How do you measure value?

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Explore ways to measure value on your Agile project

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How do you measure value?

  1. 1. How do you measure value ?
  2. 2. Our highest priority... “ Our highest priority is to satisfy the customer through early and continuous delivery of valuable software. -- Principles behind the Agile Manifesto ” http://www.thoughtworks-studios.com/content/stop-doing-agile-start-being-agile © 2013
  3. 3. What do we measure to know we are delivering on our priority? © 2013
  4. 4. What do we measure? The typical measure, the “Iron Triangle”… Cost Constraints Schedule Scope © 2013
  5. 5. What do we measure? has changed… Value (Releasable product) Quality (Reliable, adaptable product) Source: Jim Highsmith Constraints (cost, schedule, scope) © 2013
  6. 6. What do we Value measure? (Releasable product) Quality (Reliable, adaptable product) Constraints (cost, schedule, scope) The “old” Iron Triangle now becomes a set of constraints, NOT the focus of the development effort Source: Jim Highsmith © 2013
  7. 7. What do we measure? Value (Releasable product) Quality is a given. But it is relative: you must decide what is the appropriate level of quality for your solution. Quality (Reliable, adaptable product) Source: Jim Highsmith Constraints (cost, schedule, scope) © 2013
  8. 8. What do we Value measure? (Releasable product) We must measure value -‐ what is important to our customer, and what financial benefit does this bring to our organization. Quality (Reliable, adaptable product) Source: Jim Highsmith Constraints (cost, schedule, scope) © 2013
  9. 9. But, how do we measure value? © 2013
  10. 10. How do we measure value? 4 Step process: #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. © 2013
  11. 11. How do we measure value? Define your organizations “Value Dials” #1 Develop your organization's “value language” Define your currency of “Business Value Points” Value-driven culture Develop your Business Value Point Matrix http://jimhighsmith.com/determining-business-value/ © 2013
  12. 12. How do we measure value? 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”. #1 Develop your organization's “value language” Define your organizations “Value Dials” Define your currency of “Business Value Points” Value-driven culture Develop your Business Value Point Matrix http://jimhighsmith.com/determining-business-value/ © 2013
  13. 13. How do we measure value? 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”. #1 Develop your organization's “value language” Define your organizations “Value Dials” Define your currency of “Business Value Points” Value-driven culture Develop your Business Value Point Matrix http://jimhighsmith.com/determining-business-value/ © 2013
  14. 14. How do we measure value? 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 #1 Develop your organization's “value language” relative unimportant while opportunity capture very important. Conversely, in the “Mature” phase financial results might be the most important by far. Define your organizations “Value Dials” Define your currency of “Business Value Points” Value-driven culture Develop your Business Value Point Matrix http://jimhighsmith.com/determining-business-value/ © 2013
  15. 15. 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 Top Down – Allocation of Value Bottom Up – Calculation of Cost http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf © 2013
  16. 16. 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 Allocate value points across all capabilities/features, based on their relationship to the business dials Business Value Points allocated to the Financial Value Dial Business Value Points allocated to other Value Dials #3. Allocate “value points” across all capabilities http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf © 2013
  17. 17. 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 #4. Track value vs. cost for each iteration Measure both the cost & value, to ensure that the project does not cost us more than it is worth Value Captured vs. Cost Expended How do we 120 120 100 % Value 85 % Cost 80 75 60 0 70 50 30 20 15 10 5 1 80 40 30 20 100 60 55 40 95 90 110 100 100 98 90 100 2 3 4 5 http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf 6 7 Iteration 8 9 10 11 12 © 2013
  18. 18. For example… © 2013
  19. 19. For example... Project Purpose: #1 Develop your organization's “value language” 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
  20. 20. For example... Value Points (V): #1 Develop your organization's “value language” #2. Understand the value-cost of each portfolio down to the feature level Estimate of value, in this case revenue. Effort Points (P): Relative sizing, and are an estimate of cost 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. V=1 P=8 As an inventor, I want to see new Patent filings so that I can develop related products to these new Patents. V=2 P=3 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. V=4 P=5 © 2013
  21. 21. 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 Value distribution across features 25 stories 5% value ($2500 per story) 10 stories 8% value ($8k per story) 12% 8% 5% 50% 8 stories 12% value ($15k per story) 10 stories 25% value ($25k per story) 25% 5 stories 50% value ($500k/$100k per story) © 2013
  22. 22. #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 Value Captured vs. Cost Expended For example... 120 100 % Value % Cost 85 80 75 60 55 40 30 20 0 60 40 30 20 15 10 5 1 50 2 3 4 Iteration 5 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. 6 © 2013
  23. 23. #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 But what happens when we start delivering lower value stories? Value Captured vs. Cost Expended For example... 120 % Value 100 % Cost 80 75 60 55 40 30 20 0 90 85 80 70 60 50 40 30 20 15 10 5 1 98 90 95 2 3 4 5 6 Iteration 7 8 Our fixed costs remain the same, but the value of each story delivered -‐ and therefore, the total value of the project -‐ starts to plateau. 9 © 2013
  24. 24. #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 When do we “finish”? Value Captured vs. Cost Expended For example... 120 The agile approach gives us the option to finish anytime we see “enough” value. We could finish here… 100 98 % Value 85 % Cost 80 75 60 20 0 80 But never here! 50 …or “ideally” here 30 20 15 10 5 1 100 70 40 30 90 60 55 40 95 90 110 100 100 2 3 4 5 6 7 Iteration 8 9 10 11 © 2013
  25. 25. How do you measure value ? © 2013
  26. 26. §  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-acceleratingenterprise-agility-jim-highsmith-thoughtworks.pdf References http://jimhighsmith.com/determining-business-value/ §  Reed, Pat (2011) Value measurement framework http://www.alnhouston.org/documents/Summits/LeaderSummitValuePresentation-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 © 2013
  27. 27. Agile Project Management 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 See how Mingle can help you make the most out of your user stories

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