Unleashing Business Agility with the Customer Distance Index (CDI)

Have you ever wondered if your organization is designed for agility and how to continuously make it better? After having spent a lot of years working with agile transformations – and even being a part of the European Organizational Design Forum – I still hadn’t found the answer to that question. Finally in 2018 I found the answer on how to design a truly agile organization. In this article I will introduce you to a metric that is essential in order to achieve true Business Agility.

Introducing the Customer Distance Index (CDI)

There is surely nothing quite so useless as doing with great efficiency what should not be done at all
~Peter Drucker

To avoid the above an essential part of achieving Business Agility is having an organization with a very close interactions between the people building the product and the people consuming it. This will both minimize the number of possible misunderstandings and make the communication much more efficient. In practice this means that development teams and customers will have to interact.

However, through the years I had found that many team members had never actually spoken with a customer about their needs. This didn’t only make it very difficult for developers to build the right product, but it also reduced the team members to being technical specialists instead of product developers. Of course there were cases where the Product Owners did a good job of describing the customers, but still… It was never really good enough.

On the other hand I also had the pleasure of working with teams who were working very closely with the customers, and in those cases the development team were able to create solutions that achieved a lot more than simply complying with the requirements described by the Product Owner. They actually solved the deeper needs of the customers and made them love the product. In one case I had the pleasure of working with a team who ended up adding this to their Definition of Done: “The customer is ecstatic”.

As I reflected on the differences between these two different types of teams it dawned on me that there was a very formula that described the pattern of understanding the customers, and I chose to name it Customer Distance Index.

The formula is pretty simple (but looks worse than it is):

Formula for calculating the Customer Distance Index (CDI)

Here is the formula explained:

  1. Count the number of interactions it takes before a team can be in direct dialogue with a customer.
  2. Repeat step 1 for all the teams
  3. Sum up the number of interactions across all the teams
  4. Divide the total number of interactions by the number of teams
  5. This should give you the average number of interactions it takes for a team to be in direct dialogue with real customers/users.

Using CDI to increase Business Agility

In order to enable Business Agility, you need to make the following true

CDI = 0

There are many reasons why this is the case:

  • Everyone gets to interact directly with each other which increases our understanding
  • We reduce the amount of “false memory” by having multiple people hearing the same thing
  • Most importantly – we will talk to the customers much more frequently.

In a small startup the CDI will naturally be very low. If you are sitting around the same table with your team, then asking a question to a customer is very simple. You just call them or pay them a visit. However, in large corporations it has proven to be much harder. Here the hierarchy is both deep and complex. This often means that a lot of people have to be consulted before we are even allowed to call a customer. As an example I once worked with a large bank where the development team first had to talk to their Product Owner, who then had to clear it with the Product Manager, who had to organize it in collaboration with the Customer Experience Lead and align it with the Service organization. This was then followed by interactions with a series of stakeholders. Let me put it this way – we stopped counting when the CDI hit 16. At this point three months had passed since the development team had tried to get in contact with a real customer.

So how did the CDI help in that case? Well, by documenting that CDI > 16, it became clear to the management team that they had a problem they needed to solve, and thanks to their dedicated efforts it only took a couple of months before CDI = 0. Yes, transparency matters!

The benefits

When we look beyond all the softer value it creates to have a CDI of 0, you will also find hard measurable outcomes that even a CEO will care about.

Here are a few:

  • Increased Customer Satisfaction
    Because we get a better and deeper understanding of the customers, we are able to better satisfy their true needs and deliver what matters the most.
  • Higher Employee Motivation
    It’s a lot more fun to build something that makes a positive difference in someone else’s life than it is to simply do what you are told. This makes it easier to both attract and retain talent.
  • Reduction of Waste
    In organizations with a high CDI, the communication is very inefficient. First of all a lot of meetings are needed in order to both obtain the information and pass it on throughout the organization.

When you add it all up, then there’s a good chance that Increased Customer Satisfaction, Higher Employee Motivation and Reduced Waste will lead to increased revenue.

Should you then choose to strengthen your adaptability by also implementing the Decision Distance Index (DDI), you can keep accelerating your impact.

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