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Insights Teams Uncategorized

“Hiring good developers is just like sexing chickens”

A memorable – if not a little disturbing – simile once used by an industry legend during his seminar.

Sensing the discomfort of the crowd, he frowned & bellowed, “Well, you know what I mean, right?” Not a clue, but you certainly have my attention… “It’s like being able to tell the gender of a baby chicken just by looking at it.”

Apparently it’s a subtle art (in the loosest sense of the word) developed with many years of experience, one you can attain to determine chicken gender, or, more usefully in our line of work, developer quality.

I don’t know about you, but I certainly don’t know anyone that has the ten thousand hours required to master that skill.

Anyway, we’d prefer to hire whole coops, sorry, teams of developers for a number of reasons.

  1. The developers already work together so have a quicker startup time.
  2. Cross-functional teams will be able to fulfil all the roles required for project delivery – UX, development, QA, DevOps & so on.
  3. They usually have a project project manager, scrum master or coach who’ll take responsibility for helping the team organise their efforts, report on progress & deliver the project.

Hiring teams is a completely different proposition to a single developer – we can’t make them all do whiteboard interviews. Here are some of the things we look for & ask at Digital Village when hiring great development teams.

Show us what you’ve done (please)

Stand & deliver. We’re technology agnostic & focus on the best processes for delivering reliable value in. In short, we spend less time looking at tech teams work & more looking at the projects they’ve completed.

Are the projects ‘significant’ & did they challenge the team’s ability? ‘Significant’ is of course subjective, but we’re looking for teams with strong capability & ambition.

Are the projects accompanied by glowing testimonials? Unfortunately self-assessment can be a little, let’s say, biased from time to time.

Now let’s talk about it

A curated brochure of past products is nice, but we aren’t window shopping here. We need to dig into things a little (lot) more. A good ol’ fashioned interview with some representatives from the team is a perfect way to find out:

  1. What challenges the team faced while building one of their showcased projects & how they resolved them.
  2. What they enjoyed about the project. Seriously, we’re all supposed to enjoy this or what’s the point?!
  3. Which projects they’re most proud of & why (forgetting pride is of course a Sin).

Abiding by the old proverb, “it’s not what you say, it’s how you say it,” & without dabbling in amateur psychoanalysis, there’s a lot more you can take away from the interview.

Are they excited to talk about the projects? Do their eyes light up when explaining technical triumphs. Perhaps an eye-roll when describing the challenge of containing scope with an ambitious client?

Honestly, the last thing we want to see is ambivalence. We want to see anything to show a deep engagement with all the challenges (technical & otherwise) that arise during a complex project.

If they pass both stages with flying colours, hire them & give them everything they want.

Ok, just kidding. I’d feel very hesitant to hire a team purely on this basis. So, I hear you ask, what are the key questions Digital Village asks before engaging with development teams..?

How do they know they’re building (whatever it may be) correctly?

A simple yet serious question. How do they know what they’re building works as it should? It’s an opportunity to understand their practices, processes & also attitude towards producing quality software.

The answer, of course, should involve a seven letter word that causes more headaches than most: ‘testing’. But what kind of testing? QA staff are great & will pick out errors like a sniper, but automated developer tests are also important.

The bravest programmer you’ll meet (& the one you want to meet) is running a gauntlet of unit, feature & integration tests. “Does my change break anything?”, is just an automated test run away.

Adopting such methods allow teams to stride quickly & ambitiously because the safety net of automated testing is always waiting to catch them after a misstep.

How do they know they’re building the right thing?

At least this one’s simple… “it’s what the client asked for”. Get out.

Every project is a big investment for a client, so how can we be sure the investment is going to pay off?

At Digital Village we have a huge range of clients: start-up to enterprise, tech wizards to non-tech founders. With each client, we assume full responsibility for helping them understand if the proposed project is going to make their business more successful.

If not, we can steer them in a better direction even if it means having difficult (but always positive) conversations. Clients come to us looking for guidance & it’s fundamental to our service that we find the right solution.

So our question for any team is, “how will the client know if what they’ve asked for is what they really need?”

If they reply, “the client agreed to the specification, if the code meets the spec then they’re getting what they want,” they’re not the kind of team we personally like to work with.

I’d love to hear how the team proactively validates work delivered to a client, their strategies for eliciting feedback & how they manage that moment when a client says, “wait a minute, this isn’t going to work”.

So, where is everyone?

Long gone are the days of expectation & necessity for singular locations. We’ve worked with all kinds of teams: onshore, offshore & a hybrid of both. So far, we’ve found each model brings its own benefits & challenges.

If a team has offshore members, great! Some of our current teams that contain offshore members produce incredible results at a fantastic price-point.

Traditionally, communication is seen as a potential pitfall for offshore teams, but our success is due to amazing team leads who are responsible for communicating with project stakeholders locally & team members offshore… a conduit, if you like.

So let’s hear about who is responsible for communicating the client’s needs to the team & relays the team’s questions, concerns & suggestions.

What’s the silent killer of projects?

To be clear, I’ve never asked anyone, “what’s the silent killer of projects?”. One, because it’s over dramatic, & two, there are always symptoms.

