The document discusses how to measure value when using an Agile approach. It outlines a 4-step process: 1) Develop a "value language" to define what value means for the organization; 2) Understand the value and cost of each capability down to the feature level; 3) Allocate "value points" to different capabilities and features; 4) Track delivered value versus cost for each iteration to ensure the project continues to provide value. An example is provided to illustrate how tracking value delivery over iterations can show when it makes most sense to finish a project.

1. How do you
measure value ?

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. What do we measure
to know we are delivering
on our priority?
© 2013

4. What do we
measure?
The typical measure, the “Iron Triangle”…
Cost
Constraints
Schedule
Scope
© 2013

5. What do we
measure?
has changed…
Value
(Releasable product)
Quality
(Reliable, adaptable product)
Source: Jim Highsmith
Constraints
(cost, schedule, scope)
© 2013

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. 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. 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. But, how do we
measure value?
© 2013

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. 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. 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. 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. 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. 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. 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. 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. For example…
© 2013

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. 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. 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. #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. #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. #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. How do you
measure value ?
© 2013

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

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