Both agile and lean focus on delivering business value to the customers as rapidly as possible. On agile projects, story points are often used to estimate and track development effort for user stories. However, to concentrate on delivering value, we must be able to place a business value on these stories. Through lecture and interactive exercises, Ken Pugh explains how to estimate and track business value, presenting two methods for quickly estimating value for features and stories. He shows the relationships between business value and story points, and discusses how to chart business value for progress tracking. Ken demonstrates how to use that chart to determine when to terminate a project if another has a higher business value. He covers the estimation of business value for larger tasks, such as projects and epics. By the end, you’ll be able to use business value to focus both customers and developers on the most important requirements.

1. AW2
Session
6/8/16 11:30 AM
Determining Business Value in Agile
Development
Presented by:
Ken Pugh
Net Objectives
Brought to you by:
350 Corporate Way, Suite 400, Orange Park, FL 32073
888---268---8770 ·· 904---278---0524 - info@techwell.com - http://www.techwell.com/

2. Ken Pugh
Net Objectives
A fellow consultant with Net Objectives, Ken Pugh helps companies transform
into lean-agile organizations through training and coaching. His special interests
are in communication (particularly effectively communicating requirements),
delivering business value, and using lean principles to deliver high quality quickly.
Ken trains, mentors, and testifies on technology topics from object-oriented
design to Linux/Unix. He has written several programming books, including the
2006 Jolt Award winner Prefactoring and his latest Lean-Agile Acceptance Test
Driven Development: Better Software Through Collaboration. Ken has helped
clients from London to Boston to Sydney to Beijing to Hyderabad. He enjoys
snowboarding, windsurfing, biking, and hiking the Appalachian Trail. Reach Ken at
ken.pugh@netobjectives.com

3. Determining Business Value 3/30/2016
1
info@netobjectives.com
www.netobjectives.com
1 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
BFBMBVSP
Determining Business
Value In an Agile
Environment
Kenneth Pugh
Fellow Consultant
Net Objectives
March 2016
2 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Ken Pugh
ken.pugh
@netobjectives.com
Photo
Size:
Height: 2.25
Position:
from top left corner
Horizontal 0.75
Vertical 1.
Picture Style: Simple Black
Frame
No code goes in till the test goes on.
A journey of two thousand miles begins with a single step.
Fellow Consultant
OOA&D, Design Patterns, Lean, Scrum, Kanban,
Test-Driven Development
Over 2/5 century of software development
experience
Author of seven books, including:
– Prefactoring: Extreme Abstraction, Extreme
Separation, Extreme Readability (2006 Jolt Award)
– Interface Oriented Design
– Lean Agile Acceptance Test-Driven Development:
Better Software Through Collaboration

4. Determining Business Value 3/30/2016
2
3 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Outline
Agility focuses on rapidly delivering business value
– What is it?
– How do we estimate it?
– What do we do with it?
3
4 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
The Product (Project) Team
The Product (Project) Team consists of:
– The Customer Unit
Provides requirements
Provides business value estimates
– The Developer Unit
Provides implementation estimates
Implements requirements
– The Quality Assurance Unit
Validates requirements are the right ones
Verifies manifestation implements requirements

5. Determining Business Value 3/30/2016
3
5 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value – What Is It? (1)
"I can't define it, but I know it when I see it“
5
6 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value – What Is It? (2)
Business Value can be:
– Increased revenue (sales, royalties, fees) ($$)
– Decreased expenses ($$)
Less resources
More efficient use of resources
– Customer satisfaction ($$ ??)
Promoters / Satisfiers/ Detractors
– Staying in business ($$ ??)
– Staying out of jail ($$ ??)
– Avoiding risk ($$ ??)
6

