managers advocate for customers within the organization and make sure the voice of the market is heard and heeded. 6
Many manufacturers may already have a product-oriented structure to their physical operations, but it becomes important to think about how digital operations align inside that view.
Internally, you might have IT delivering tools for use inside your organisation. If they are, you might want to think about enablement in terms of products like “Remote working”, “Knowledge sharing”, “Warehouse management”, and so on. You probably don’t have enough people (because when do we ever have enough people eh?) to have whole teams newly created to work on each of these in a full-time capacity with dedicated product managers for each area. Instead, you can look at reorienting your teams into cross-functional groups that work on clusters of capabilities and embracing hybrid business/technical staff who can help drive the conversation of benefit. This can work like data champions in stimulating a delivery of work that matters most to your transformation.
If you’re embracing new models through servitisation, extending your value chain into the B2B2C world, or going directly to the customer, your digital offering is likely to be critical. Businesses are wary of insecure code in their supply chain and end-user customers are fed up with poor software. You need to be embracing dedicated product manager roles to any technology that is shipping to customers.
How you build your technology team and retain them is the third key cultural factor to being able to offer significant business value using technology.
Our study found that the talent factors most correlated with high rates of Developer Velocity–in addition to the impact of tools on talent outcomes as discussed earlier–are incentives, multifaceted recruiting programs, a rich program of ongoing learning, well-defined engineering career paths, and an active measurement of team health. 2
Acquiring developers as a manufacturer can be hard. We regularly hear from manufacturers about difficulties attracting people. The biggest issues I see are salary, 100% in the office, and this question of talent management.
In the in-depth study into some of the top performing leaders, Capital One addressed some of their talent management and recruitment gap through an in-sourcing process:
Capital One values in-house talent across the company to drive employee ownership and quality. Hiring technical talent became a key focus, especially concentrating talent on primary areas that drive business growth. Building partnerships with universities was especially important, as was training and growing early-in-career talent with both banking domain expertise and technical knowledge. Capital One attracted talent with a unique value proposition: solving real world customer problems at a scale of millions of users per day. 1
In contrast, ABN AMRO took a decision to integrate external organisations and contractors:
Further, a core ABN AMRO value is that any third party it works with is considered a partner, not a contractor. Partners were included in broader decisions (such as technical roadmaps) and internal trainings. Some ABN AMRO employees even relocated to offshore development facilities to form closer bonds with partner teams. Their efforts were so successful that many partner teams hung pictures of Amsterdam on their walls and adopted ABN AMRO’s values as their own. 1
Ultimately, whether you grow your team through permanent employees or - term relationships with service providers, you need to spend time on making sure people are retained, rewarded, and valued.
Product management heavily influences processes but additional areas around team structure, compliance and security, and technology debt management are also big factors.
Effective compliance and security processes and “baking them in” to the technology workflow is critical to being able to deliver quality software to solve your internal needs or those of your customers.
We see significant standards for software involved in sectors like automotive, but we also need to think about how it applies to internal-use software too. Using old, out of date, on-premises solutions is a common vector for security vulnerabilities, with manufacturers paying millions out in ransomware cases. 8
Getting clued up on security & compliance in a whole new area, on top of what you already have to do for your physical products can seem overwhelming. We often recommend using more of a Microsoft stack in the cloud to help reduce your software sprawl, get the most out of licensing costs, and give you superior compliance controls. Microsoft also make it easy to start getting the compliance and security fundamentals right with an online learning path designed for business and IT folks alike to learn. This is a great way to start ensuring better security practices.
The final area that helps you deliver the most value from technology is tools – the technology you use to ensure the right thing gets built, quickly, effectively, and with good quality.
Public-cloud adoption as a catalyst of Developer Velocity is especially strong for nonsoftware companies – public-cloud adoption has four times the impact on their business performance than it does for software companies. 2
Top 10 tools
The top ten areas to invest in tools for your teams are:
- Planning tools
- Collaboration tools
- Development tools
- DevOps tools
- Public cloud adoption
- Test automation
- Low- or no-code tools
- Software architecture
- AI assistance in development
- Infrastructure as code
For companies with fewer developers and are not involved in making software generally, public cloud adoption, low- or no-code tools, and AI assistance can make much bigger gains. This gels with our experience providing no-code tools that use AI to help people in different business units develop digital automations to solve problems.
Roadmap for success
To summarise what manufacturers should prioritise in terms of actions to improve developer velocity in terms of where they are now:
- All manufacturers
- Talent management
- Low developer velocity
- Move to the cloud
- Develop more agile working practices
- Medium developer velocity
- Improve compliance and security practices
- Develop a product management function
- High developer velocity
- Embrace open source technologies
- Developer Velocity: Lessons from digital leaders whitepaper
- Developer Velocity: How software excellence fuels business performance whitepaper
- Developer Velocity Assessment
- Developer Velocity Lab publications
- Team Topologies
- What is product management
- StackOverflow Developer Survey 2020
- Manufacturing Sector Paid Out 62% of Total Ransomware Payments in 2019