I would love to know, however, what the team thinks is most likely to derail a project. Although answers will vary, if this were a game of Family Feud I’d expect “communication problems” to be a top answer.

As Bernard Shaw, a man that revolutionised comedic drama, said, “The single biggest problem in communication is the illusion that it has taken place”.

So what are their individual thoughts regarding communication? How could they be sure a client has understood them (& vice versa)? Perhaps most importantly, will they be willing to take on the commitment to communication that Digital Village does?

Dev teams are often missing one vital piece of the puzzle. The client. Now we aren’t expecting 40hrs a week, but we always try to bring clients & users into the project team. Invite clients to join meetings & the same communication channels as the rest of the team.

The last word(s)

So, a case study & an interview. We’re hardly rattling the established pillars of HR & recruitment with this one, are we? But what it all boils down to is can we answer the following questions with a reasonable degree of certainty:

  1. Is the team proficient enough to produce technically sound work?
  2. Do they care enough about their client to provide them with results that make them more successful & do it in a way that makes the client feel empowered during the process?

I’d be happy to work with anyone who can do that.

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Customer Lifetime Value Digital Transformation Insights library Organisational Change

You thought finding toilet paper was hard. How about finding your most valuable customers?

by Suraj Pabari, Partner in Customer Analytics at SingleView, a data consultancy in Australia.

Summary

  • Currently, many businesses value customers based on their first purchase. As a result, they may under-invest in customers that would be higher value over a period of time and over-invest in lower value customers.
  • However, we can value customers based on their lifetime value, which is the total spend of the customer over a given period of time.
  • One way to measure lifetime value is to segment based on recency, frequency and monetary value.
  • By calculating RFM scores for our customers, we can segment our customers and understand the highest value customers,as well as those with low frequency, low average spend and those who have not visited for a long while.
  • We can then take action based on these segments to increase long term business revenue.

What do we mean by lifetime value?

You acquire a new customer. Not only that, but the customer returns again and again, spending hundreds of dollars every time they return. This customer must really love you! However, traditionally, you value this customer based on the revenue from their first purchase and now, this customer does not look so good. In fact, you would pay the same for this superstar customer as you would pay for his discount-seeking neighbour, who only bought something because it had a heavy discount. But do not fret, as we are moving to a new world, a world in which the customer is valued based on their total spend over a defined time period… or their lifetime value. Now, you can more easily find the valuable superstars and give them that star treatment with the hope that they stay with your business, and help you discover more just like them, transforming your business into a business of superstars.

The problem with big shiny things

Let’s imagine an extremely technical person in your business spends six months on building a model to predict the customers that will churn in the immediate future. They tell you that they have found a number of relevant features that predict churn, such as delay in bill payment, location and even age. They even excitedly proclaim that they have refined the model to the point where the model can find almost 90% of the customers that will churn. You are excited! You decide to run an experiment by showing ads to customers that are likely to churn to try to prevent them from leaving. However, clicks are so low, that you see no difference in churn rate. You go home, dejected.

Can you relate? After nine years in the Marketing Analytics space, I certainly can. And I’m not the only one.

We often hear buzzwords about things we ‘should do’. ‘Optimise to lifetime value,’ they say. ‘The customer journey is complex, implement a custom attribution model,’ is a common recommendation. ‘Most of your sales are occurring offline, why not connect offline data?’ is often proposed as a solution. You spend time and money on these pet projects, thinking they will transform your business and you divert resources away from your acquisition marketing efforts. The results are often far from impressive.

Should you avoid these types of projects? Absolutely not. The intentions of these projects are generally sound. However, my learning has been that these projects only work when you think about ways that you can use these programs to drive value before you invest significant resources. Write these specific actions down. Get endorsement from other teams that need to be involved. Quantify the value (with some justifiable logic!)

One particular project that often can drive a high cost despite demonstrating a low return is ‘lifetime value’. However, hopefully by the end of this article you will realise that lifetime value can drive significant business growth, in ways that are neither time consuming nor expensive.

The most valuable customers are the ones who have spent the most, right?

To start with, let’s discuss why lifetime value is so important. The current state of measurement with many businesses can be demonstrated in the graphs below. Assume the bars represent the value of five individual customers and the horizontal line represents the cost to acquire a customer: naturally, you set that cost to be equal to the value that you will get from the customers to break even (or even lower if you want a higher margin). You can see that by optimising to this cost you end up over-investing in some ‘low value’ customers (shaded red) and under-investing in other ‘high value’ customers (shaded green).

Figure 1: The problem with optimising to the mean

In contrast, if you were to focus on acquiring more high value customers (the green bars), in many cases, the long term revenue would be higher, as can be seen below.

Figure 2: Maximise share of high value customers

So what do we mean by high value customers? The ones that spend the most money?

Not quite. Often using total spend over a period of time can be a good proxy, but it is important to take a more nuanced view. Take the example below. Which customer do you think has the greatest value to the business?