6. Determining Business Value 3/30/2016
4
7 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Requirement Prioritization
Every requirement has a business value
– Or else why is it required?
Need to prioritize requirements
– If multiple product owners, need agreement on priorities
– Priorities should be partially based on business value of
requirements
Example priorities
– Must have
– Should have
– Could have
– Might have
– “In your dreams”
7
8 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value Measurement
Customer should estimate business value for
requirement stories
– Could use $$
Often difficult to do or compute
Question: Can it be measured?
Business value is unit-less
– Allows comparison between non-$$ and $$
As requirement is "done", business value achieved
8

7. Determining Business Value 3/30/2016
5
9 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value Chart
Shows increase in business value
What does this tell us?
9
BV
Iteration
10 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value Chart
Business value not delivered linearly
50% of effort usually delivers more than 50% of BV
– 40% / 60%
– 20% / 80%
Need to estimate how to get BV quicker
Often for new team / project
– Velocity is initially slower (stories / iteration)
– Or some overall issues are dealt with
– Therefore BV delivery is slow

8. Determining Business Value 3/30/2016
6
11 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Project Example
Sam’s Lawn Mower Repair and CD Rental Store
Wants to replace existing manual system
Issues
– Current system requires too much time to check-out CD
– Hard to get a report on what’s in inventory
– Can’t notify customers that CD is almost late and they’ll be
charged an enormous late fee.
What’s it worth to you (Sam that is)?
– Determine an overall $ cost savings
12 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value Example
Example - Sam’s Lawn Mower Repair and CD Rental
Shop
– Keep track of where each CD is – in store or on rental (and
with whom) (100)
– Report when CDs are overdue (40)
– Have a catalog so the customer can see what CDs are
available and what songs are on what CDs (13)
– A charge system to bill customers monthly, rather than by
each rental (20)
– Be able to offer discounts to frequent renters (5)
– When multiple stores, the system should show which stores
have a particular CD (3)
12

9. Determining Business Value 3/30/2016
7
13 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value Points (1)
Could set highest priority story at a value (e.g.
100) and estimate relative points
Or could use triangulation
– Compare stories to multiple other stories
– Group like stories together
Values (unit-less)
– 0, ½, 1, 2, 3, 5, 8, 13, 20, 40, 100, etc
– 0 is little business value
13
14 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Game Play
Place Story Cards in pile
– Place top card on playing surface
Next player places top card relative to first card
– (left easier, right harder, below equal)
In succession, each player can either:
– Play top card from pile
– Moving a played card
– Pass
Repeat above until:
– No more cards remain in the pile, and
– No player wishes to move a card
Then assign points to each column
– (1,2,3,5,8,13, 20, 40, 60, 100)

10. Determining Business Value 3/30/2016
8
15 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Starting Point Ending Point
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
1 2 3 5 8
16 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value Workshop
Sample
– Mow lawn
– Take out trash
– Repair leaky faucet
– Clean basement
– Tune up auto
– Set clock on VCR
– Watch basketball finals
16

11. Determining Business Value 3/30/2016
9
17 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value and Story Points
Business value is one-half of equation
Need cost estimate as well
Time/cost estimates are frequently WAG's
– Story points are relative measure of time/cost
17
18 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Time Estimating Example
Example - Sam’s Lawn Mower Repair and CD Rental
Shop
– Keep track of where each CD is – in store or on rental (and
with whom) (5 – comparison)
– Report when CDs are overdue (2 - comparison)
– Have a catalog so the customer can see what CDs are
available and what songs are on what CDs (3)
– A charge system to bill customers monthly, rather than by
each rental (20)
– Be able to offer discounts to frequent renters (13)
– When multiple stores, the system should show which stores
have a particular CD (5)
18

12. Determining Business Value 3/30/2016
10
19 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Story Points (2)
Estimation Poker
– Each estimator has deck of cards
– Decide on one story that’s average – 5 or 8 - for comparison
– Read story
Each person pulls a card
Turn all cards over
Discuss differences
Redo until agreement
19
20 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Story Point Workshop
Instead of cards, we'll use hand signals
Sample
– Mow lawn
– Take out trash
– Repair leaky faucet
– Clean basement
– Tune up auto
– Set clock on VCR
– Watch basketball finals
20

