Don’t Value Be a Detour!
Value is the most talked about and least understood concept in Agile. In terms of software development, enhancements, and maintenance, the value of a piece of work is the worth to an organization it is the outcomes that result from doing the work. That definition might be hard to wrap your head around. More simply, value is what you get from the sweat, tears, and money needed to take an idea and convert it into functional software (or hardware, network, or service). From an organization’s perspective, some functional software is more valuable than others regardless of the input. The difference between the time and money and the perceived value of what is delivered is the net value. Most of the definition of value should boil down to basic accounting, but unfortunately there are complications.
Complications include:
- Value can accrue from many sources. It is often difficult to get a handle on (or even remember) all of the potential sources of value.
- Results must be valued in a common unit of measurement. Differing units of measure make coming up with a total value number difficult and make comparisons of an alternative hard.
- Value is often a function of the perspective of the person estimating or determining value. Perspective is often even more of an issue when accounting for indirect or seemingly intangible sources of value and cost.
The potential sources of value are often varied. For large, mission-critical pieces of work or products, the number of sources can be quite large and some might be more important than others, while for smaller pieces of work the source of value might be very specific. The list below identifies several possible sources of value and potential seed questions to elicit information about a value source:
Mission
Impact/effect on the organization’s
- Will doing (or not doing) the work have a direct impact on the organization’s mission?
Coupling – describes how related or coupled to the business is the piece of work to the mission or vision.
- How related is the piece of work to the organization’s mission and/or values?
Types of Value
Direct value is generated by direct creation or consumption of resources.
Revenue – Sales, Investments, License Fees, Patent Shares
- How much income (or returns) for the organization is generated by executing this work?
Costs – Reduction of cost include savings from not doing work, retiring manual workarounds, or tools.
- What are the cost savings you expect to accrue from implementing this piece of work?
- How will this piece of work impact cost in the organization?
Labor savings – Labor savings are a specific form of cost savings. They are generally generated by reducing staff or avoiding hiring.
- How many FTE can be trimmed/removed from your budget when the work is implemented?
- What is the impact of implementing this work on your hiring plans?
Improved efficiency – Savings in this category are generated when work is done “better.” Efficiency is a reflection of more usable output per unit of input. Productivity is a measure of efficiency. (Note: typically seen as labor reduction) Efficiency can be improved by doing a better job (higher quality – more effective) and/or doing the job better (less effort or more usable output).
- What portions of your operations budget can be trimmed/removed based on implementing this work?
Indirect – Costs and benefits are derived from the use of direct labor and resources.
For example, software has a tangible direct value. Using the software to do something delivers an indirect benefit from the software.
Effectiveness – Effectiveness is a reflection of how successful a process or project is in producing the desired outcome. Improving quality is a reflection of improved effectiveness.
- How will this piece of work improve quality and by how much?
- How will this piece of work increase improve the probability of delivering the expected value?
- How does implementing the work deliver a better product or service? Note: I always ask why won’t improved effectiveness increase revenue or reduce operations costs?
Improved Scaling – Scaling is providing a system or process the ability to expand services, products, or generally do more. If the scaling features being deployed are to be used immediately the cost or revenue impact would be direct. In scenarios in which the work is being done to “position” the organization for change ,the impact is indirect.
- Does the work position the organization or grow efficiently in the future? (Growth should relate to the mission.)
Risk Reduction – Risk is the probability of something happening (typically that negatively impacts plans or operations). Reducing risk is the quantified reduction in the probability of occurrence or impact if the risk becomes an issue.
- What risk is less likely to occur if this work is delivered?
- Does this work reduce the impact of a risk (be specific if possible)?
Future Options – Some work, due to its nature, changes the options possible in the future. For example, implementing a maintenance on a software package so the organization is positioned to use/implement features that will be delivered in the futures. (This is a specialized form of scaling).
- Will this work enable other changes in the future? Follow-up with, what value will those future changes deliver?
Goodwill – Goodwill is a valuation of the brand, customer base, external relations, and relations with current and future employees.
- Will doing (or not doing this work) negatively impact the institutes brand or relationships with stakeholder communities?
People/Current Employees
Engagement – Engagement is a measure of how likely an employee is to do their best, present best effort all of which is committed to the organization’s goals and values. Engagement is often linked to higher quality and productivity (effectiveness and efficiency).
Morale – (a specialized form of engagement) Morale is the impact on job satisfaction, outlook, and attitude.
- Will the work item improve employee engagement? Follow on by asking: how the improvement impacts areas such as employee retention, reduction in sick time, and less retraining?
Motivation – The impetus to do what is needed to ensure the company/organization is successful.
- How will the piece of work impact employee motivation? Do you expect the motivation gain to translate into improved effectiveness or efficiency?
To paraphrase Johnny Lee, we need to look for value in all of the right places because value is rarely a simple number that a product owner carries around in their back pocket. While sometimes full-scale, detailed cost benefit analyses are required, most work needs far less detail. Most work does need an understanding of value so it can be prioritized, so that the really important bits can be identified, and so that a minimum viable product can be identified. The list of sources and questions are a tool to prime the discussion pump.
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