How do you measure value?
27
How do you measure value ?
-
Upload
thoughtworks -
Category
Technology
-
view
3.676 -
download
2
description
Explore ways to measure value on your Agile project
Transcript of How do you measure value?
© 2013 © 2013
Our highest priority is to
satisfy the customer through early and
continuous delivery of valuable software. -- Principles behind the Agile Manifesto
Our highest
priority...
”
“
http://www.thoughtworks-studios.com/content/stop-doing-agile-start-being-agile
© 2013 © 2013
Cost
What do we
measure? The typical measure, the “Iron Triangle”…
Constraints
Schedule Scope
© 2013 © 2013
Constraints (cost, schedule, scope)
Value (Releasable product)
Quality (Reliable, adaptable product)
What do we
measure? has changed…
Source: Jim Highsmith
© 2013 © 2013
Constraints (cost, schedule, scope)
Quality (Reliable, adaptable product)
What do we
measure?
The “old” Iron Triangle now becomes a set of constraints, NOT the focus of the development effort
Source: Jim Highsmith
Value (Releasable product)
© 2013 © 2013
Constraints (cost, schedule, scope)
Quality (Reliable, adaptable product)
What do we
measure? Quality is a given. But it is relative: you must decide what is the appropriate level of quality for your solution.
Source: Jim Highsmith
Value (Releasable product)
© 2013 © 2013
Constraints (cost, schedule, scope)
Quality (Reliable, adaptable product)
What do we
measure? We must measure value -‐ what is important to our customer, and what financial benefit does this bring to our organization.
Source: Jim Highsmith
Value (Releasable product)
© 2013 © 2013
How do we
measure value?
#1 Develop your organization's “value language”. #2 Understand the value-cost of each portfolio down to the feature level. #3 Allocate value points across all capabilities/features. #4 Track value vs. cost for each iteration.
4 Step process:
© 2013 © 2013
How do we
measure value?
#1 Develop your organization's “value language”
Value-driven culture
Define your organizations “Value Dials”
Define your currency of “Business
Value Points”
Develop your Business Value
Point Matrix
http://jimhighsmith.com/determining-business-value/
© 2013 © 2013
How do we
measure value?
#1 Develop your organization's “value language”
Indicators of business value that may or may not map to the financial bottom line.
E.g. “Financial”, “Opportunity Capture”, “Customer Impact”, “Employee Impact”, “Social
Impact”, and “Traits”.
Value-driven culture
Define your organizations “Value Dials”
http://jimhighsmith.com/determining-business-value/
Define your currency of “Business
Value Points”
Develop your Business
Value Point Matrix
© 2013 © 2013
How do we
measure value?
#1 Develop your organization's “value language”
Analogous to “story points”, the estimated business value is assigned relatively. Rather
than using $/€/¥, business value points increases the visibility of the oft-‐neglected
“intangibles”.
http://jimhighsmith.com/determining-business-value/
Value-driven culture
Define your organizations “Value Dials”
Define your currency of “Business
Value Points”
Develop your Business
Value Point Matrix
© 2013 © 2013
How do we
measure value?
#1 Develop your organization's “value language”
To help you prioritize your projects, map your Value Dials with measures such as
“Start Up”, “Scale”, “Mature”, and “Decline”. The numbers indicate relative
importance of the factors. For e.g., in a “Start Up” phase, financial results might be
relative unimportant while opportunity capture very important. Conversely, in the
“Mature” phase financial results might be the most important by far.
http://jimhighsmith.com/determining-business-value/
Value-driven culture
Define your organizations “Value Dials”
Define your currency of “Business
Value Points”
Develop your Business
Value Point Matrix
© 2013 © 2013
How do we
measure value? Understand value & cost right through the capability/feature level
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level
http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf
Top Down – Allocation of Value
Bottom Up –
Calculation of Cost
© 2013 © 2013
How do we
measure value? Allocate value points across all capabilities/features, based on their relationship to the business dials
http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf
Business Value Points allocated to the Financial Value Dial
Business Value Points allocated to other Value Dials
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level #3. Allocate “value points” across all capabilities
© 2013 © 2013
How do we
measure value? Measure both the cost & value, to ensure that the project does not cost us more than it is worth
http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level #3. Allocate value points across all capabilities #4. Track value vs. cost for each iteration
5 15
30
55
75 85
90 95 98
100 100 100
10 20
30 40
50 60
70 80
90 100
110 120
0
20
40
60
80
100
120
1 2 3 4 5 6 7 8 9 10 11 12
Valu
e Ca
ptur
ed v
s. C
ost
Expe
nded
Iteration
% Value
% Cost
© 2013 © 2013
For example...