13. Determining Business Value 3/30/2016
11
21 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Bang for the Buck
Once business value and time estimated
– Determine “bang for the buck”
Bang = Business value points / Story points
– Represents roughly “return on investment”
– Don’t get into differences of 1.3 versus 1.4, but
rather 1 and 2 or 3
May want to prioritize high Bang stories
21
22 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Bang for the Buck Example
Example - Sam’s Lawn Mower Repair and CD Rental
Shop
– Keep track of where each CD is – in store or on rental (and
with whom) 100/5 = 20
– Report when CDs are overdue 40/2 = 20
– Have a catalog so the customer can see what CDs are
available and what songs are on what CDs 13/3 = 4
– A charge system to bill customers monthly, rather than by
each rental 20/20 = 1
– Be able to offer discounts to frequent renters 5/13 = .5
– When multiple stores, the system should show which stores
have a particular CD 3/5 = 1
22

14. Determining Business Value 3/30/2016
12
23 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Bang for Buck Workshop
Compute "Bang for the Buck"
Sample
– Mow lawn
– Take out trash
– Repair leaky faucet
– Clean basement
– Tune up auto
– Set clock on VCR
– Watch basketball finals
23
24 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Business Value Chart (Revisited)
Slope is roughly "Bang for the Buck“
– (If SP per iteration constant)
24
BV
Iteration

15. Determining Business Value 3/30/2016
13
25 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Bang for the Buck
When Bang for Buck decreases
– Consider project termination
– Look for other projects with bigger BfB
25
26 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Weighted Shortest Job First (1)
WSJF uses Cost of Delay (CoD) which combines
– Business value
– Time Criticality
Does value decay over time?
Fixed deadline?
Will customer wait for us?
– Risk reduction / opportunity enablement
What else does this do for us?
Reduce risk?
Open up opportunities?

16. Determining Business Value 3/30/2016
14
27 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Weighted Shortest Job First (2)
Estimate (on 1 to 20 scale)
– Business value
– Time Criticality
– Risk reduction / opportunity enablement
Then combine into CoD
– At least two ways to do this:
– CoD = BV + TC + RR_OE
– CoD = BV + TC*TCWeight + RR_OE * RR_OEWeight
WSJF = CoD / SP
28 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
WSJF
Example - Sam’s Lawn Mower Repair and CD Rental
Shop
28
Item BV CoD RR_OE Unweighted CoD
Keep track of
where each CD is
100 100 20 220
CDs are overdue 40 1 1 42
catalog 13 8 1 21
Charge system 20 5 13 38
Discounts 5 1 5 11
Multiple stores 3 1 13 17

17. Determining Business Value 3/30/2016
15
29 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
CoD Exercise
Business Value Time Criticality Risk reduction /
opportunity
enhancement
Mow lawn
Take out trash
Repair leaky faucet
Clean basement
Tune up auto
Set clock on VCR
Watch basketball
finals
30 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
CoD Considerations
Time Criticality Risk reduction / opportunity
enhancment
Mow lawn Harder to do when higher Neighbors complaining
Win best yard in neighborhood
Take out trash Smell increases Rats
Repair leaky faucet Cost of additional water Possible water damage
Prevent mold growth
Prevent losing job from loss of sleep
Clean basement Loss of pizza due to
cockroaches
Losing significant other after seeing
cockroaches
Tune up auto Loss of resale value Possible car not starting
Possible engine repairs
Set clock on VCR None Missed taping of shows
Annoyance of blinking
Watch basketball
finals
Won’t be real time if
missed
Watching after knowing score

18. Determining Business Value 3/30/2016
16
31 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Assumptions
Benefits of estimating CoD (or just BV)
– Make explicit implicit assumptions about value
32 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Smaller Picture
Example had “big level stories”
Big level stories turned into stories for
scheduling
BV allocable among stories
– Can use planning poker, card movement, or just
agreement
Example big level story:
– Keep track of where each CD is – in store or on rental
(and with whom) BV 100
32