Figure 3: Looking at recency, frequency and monetary value

Were you able to guess correctly? The behaviour of the first customer suggests that they will be more loyal, as they have greater consistency and bought more recently. We saw this with one of our hospitality clients: they had customers spending a lot of money in their venues on expensive champagne, and then not spending anything for a long period; we had to think of them differently to those customers who spent the same amount, but over a more extended period. The former may have been enjoying themselves on a luxury holiday, and since they will not be coming back, it may not make sense to define them as a high value customer.

So how do we define a high value customer then?

We have a fairly simple way of measuring high value, which is based on three factors:

  • Recency = How recently the customer bought. Someone who bought a year ago is at risk of churning and may not be high value versus someone who bought last week. Note that, in some models, recency refers to the gap between the first and last purchases.
  • Frequency = Number of repeat purchases. More purchases demonstrates greater loyalty. Using frequency in this way allows us to distinguish between the tourist who came to the venue and spent a lot of money whilst she was on holiday, and the businessman who goes to the same venue every week.
  • Monetary value = Average order value. We sometimes exclude the first purchase in this average, particularly if the purchase has been driven by a voucher.

This RFM method gives us a score for each factor. The simplest way to come up with a score is to rank the value that each customer has for each variable between 1 and 5 (though the exact scoring might differ by business). As an example, for recency: bought within last week = 5, bought within last month = 4, bought within last year = 3 etc.; for frequency: 10+ purchases = 5; 8–10 purchases = 4 etc. The recommended approach to determine the actual boundaries is to ensure that 20% of the customers are in each bucket.

Now the fun begins!

With some simple maths (which can even be done in a spreadsheet) you now have three scores per customer. What does this mean?

Let’s say a customer has a RFM score of 555. Keep this customer close! They have recently bought a high value item, and will often return to buy high value items. But what about a 155? With a low recency, this customer hasn’t bought anything recently. Why haven’t they bought anything? How can we bring them back? This diagram makes it simpler to understand.

Figure 4: Developing segments using monetary value and frequency

..though note that in reality we are looking at a cube as a pose to a square!

Figure 5: RFM cube

You may already be thinking about some of the things you can do with this data. What could you do with a ‘High Spender’ to increase their frequency? Would you give the ‘Superstar’ a voucher or would you instead offer them a ‘concierge’ service? Now, rather than simply saying: “These are my high value customers and these are my low value customers,” you can answer some more complex questions, such as:

  • Who are my highest value customers?
  • Which customers are on the verge of churning?
  • Which customers have the potential to be transformed into higher value customers? How might we do that: by trying to upsell them, or getting them to return more often?
  • Who are the low value customers that you can ignore?
  • Which group of customers is most likely to respond to your current campaign?

I hope you now have a better idea about the power of LTV segmentation, and understand how you can segment your customers using RFM methodology to answer some important questions.

How do you currently segment your customers? How do you leverage the insights from your segmentation? Feel free to add some comments in the post!

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Digital Transformation Insights library Organisational Change

Dawn of a new age of opportunity in IT services

by Paul Scott, Director and Board Advisor at Digital Village

Photo by Joshua Earle on Unsplash

Australia’s unemployment rate shot up to 7.1% in July 2020. Some sectors were worse affected than others, with travel, retail and hospitality feeling the brunt of it.

The IT sector got off lightly with less than 15,000 redundancies and around 20,000 furloughed staff out a total number of 250,000 working in the industry nationally, when you add full time and self-employed.

The ABS statistics only tell part of the story. The more significant revelation from COVID has been a realisation that the way organisations adopt and operationalise technology needs to change. Put bluntly, most organisations are paying too much for resources they don’t need — at least not full time — and when they do need them, they can’t manage them effectively to deliver business outcomes.

Why is this so? Well the experience of many organisations during COVID has been their IT has run perfectly well with either contracted in resource, shifting them to work remotely or a mix of offshore services to onshore — mainly those services involving IT support and end customer technical support. The same goes for innovation and systems development. The gig economy and rapid growth of IT services platforms like UpWork, Equal Experts and Digital Village has made it easy for businesses to pick resources they need off-the-shelf, with clearly defined outcomes at a competitive price.

The big takeaway for those who were employed during the lockdown was that remote working is both productive and often preferred. Provided there is a dedicated space at home and decent WiFi bandwidth, the overall work-life balance equation improved and the sense of being in control of one’s life also ticks up.

Many people felt stressed and unsure, to begin with, but by the time lockdown came to an end and they were able to make choices about whether to work from home or return to the office, the vast majority wanted to continue homeworking to some degree. Atlassian, Australia’s largest locally owned IT company, tells us 76% of their staff prefer to avoid their office altogether when they need to concentrate on a project. This stat, along with 40 others gathered by Hubspot, underlines remote working is here to stay and has profound implications for the IT services sector in particular.

Any organisation seeking to optimise its IT resources post-COVID has the opportunity to make some changes which both improve their capability to develop and support systems. It’s also going to be a relatively easy sell to people if they chose to move to a remote working or semi outsourced model, as most have now come to terms with the benefits and ways to make it work for them.

But there is a word of warning: “Most anyone can learn to be a great virtual employee. The top skills to learn are setting healthy boundaries between your work life and personal life and building relationships virtually.” ― Larry English, Office Optional: How to Build a Connected Culture with Virtual Teams