More Related Content Similar to How do you measure value? Similar to How do you measure value? (20) More from ThoughtWorks Studios More from ThoughtWorks Studios (20) 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?
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4. What do we The typical measure, the “Iron Triangle”…
measure?
Cost
Constraints
Schedule Scope
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5. What do we has changed…
Value
measure? (Releasable product)
Quality Constraints
(Reliable, adaptable product) (cost, schedule, scope)
Source: Jim Highsmith
© 2013
6. What do we
Value
measure? (Releasable product)
Quality Constraints
(Reliable, adaptable product) (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
Value
measure? (Releasable product)
Quality is a given. But it is
relative: you must decide what is
the appropriate level of quality for
your solution.
Quality Constraints
(Reliable, adaptable product) (cost, schedule, scope)
Source: Jim Highsmith
© 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 Constraints
(Reliable, adaptable product) (cost, schedule, scope)
Source: Jim Highsmith
© 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
Define your
organizations
#1 Develop your organization's currency of
“Value Dials”
“Business
“value language”
Value Points”
Value-driven culture
Develop your
Business Value
Point Matrix
http://jimhighsmith.com/determining-business-value/
© 2013
12. How do we
Indicators of business value that may or may not map to the financial bottom line.
measure value? E.g. “Financial”, “Opportunity Capture”, “Customer Impact”, “Employee Impact”, “Social
Impact”, and “Traits”.
#1 Develop your organization's
“value language”
Define your
organizations Define your
“Value Dials” 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
Analogous to “story points”, the estimated business value is assigned relatively. Rather
measure value?
than using $/€/¥, business value points increases the visibility of the oft-‐neglected
“intangibles”.
#1 Develop your organization's
“value language”
Define your
organizations Define your
“Value Dials” 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
To help you prioritize your projects, map your Value Dials with measures such as
measure value? “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
relative unimportant while opportunity capture very important. Conversely, in the
#1 Develop your organization's
“value language” “Mature” phase financial results might be the most important by far.
Define your
organizations Define your
“Value Dials” 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
Understand value & cost right through the
measure value?
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
Allocate value points across all capabilities/features,
measure value?
based on their relationship to the business dials
Business Value Points
#1 Develop your organization's Business Value Points allocated to other Value Dials
“value language” allocated to the Financial
Value Dial
#2. Understand the value-cost
of each portfolio down to the
feature level
#3. Allocate “value points”
across all capabilities
http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf
© 2013
17. How do we
Measure both the cost & value, to ensure that the
measure value?
project does not cost us more than it is worth
120 120
Value Captured vs. Cost Expended
#1 Develop your organization's 100 110
“value language” 100 98 100 100
% Value 95
90 90 100
% Cost 85
#2. Understand the value-cost 80 80
75
of each portfolio down to the 70
feature level 60 60
55
50
#3. Allocate value points 40
30
40
across all capabilities 30
20 20
15
#4. Track value vs. cost for 10
5
each iteration 0
1 2 3 4 5 6 7 8 9 10 11 12
Iteration
http://www.alnhouston.org/documents/Summits/LeaderSummit-ValuePresentation-Reed-20110610.pdf
© 2013
19. For example...
Project Purpose: Increase the availability -‐ and thereby sales -‐ of
#1 Develop your organization's Patent documents to the legal community (for a
“value language”
legal publishing company)
Projected Revenue: $1million
Fixed Costs: $62,400 per iteration
© 2013
20. For example...
Value Points (V): Estimate of value, in this case revenue.
#1 Develop your organization's
Effort Points (P): Relative sizing, and are an estimate of cost
“value language”
#2. Understand the value-cost As a Patent Attorney, I want to search
existing Patents by keyword, so I can As an inventor, I want to see new
of each portfolio down to the
feature level find if there are similar filings to the Patent filings so that I can develop
one I am about to file. related products to these new
V=1
Patents.
P=8 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... Value distribution across features
#1 Develop your organization's 25 stories 5% value
“value language” 10 stories 8% value ($2500 per story)
($8k per story)
#2. Understand the value-cost 5%
8%
of each portfolio down to the
12%
feature level
50%
#3. Allocate value points 8 stories 12% value 25%
across all capabilities ($15k per story)
#4. Track value vs. cost for 5 stories 50% value
each iteration
($500k/$100k per story)
10 stories 25% value
($25k per story)
© 2013
22. For example... We now start measuring delivered value against
cost for every iteration
#1 Develop your organization's 120
Value Captured vs. Cost Expended
“value language”
% Value
100
#2. Understand the value-cost % Cost We start out on an agile
85
of each portfolio down to the 80 project by delivering the most
75
feature level
valuable stories first. It takes
60 60
55
#3. Allocate value points 50 a couple of iterations to
across all capabilities 40 40 stabilize, and then the value
30
30
#4. Track value vs. cost for picks up.
20 20
15
each iteration 10
5
0
1 2 3 4 5 6
Iteration
© 2013
23. For example... But what happens when we start delivering
lower value stories?
#1 Develop your organization's 120
Value Captured vs. Cost Expended
“value language” % Value
100 98
% Cost 95 Our fixed costs remain the
#2. Understand the value-cost 90 90
85
of each portfolio down to the 80 80 same, but the value of each
75
feature level 70
story delivered -‐ and
60 60
55
50 therefore, the total value of
#3. Allocate value points
across all capabilities 40
30
40 the project -‐ starts to
30
plateau.
#4. Track value vs. cost for 20 20
15
each iteration 10
5
0
1 2 3 4 5 6 7 8 9
Iteration
© 2013
24. For example... When do we “finish”?
The agile approach gives us the option to finish
anytime we see “enough” value. We could finish here…
#1 Develop your organization's 120
Value Captured vs. Cost Expended
“value language” 100 110
100 98 100
% Value
#2. Understand the value-cost 90 95 90 100
% Cost 85
of each portfolio down to the 80 80
75
feature level 70
But never here!
60 60
55
#3. Allocate value points 50 …or “ideally” here
across all capabilities 40 40
30
30
#4. Track value vs. cost for 20 20
15
each iteration 10
5
0
1 2 3 4 5 6 7 8 9 10 11
Iteration
© 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-accelerating-
enterprise-agility-jim-highsmith-thoughtworks.pdf
References http://jimhighsmith.com/determining-business-value/
§ Reed, Pat (2011) Value measurement framework
http://www.alnhouston.org/documents/Summits/LeaderSummit-
ValuePresentation-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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