Why are some Tech companies more successful than other?
One factor is that they deliver faster new value to their customers than others. This implies that they don’t retain a lot of code that does not yet create value to their customers and that they can test new features promptly and adjust rapidly if needed. We call this capability of IT companies and development teams productivity or simply speed.
Why is this interesting to investors?
Development organizations with high productivity have established habits and processes and have the skills to be productive in even in the future. That is, given a certain amount of money invested and a certain burn rate, the customer value developed with help of this investment is larger for high-speed than for underperforming teams. Hence, the value developed for the investment and ultimately the return on investment on exit gets larger. All that provided that the developed product or service find their customers. But even if some of the developed features don’t create a real customer value, high-speed teams will find out earlier and can adjust.
Speed refers to the whole development process, from the identification of some needs all the way to the deployment to customers. It is not sufficient, to identify new features quickly if they take too long to be developed. It is not sufficient either if features get also developed quickly if they don’t get to the customers before the next release half a year later.
Speed at all costs, however, cannot be considered in isolation. Think of badly designed or buggy features that can even do more harm than good. Hence, speed is one factor to optimize for, but not at the costs of code correctness (or security or code quality etc.).
Speed can effectively and automatically be assessed in an IT due diligence process. It is common practice in agile project management today that IT teams use tool for issue and bug tracking and for contiguous integration. By observing the history of these tools, we can measure issues and bugs resolved and deployments per time.
All the above has also been supported by data. Researchers assessed, the speed of successful and lesser successful companies and found a clear correlation between development speed and business success of the companies.
Want to find out more about Speed?
We highly recommend the book, Accelerate, written by Nicole Forsgren, PhD.