business value modeling: guiding key project decisions

Business Value Modeling:Guiding Key Project Decisions

Kent J. McDonald@beyondreqs

Discussion Topics

Business Value? Purpose Considerations Costs & Benefits Using the Business

Value Model to decide

The Prime Directive:

Deliver Business Value!

*The organizers wish to apologize for any gratuitous trekkie references that may appear in this presentation.

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 QuestionsExactly what problem will this solve?

Why are we best suited to pursue this?

For whom do we solve that problem? 

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Purpose Based Alignment Model

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Purpose Based Alignment Model

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

Student Information System

Yes, it has been abbreviated to “SIS”

SIS “Requirements”

In search of a "Student Information System" that will be used to manage student and parent data, enable interactive communication between teachers and parents, as well as online enrollments. Requirements: Student/Parent Directory Staff Directory Calendar Online Enrollment Parent/Classroom Portal

Des Moines Academy15:1 Student Teacher Ratio

“Personalized” lesson plans

Music Education w/ DSM Symphony

OTM

EnrollmentFundraisingBook keepingCurriculum FacilitiesParent Communication

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?

Considerations

= What could impact value?

Guiding QuestionsWhat 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 QuestionsWhy 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 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?

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 BenefitsSolution Matrix Ltd By Marty J Schmidt

Guess

Increase Revenue

Reduce Costs

Guiding Question

How will we measure success?

Objectives

SpecificMeasureableAgreed UponRealisticTimely

Financial Objectives?

ROIReturn on Investment

NPVNet Present Value

TCOTotal Cost of Ownership

IRRInternal Rate of Return

Financial Objectives = Cash Flow

Year 0 Year 1 Year 2 Year 3 Year 4

BenefitsCosts

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 the problem

Identify the costs incurred by each alternative Identify the benefits provided by each

alternative How would you measure success?

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But Wait!

How can I possibly calculate a number for my business value with that stuff?

What ever should I do?

It’s a conversation!

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 3Release 2 If time…

Timing Can Be Key

Period 0 Period 1 Period 2 Period 3 Period 4

BenefitsCosts

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?

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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

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

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 McDonaldkentjmcdonald@gmail.com@BeyondReqswww.beyondrequirements.comSlides available from:

http://www.knowledgebridgepartners.com/presentations/businessvaluemodeling/