Software Development Handbook: Transforming for the Digital Age




Research Summary: “Software Development Handbook: Transforming for the Digital Age” By Tobias Strålin, Chandra Gnanasambandam, Peter Andén Santiago Comella-Dorda, & Ondrej Burkacky, McKinsey & Company (2016)

Agile vs. Waterfall Approaches to Software Development

At Issue: Software development is no longer strictly the domain of Silicon Valley tech companies. Custom software is increasingly essential to companies large and small, across all industries and geographies. Organizations that once dedicated nearly all of their innovation resources to hardware are increasingly focused on software. Nonetheless, a persistent innovation gap exists between top and bottom performers in every industry. Organizations seeking to position themselves at the top end of the spectrum require a clear path forward that prioritizes innovative software development.

Research Objective(s): The authors’ objective was to compile a compendium of research articles that collectively function as software development handbook.

Scope: This handbook addresses the various elements of building and sustaining successful software development initiatives for organizations of all sizes, industries, and geographies.

Approach: The authors created the handbook by utilizing relevant articles previously written by other McKinsey researchers, in addition to writing several new research articles specifically for the handbook’s purposes.

Findings: Select findings from the handbook include:

  • Top-quartile companies develop software upwards of three times more productively than companies in the bottom quartile. Top-quartile companies have 80 percent fewer residual design defects in their software output, and their “time to market” is 70 percent faster.
  • Organizations with the most innovation-friendly operating models incorporate agile working methods, flexible hours, and motivational tactics (such as internal competitions) to spur employees to pursue innovative and challenging projects.
  • Successful digital transformations require companies to 1) conduct deep-dive analyses of customer needs and the organizational value chain; 2) build on existing organizational strengths; and 3) where possible, create structural advantages.
  • Organizational leaders overseeing software development should consider four key questions: What software is being developed? Where is the software developed? How is software developed? How is software development enabled?
  • Best-in-class software developers are twice as effective as average performers at producing high-quality code, which constitutes a meaningful competitive advantage in the current business environment.
  • Companies that maintain completely separate organizational functions tend to be the least effective at software development.
  • The “agile” development methodology produces better, more reliable software faster and at lower cost than traditional “waterfall” development approaches.
  • Implementing “agile” software development at scale requires the right design choices, practices, and processes in four broad categories: products and architecture, methods, organization, and enablers.
  • A company’s software development “agility” depends on its organizational structure, how teams are managed and supported, and how the organization interfaces with its development partners.
  • Taking a modular approach to software development enables organizations to customize, maintain, and extend their technological capabilities in a cost-effective way.
  • The “Internet of Things” revolution, cheap connectivity, and advanced analytics are key parts of a growing digital landscape that is predicted to have an $11 trillion global impact.

Notes: The complete Software Development Handbook can be accessed here.

Keywords: software development, software innovation, custom software

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.


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