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# Business Value Modeling: Guiding Key Project Decisions

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• ### Business Value Modeling: Guiding Key Project Decisions

1. 1. Business Value Modeling:Guiding Key Project Decisions Kent J. McDonald @beyondreqs
2. 2. Discussion Topics Business Value? Purpose Considerations Costs & Benefits Using the Business Value Model to decide
3. 3. The Prime Directive:Deliver Business Value! *The organizers wish to apologize for any gratuitous trekkie references that may appear in this presentation.
4. 4. What is Business Value? I’ll know it when I see itJustice Potter Stewart, concurring opinion in Jacobellis v. Ohio 378 U.S. 184 (1964), regardingpossible obscenity in The Lovers.
6. 6. Determining the inputs?Estimate Guess Business Value Common Practice
7. 7. Why do we want to know Business Value? To make decisions!
8. 8. Use business value model and guidingquestions to decide if a project is worth it.
9. 9. Purpose = What problem are you trying to solve?
10. 10. Solutionwithout aproblem
11. 11. Guiding QuestionsExactly whatproblem will thissolve? Why are we best suited to pursue this?For whom do wesolve that problem?
12. 12. Purpose Based Alignment Model 13
13. 13. Purpose Based Alignment Model Do we take this Innovate, on? Create Achieve and Minimize/ maintain parity, Eliminate Mimic, Simplify 14
14. 14. Decision Filters  Simple rules to guide decision making  Disperse throughout the organization Used for (among others)  Strategy alignment  Scoping  Design approach
15. 15. “To be the low cost airline.” - Southwest Airlines
16. 16. “Will this help us be the low cost airline?” - Southwest Airlines
17. 17. Purpose and Decision Filters To be the low cost airline Will this help us be the low cost airline?
18. 18. The Billboard TestOrder newpages by2pm and getthem tomorrow!
19. 19. Student Information SystemYes, it has been abbreviated to “SIS”
20. 20. SIS “Requirements”In search of a "Student Information System" thatwill be used to manage student and parent data,enable interactive communication betweenteachers and parents, as well as online enrollments.Requirements: Student/Parent Directory Staff Directory Calendar Online Enrollment Parent/Classroom Portal
21. 21. Des Moines Academy 15:1 Student TeacherMusic Education w/ RatioDSM Symphony “Personalized” lessonOTM plans Enrollment Fundraising Book keeping Curriculum Facilities Parent Communication
22. 22. Case Study – Purpose What problem are we trying to solve? For whom are we trying to solve this problem? What are the decision filters? Are the capabilities identified parity, differentiating, partner, or who cares?
23. 23. Considerations= What could impact value?
24. 24. Guiding QuestionsWhat alternativesare out there now? What factors are critical to success?
25. 25. Guiding QuestionsHow will we get this product to market?
26. 26. Uncertainty Market uncertainty Technology uncertainty Number of customers Project duration Approach to change
27. 27. Complexity Team size Mission critical Team location Team maturity Domain knowledge gaps Dependencies
28. 28. Context Leadership Model 31
29. 29. Guiding QuestionsWhy Now? Do we have the right people to solve this?
30. 30. ConstraintsConstraint Fixed Flexible AcceptScope XTime XCost XQuality X
31. 31. Case Study – Considerations What alternatives already exist to solve the problem? What factors are critical to this project’s success? What is the risk profile? How do you think the constraints should be prioritized?
32. 32. Costs & Benefits= What’s the impact on business objectives?
33. 33. Guiding QuestionsHow much could we spend on this?
34. 34. “Gut Feel” or “Ball Park”How long, and how much? About a year and \$2.5 million.
35. 35. Comparison to Past Projects\$1,000 \$100K \$10M ?? \$1M
36. 36. ExtrapolateAssumptions: 2 week iterations Overall backlog size: 600 points Planning Velocity: 30 ? 5 Person Team Avg Cost/person/wk: \$4,000 Estimate: \$800,000
37. 37. Guiding QuestionsHow big is the opportunity?
38. 38. Benefits A consequence of the action that contributes to meeting business objectives. Can be identified in financial or non financial terms, but should be measurableSoft Benefits in a Hard Business Case: Legitimacy and Value for Difficult BenefitsSolution Matrix Ltd By Marty J Schmidt
39. 39. Guess
40. 40. IncreaseRevenue
41. 41. Reduce Costs
42. 42. Guiding QuestionHow will we measure success?
43. 43. ObjectivesSpecificMeasureableAgreed UponRealisticTimely
44. 44. Financial Objectives? ROI Return on Investment NPV Net Present Value TCO Total Cost of Ownership IRR Internal Rate of Return
45. 45. Financial Objectives = Cash Flow Costs BenefitsYear 0 Year 1 Year 2 Year 3 Year 4
46. 46. Non Financial ObjectivesBy Dec 2012 increase By Dec 2012 reduce paperinventory turns from 5/year apps from 1,000/month toto 10/year 500/month
47. 47. Case Study – Costs & Benefits Identify at least two options to solve the problem Identify the costs incurred by each alternative Identify the benefits provided by each alternative How would you measure success?
48. 48. But Wait!How can I possiblycalculate a numberfor my businessvalue with thatstuff?What ever should Ido? 52
49. 49. The Conversation RoomThanks to Nigel Dalton
50. 50. Is It Worth It?Move forward? Trash it?
51. 51. Case Study – The ConversationIs the project worth pursuing?If so, which approach will you take and why?If not, why not?
52. 52. In what order should we deliver?Release 1 Release 2 Release 3 If time…
53. 53. Timing Can Be Key Costs BenefitsPeriod 0 Period 1 Period 2 Period 3 Period 4
54. 54. The only constant is change Change in assumptions Change in constraints Change in understanding Change in business conditions Change in objectives
55. 55. How often do you reevaluate? Definitely after each release/implementation If you become aware of any big changes Ask at retrospectives: “Is it still worth it?”
56. 56. Is It Still Worth It?Move forward? Change it? Trash it?
57. 57. Case Study – The Conversation ReduxBased on the new information… Is the project still worth it? Would you change your approach? If so, how?
58. 58. If you remember nothing else… Business Value guides decisions Purpose & Considerations impact Business Value Costs & Benefits focus on objectives It’s a conversation, not a number 64
59. 59. Guiding Questions 1. Exactly what problem will this solve? 2. For whom do we solve that problem? 3. How big is the opportunity? 4. How will we measure success? 5. What alternatives are out there now? 6. Why are we best suited to pursue this? 7. Why now? 8. How will we get this product to market? 9. What factors are critical to success?From Inspired: How to Create Products Customers Love by Marty Cagan
60. 60. Additional Guiding Questions1. Is the problem worth solving?2. Do we have the right people to solve this?3. How will we encourage adoption?4. How much could we spend on this?
61. 61. Questions?Kent McDonaldkentjmcdonald@gmail.com@BeyondReqswww.beyondrequirements.comSlides available from:http://www.knowledgebridgepartners.com/presentations/businessvaluemodeling/