19. Determining Business Value 3/30/2016
17
33 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Smaller Picture
Stories with “Allocated BV”
– As the Counter Clerk, I want to check-out a CD for a
customer
BV = 40
– As the Counter Clerk, I want to check-in a CD
BV = 40
– As the Counter Clerk, I want to note that a CD is
damaged on check-in
BV = 5
– As the Counter Clerk, I want to note that the
customer reported the CD as lost or stolen
BV = 5
33
34 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
“Right-Sized” Stories
If user story effort (Story Points) exceeds an iteration (or
other limit)
– Break story into smaller stories
– Every story should have BV (minimum of 1)
Example Story
– As the Counter Clerk, I want to check-out a CD for a customer
BV = 40
Smaller Stories:
– As the Counter Clerk, I want to check-out a CD for a standard rental
for a customer
BV = 20
– As the Counter Clerk , I want to check-out a CD for an extended
rental for a customer
BV = 20

20. Determining Business Value 3/30/2016
18
35 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
“Right-Sized” Stories
If story not breakable into stories with BV
– Break story into developer stories
– Developer stories have no BV
Should have developer-supplied acceptance tests
Example Story
– As the Counter Clerk, I want to check-out a CD for a customer
BV = 40, SP = 8
Smaller Stories:
– As the Developer, I need to create a database to support check-out
CD for a customer
SP = 2
– As the Developer , I want to create a user-friendly UI to support
check-out CD for a customer
SP = 2
– Etc.
Achieve BV when all developer stories done
36 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
BV to $$
If need $$
– Take total estimated $$ for a project
– BV $ = (Total BV) / (Total $$)
– Using past history, determine estimated SP $
(Total $$ / Total SP for a project)
ROI is BV $ / SP $

21. Determining Business Value 3/30/2016
19
37 30 March 2016
Bigger Picture
38 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Bigger Picture
Can use"Bang for the Buck" on larger scale
– Determine "Business Value" for project on large scale
– Determine "Story Points" for project on large scale
– Rank projects (or individual features) on "Bang for the Buck“
Issues
– People who have bigger picture view / appreciation
– Need to rank non-homogeneous projects
– Need to adjust effort estimates by different teams
Use past history, if available
Measures
– May use WP (work points) for non-software work
– Need to determine a WP to SP ratio to adjust BfB
38

22. Determining Business Value 3/30/2016
20
39 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Portfolio Project Example
39
CheckInOut
BV =
SP =
BB =
Website Redo
BV =
SP =
BB =
HR Automation
BV =
SP =
BB =
New Store Layout
BV =
WP =
BB =
40 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Portfolio Feature Example
40
CheckInOut Website Redo HR
Automation
New Store Layout
Keep track of CDs
BV 100; SP 5; BB 5
Menus
BV 100; SP 3; BB 33
Paychecks
BV 5; SP 2; BB 3
Checkout area
BV 20; WP 5; BB 4
Overdue report
BV 40; SP 2; BB 20
Sign up
BV 20; SP 13; BB 2
Vacation plans
BV 1; SP 3; BB .5
New CD shelves
BV 13; WP 20; BB .5
Catalog
BV 13; SP 3; BB 4
Charge system
BV 20; SP 20; BB 1
Discounts
BV 5; SP 13; BB .5
Other Stores
BV 3 SP 5; BB 1
What might be the sequence?

23. Determining Business Value 3/30/2016
21
41 30 March 2016
Not an Ending,
But a Beginning
42 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Summary
We've looked at business value
– What is it?
Measure of worth to the business
– How do we measure it?
Customer unit estimate sit
– What do we do with it?
Determine bang for buck
Determine requirement priorities
Show business value growth
Prioritize portfolios
42

24. Determining Business Value 3/30/2016
22
43 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
A Last Exercise
If there’s time
– Let’s try it for real
info@netobjectives.com
www.netobjectives.com
44 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
Start Becoming
Business Valuators
Thank you
Please fill out Evaluations