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A Study Review – “Developer Velocity: How software excellence fuels business performance”

There is no doubt that software developers are key to driving the performance of many businesses in regards to growth and success. We have seen the demand for software developers increase dramatically over the past few years. However, for the majority of businesses the investments spent on growing their software development team, have not led to the performance improvements that they were expecting.

Why is this the case?

Simply put, the focus in many cases has been on growing the team, as opposed to ‘empowering’ the team and creating the right environment for the team to develop i.e. improving the Developer Velocity. Developer Velocity is focussed on ‘unleashing the full potential of development talent’. Shivam Srivastava, Kartik Trehan, Dilip Wagle, and Jane Wang recently wrote an article based on a study for McKinsey & Company.

The researchers conducted an in-depth survey of senior executives at 440 large enterprises, more than 100 expert interviews and extensive external research. From this they created the Developer Velocity Index (DVI) “which pinpoints the most critical factors (related to technology, working practices, and organizational enablement) in achieving Developer Velocity, as well as those that are not nearly as important as many executives and observers might believe.”

Their findings were as follows:

1. Companies scoring in the top quartile of the DVI …

a. outperform others in the market by four to five times.
b. have 60% higher total shareholder returns and 20% higher operating margins than others in the market.
c. appear to be more innovative, scoring 55% higher on innovation than those in the bottom quartile.
d. score higher on customer satisfaction, brand perception and talent management.
e. saw revenue growth almost two times faster than other software companies in the same period.
f. utilise strong developer tools for planning, development, collaboration and
continuous integration and delivery.

2. Sectors that are more ‘digitally mature’ e.g. software, discrete manufacturing and financial services had higher DVI scores overall.

3. An organization’s capabilities which have the greatest positive impact on developer velocity and thus overall business performance are …

a. Tools (inc. planning tools, collaboration tools, development tools, DevOps tools, Low- or no-code tools, and AI assistance in development)
b. Culture (inc. psychological safety, collaboration and knowledge sharing, continuous improvement culture, servant leadership, and culture of customer obsession)
c. Product Management (inc. product management capabilities, product telemetry, product vision, linkage between strategy and team metrics, and rapid prototyping)
d. Talent Management (inc. incentives, capability building, recruiting, team health management, employee value proposition, engineering career paths)

These areas are also very closely correlated i.e. top scorers with one capability tend to also have high scores in the other three.

4. Business leaders interviewed assumed agile ceremonies at a team level would be among the top enablers of software development. However, while agile team practices are helpful in some areas (e.g. lifting performance in third- and fourth- quartile scorers), it was found that they do not play an outsized role in advancing DVI scores beyond that.

5. Best-in-class developer tools are the top contributor to business success, and the importance of these are severely underestimated by many leaders.

a. Organizations with strong tools (for planning, development, collaboration and continuous integration and delivery) are 65% more innovative than bottom- quartile companies.
b. The ability to access relevant tools for each stage of the software life cycle contributes to developer satisfaction and retention rates that are 47 percent higher for top-quartile companies compared with bottom-quartile performers.
c. Only 5% of executives recognized the link between utilising good developer tools and developer velocity and ranked tools among their top-three software enablers.

To conclude

There appears to be some disconnect between what leaders think drives software success and what actually does. This illustrated that few leaders fully understand the day-to-day developer experience. To address the status of Developer Velocity in an organization the focus should be on improving tools, culture, product management and talent management – with the main focus on researching and utilising developer tools that meet the needs of the developers at different stages of the development process.

“Improving Developer Velocity is a journey, not a race. The businesses that are achieving the greatest returns from their software investment are those willing to tackle the entrenched cultural and structural barriers that are often the hardest and most nebulous to address.”

Full article: telecommunications/our-insights/developer-velocity-how-software-