If you’re a developer, or a developer team lead, this article offers you actionable insights from a research study conducted by McKinsey & Microsoft that delves into the relationship between Developer Velocity and fundamental business outcomes, such as revenue growth, operating margins, and how quickly a business can innovate.
Microsoft worked with McKinsey on this study to further our understanding of the critical role that developers play in the success of organizations around the world. As a company that deeply understands the impact of developers, we’re excited to share these results, and hope the findings will grab the attention of senior business leaders. Our message for them is simple: orienting your organization to prioritize and empower the success of developers is a decisive competitive advantage.
Before we dive into the results, let’s take a moment to define Developer Velocity. This terminology refers to the pace at which a team of developers can deliver innovative software that is loved by end users. Developer Velocity goes well beyond the simple pace of delivery though. It’s about helping business leaders understand the value of providing world-class developer tools, structuring working groups to promote autonomous productivity through Agile and DevOps practices, and incentivizing innovation through a culture that fosters psychological safety.
The Developer Velocity Index (DVI) was created for this study as a quantitative measure to enable a comparison of Developer Velocity at 400+ global companies. The next step was evaluating the impact of Developer Velocity on business outcomes that matter to every senior business leader. In short, the research study demonstrates that companies scoring in the top 25% of the Developer Velocity Index experience 4-5x faster revenue growth, 20% higher operating margins, and 55% higher levels of innovation.
While the results of the full research study are intriguing, for the sake of brevity, let’s focus here on the top 5 drivers of Developer Velocity. And if you’re interested, you can find all the details of this research through the “Learn More” links provided at the bottom of the article.
Organizations in the top quartile of Developer Velocity invest in developers by providing access to world-class developer tools. Specifically, these companies provide developers with a flexible choice of integrated developer environments (IDEs), collaboration software, and continuous integration and delivery (CI/CD) tools that support each stage of the software life cycle. Another common tendency among top companies is enabling non-developer employees to create applications through low-code and no-code platforms, thereby protecting the time of their software engineers to focus on more challenging tasks. The rewards of these investments become obvious when you consider that these top 25% of companies achieve developer satisfaction and retention rates that are 45% higher than the bottom 75% of companies.
The most critical cultural attribute shared by the top 25% of companies is creating an environment of psychological safety. This means establishing a shared belief that incentivizes risk-taking through experimentation and embraces failure through learning and knowledge sharing. This approach fosters innovation and continuous improvement, which becomes particularly effective when paired with a customer-centric philosophy. These top companies also frequently recognize the efforts of their developers, taking the time to publicly acknowledge and reward individual and team achievements.
Highly effective product management is a differentiator that’s increasingly valuable for the top 25% of companies. Along with managing budgets and project timelines, the role of a product manager focuses on delivering a compelling experience for end users. This job function requires a unique blend of business acumen, technical understanding, customer experience, and interpersonal skills that are necessary to deftly influence others towards desired outcomes. Hiring, training, and retaining skilled Product Managers should be treated with the same strategic significance as finding the right developers for your team. The most successful teams of developers also embrace a mindset wherein they take turns stepping into the shoes of the Product Manager to better understand the problems facing their end users and the solutions they can develop to address those challenges.
Best-in-class organizations do the best job of hiring, incentivizing, educating, and retaining talented people by deeply considering their internal developer experience. It begins by recruiting top developers with a compelling value proposition to join the team and continues by building programs that support continuous learning and set clearly defined career paths. Another critical step is structuring the organization around smaller developer teams to prioritize autonomy, loosely coupled architecture, and the implementation of Agile and DevOps best practices. Finally, introducing formal processes that encourage transparent dialogue and measure team health through regular surveys create an important feedback loop for the organization to listen to their developers and understand how to improve their experience.
Companies in the top 25% of DVI that adopt open-source software and encourage their developers to contribute to open-source observe three times the impact on innovation compared to the organizations in the bottom 75%. Here we learn that embracing an open-source mentality has a significant multiplying effect on innovation for companies that are already leaders in Developer Velocity. And it should be reinforced that embracing open-source means adopting open-source software, motivating employees to contribute to open-source communities and projects, and adopting a similar internal sharing philosophy that is commonly referred to as InnerSourcing.
I hope this article has inspired ideas that you can bring back to your role as a developer, or developer team leader. Below are links to the full research study by McKinsey, along with a short-form (5 Questions) and long-form (10-15 Minutes) assessment tool with results from each that provide actionable guidance to help you accelerate the Developer Velocity of your organization.
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