is it worth it: using business value model to guide decisions · knowledge bridge partners ....
TRANSCRIPT
Is It Worth It: Using A Business Value Model to
Guide Decisions
Kent J. McDonald
Knowledge Bridge Partners
Discussion Topics
Business Value?
Purpose
Considerations
Costs & Benefits
Using the Business Value Model to decide
What is Business Value?
I’ll know it when I see
it
Justice Potter Stewart, concurring opinion in Jacobellis v. Ohio 378 U.S. 184 (1964), regarding possible obscenity in The Lovers.
Determining Business Value?
Costs
Benefits
Business Value
Determining the inputs?
Common Practice
Estimate
Guess
Business Value
Why do we want to know Business Value?
To make decisions!
Use business value model and guiding questions to decide if a project is worth it.
Purpose = What problem are you trying to solve?
Solution without a problem
Guiding Questions
Exactly what problem will this solve?
Why are we best suited to pursue this?
For whom do we solve that problem?
Purpose Based Alignment Model
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Purpose Based Alignment Model
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Innovate, Create
Achieve and maintain parity, Mimic, Simplify
Do we take this on?
Minimize/ Eliminate
Decision Filters
Simple rules to guide decision making
Disperse throughout the organization
Used for (among others)
Strategy alignment
Scoping
Design approach
“To be the low cost airline.”
- Southwest Airlines
“Will this help us be
the low cost airline?”
- Southwest Airlines
Purpose and Decision Filters
To be the low cost airline
Will this help us be the low cost airline?
Order new pages by 2pm and get them tomorrow!
The Billboard Test
Case Study – Purpose
What problem is Cooking Ugly trying to solve?
For whom is Cooking Ugly trying to solve this problem?
What are Cooking Ugly’s decision filters?
Are the capabilities Beth identified parity, differentiating, partner, or who cares?
Cooking Ugly
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Customer Relationships
Baking (production) Decorating Marketing & Sales Purchasing Accounts receivable Inventory
Considerations
= What could impact value?
Guiding Questions
What alternatives are out there now?
What factors are critical to success?
Guiding Questions
How will we get this product to market?
Uncertainty
Market uncertainty
Technology uncertainty
Number of customers
Project duration
Approach to change
Complexity
Team size
Mission critical
Team location
Team maturity
Domain knowledge gaps
Dependencies
Context Leadership Model
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Guiding Questions
Why Now?
Do we have the right people to solve this?
Constraint Fixed Flexible Accept
Scope X
Time X
Cost X
Quality X
Constraints
Case Study – Considerations
What alternatives already exist to solve Cooking Ugly’s problem?
What factors are critical to this project’s success?
What is the risk profile?
How do you think the Constraints should be prioritized?
Costs & Benefits
= What’s the impact on business objectives?
Guiding Questions
How much could we spend on this?
“Gut Feel” or “Ball Park”
How long, and how much? About a year and
$2.5 million.
Comparison to Past Projects
$1,000 $100K $10M ??
$1M
Assumptions: 2 week iterations Overall backlog size: 600 points Planning Velocity: 30 5 Person Team Avg Cost/person/wk: $4,000
Extrapolate
Estimate: $800,000
?
Guiding Questions
How big is the opportunity?
Benefits
A consequence of the action that contributes to meeting business objectives.
Can be identified in financial or non financial terms, but should be measurable
Soft Benefits in a Hard Business Case: Legitimacy and Value for Difficult Benefits Solution Matrix Ltd By Marty J Schmidt
Guess
Increase Revenue
Reduce Costs
Guiding Question
How will we measure success?
Objectives
Specific
Measureable
Agreed Upon
Realistic
Timely
Financial Objectives?
ROI Return on Investment
NPV Net Present Value
TCO Total Cost of Ownership
IRR Internal Rate of Return
Financial Objectives = Cash Flow
Year 0 Year 1 Year 2 Year 3 Year 4
Benefits Costs
Non Financial Objectives
By Dec 2012 increase inventory turns from 5/year to 10/year
By Dec 2012 reduce paper apps from 1,000/month to 500/month
Case Study – Costs & Benefits
Identify at least two options to solve Cooking Ugly’s problem
Identify the costs incurred by each alternative
Identify the benefits provided by each alternative
How would you measure success?
But Wait!
How can I possibly calculate a number for my business value with that stuff?
What ever should I do?
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Thanks to Nigel Dalton
The Conversation Room
Is It Worth It?
Move forward? Trash it?
Case Study – The Conversation
Is the project worth pursuing?
If so, which approach will you take and why?
If not, why not?
In what order should we deliver?
Release 1 Release 3 Release 2 If time…
Timing Can Be Key
Period 0 Period 1 Period 2 Period 3 Period 4
Benefits Costs
The only constant is change
Change in assumptions
Change in constraints
Change in understanding
Change in business conditions
Change in objectives
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?”
Is It Still Worth It? Move forward?
Trash it?
Change it?
Case Study – The Conversation Redux
Based on the new information…
Is the project still worth it?
Would you change your approach? If so, how?
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
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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 Mitch Cagan
Additional Guiding Questions
1. 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?
Questions?
Kent McDonald [email protected]
@BeyondReqs
www.beyondrequirements.com
Slides available from:
http://www.knowledgebridgepartners.com/presentations/isitworthit/