#1 Develop your organization's “value language”
Project Purpose: Increase the availability -‐ and thereby sales -‐ of
Patent documents to the legal community (for a
legal publishing company)
Projected Revenue: $1million
Fixed Costs: $62,400 per iteration
© 2013 © 2013
For example...
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level
As a Patent Attorney, I want to search existing Patents by keyword, so I can find if there are similar filings to the one I am about to file.
As a Patent Attorney, I want to see the entire text and drawings in a Patent Filing, so that I can make a judgment about possible infringement.
As an inventor, I want to see new Patent filings so that I can develop related products to these new Patents.
Value Points (V): Estimate of value, in this case revenue.
Effort Points (P): Relative sizing, and are an estimate of cost
V = 1 P = 8 V = 2
P = 3
V = 4 P = 5
© 2013 © 2013
50%
25%
12% 8%
5%
For example...
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level #3. Allocate value points across all capabilities #4. Track value vs. cost for each iteration
5 stories 50% value ($500k/$100k per story)
Value distribution across features
10 stories 25% value ($25k per story)
8 stories 12% value ($15k per story)
10 stories 8% value ($8k per story)
25 stories 5% value ($2500 per story)
© 2013 © 2013
5 15
30
55
75 85
10 20
30 40
50 60
0
20
40
60
80
100
120
1 2 3 4 5 6
Valu
e Ca
ptur
ed v
s. C
ost
Expe
nded
Iteration
% Value
% Cost
For example...
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level #3. Allocate value points across all capabilities #4. Track value vs. cost for each iteration
We now start measuring delivered value against cost for every iteration
We start out on an agile project by delivering the most valuable stories first. It takes a couple of iterations to stabilize, and then the value picks up.
© 2013 © 2013
For example... But what happens when we start delivering lower value stories?
Our fixed costs remain the same, but the value of each story delivered -‐ and therefore, the total value of the project -‐ starts to plateau.
5 15
30
55
75 85
90 95 98
10 20
30 40
50 60
70 80
90
0
20
40
60
80
100
120
1 2 3 4 5 6 7 8 9
Valu
e Ca
ptur
ed v
s. C
ost
Expe
nded
Iteration
% Value
% Cost
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level #3. Allocate value points across all capabilities #4. Track value vs. cost for each iteration
© 2013 © 2013
5 15
30
55
75 85
90 95
98 100 100
10 20
30 40
50 60
70 80
90 100
110
0
20
40
60
80
100
120
1 2 3 4 5 6 7 8 9 10 11
Valu
e Ca
ptur
ed v
s. C
ost
Expe
nded
Iteration
% Value
% Cost
For example... When do we “finish”?
But never here!
…or “ideally” here
The agile approach gives us the option to finish anytime we see “enough” value. We could finish here…
#1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level #3. Allocate value points across all capabilities #4. Track value vs. cost for each iteration
© 2013 © 2013
References
§ Highsmith, Jim (2011) Agile Triangle, Value vs. Cost graphs
http://www.thoughtworks-studios.com/content/stop-doing-agile-start-being-agile
http://thoughtworks.fileburst.com/articles/adaptive-leadership-accelerating-enterprise-agility-jim-highsmith-thoughtworks.pdf
http://jimhighsmith.com/determining-business-value/
§ Reed, Pat (2011) Value measurement framework http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf
§ Matthew M. Carty and Richard Lansford, Intel Corporation (2009) Value Dials
Using an IT Business Value Program to Measure Benefits to the Enterprise
Make decisions, not documentation The best Agile requirements are the ones the team builds as they work. Mingle generates actionable project records from natural team collaboration.
Learn More
Agile Project Management
See how Mingle can help you make the most out of your user stories
