Business Value - The Ultimate Metric !!

In Agile software development, Value is an important concept in Agile. The first principle in the Agile Manifesto is:

“Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.”

But what is Business Value? How can we access those values?

Business Value is complicated because it comprises many things. It is a compendium of what all stakeholders experience as value. It includes both quantitative and qualitative components. And to make it even more interesting, it includes both a rational and an emotional component.

And did I mention that it also varies over time?

Based on the elements of the Value Pyramid above, it's very difficult to measure and include all components in a meaningful way.

Business Value results from the intersection of three dimensions :

1. What you can implement successfully and sustainably

2. What your customers want and will buy (even if they don’t know it yet)

3. What your team is excited about creating

How Do You Measure Business Value?

Business value is very dynamic, so it’s not an easy task to capture and compare business value. Here’s a list of elements that you can measure to determine your organization’s business value.

Yes, we have plenty of indicators, like velocity, lead time, processing time, mean time to recover, mean time to deployment, percent of complete and accurate, bug leak ratio just to mention a few. They are all important. However, they either measure efficiency of delivery, or operational performance. Often the business value measurement is lost from the focus of the teams and left to the Product Owners or Product Managers. But measuring business value is often subjective and challenging to calculate and monitor.

Business Value should be assessed against KPIs which are outcome-focused i.e. tied to objective (or business goals) of the project and target based.

These must be forward-looking indicators to provide meaningful data to business from value accrued to date, financials, customer growth, customer acquisitions, etc.

Business Value should be broadly reported on 5 key areas:

1. Product/Service Value 

Out of the business goal you are working on, try to understand which EPIC is delivering what percentage of the business value.

We need to understand that not all the EPIC/FEATURES are delivering equal values.

As per above figure, typically 80$ of the business value resides in the 20% of the User Stories in the backlog.

This is based on The Pareto Principle that suggests two out of ten items, on any general to-do list, will turn out to be worth more than the other eight items put together. We need to make sure we are prioritizing based on that. Prioritizing Features Effectively Can Deliver Radically More Business Value.

2.Timelines 

Using Agile EVM calculations. Quantitative family of metrics, measures, and models to determine project, program, or portfolio performance.

Numerical ratings to measure technical, cost, and time or schedule performance of IT programs and projects based on the business value assigned. Helps ensure BUSINESS VALUE is achieved by measuring technical, cost, and schedule performance early and often

3.Customer KPIs

Identifying and measuring the right customer service KPIs or metrics help businesses to monitor and analyze customer relations by considering their overall journey. This helps us to access the Business value we are delivering in the right way. Below are some of the broadly required KPIs.

a)Average Resolution Time (ART): Fast resolution is always a stable determinant for customer satisfaction. Every customer expects a quick consistent support experience. Addressing customer’s queries in real-time is imperative for you to hold them from leaving you at the risk. Average resolution time (ART) refers to the total time taken by the team to resolve the support ticket once it is looked upon. It is measured in days or online hours. The lower the resolution time, the higher is the customer satisfaction.

b)Customer Effort Score (CES): Customer Effort Score (CES) is a customer experience metric that measures how easy it is for a customer to do business with you via a CES survey. You can ask customers to evaluate their experience with your products and services is directly associated with satisfied customers and business growth. So put your best effort so that the score is the lowest on a scale of 1-10.

c)First Contact Resolution (FCR): First contact resolution (FCR) helps gauge customer satisfaction, the higher your FCR rate, the more satisfied your customers tend to be. It is a key factor that drives customer loyalty and also measures your agents’ efficiency to resolve an issue on the first interaction. The FCR performance indicator gives you insights into how good your agents are at understanding and addressing a problem without needing multiple interactions.

d)Customer Retention Rate (CRR): Acquiring new customers indeed improves your brand image, however, retaining them for longer-term shows that you have developed trust & loyalty with the customer retention strategies.

4)Financial KPIs :

Identifying the right KPI will help a lot in understanding right business value is being delivered or not.

Let's take an example as per above figure, we do realize the return on investment starts increasing with time. This will help us to calculate the net present value of any business goal we are delivering or building.

NPV/Point Drives Better Decision Making:

One metric to encapsulate return on investment

1. Calculate Epic NPV

2. Can also include “intangible” benefits

? Use Planning Poker to estimate business value relative to reference activity with known cash flows

3. Estimate story points to complete Epic

4. Divide total NPV by estimate of points

? Answers: How can we get the most return with the least effort?

Based on NPV value, this will help us to establish and access the business value concerning each EPIC or business goal.

5)Business Change indicators

 Qualitative measurements alone could stunt your agile growth because they focus on “doing agile” and not “being agile”. Those metrics don’t communicate if you’re promoting customer collaboration, building trust, sharing knowledge, providing cross-functional training, prioritizing high value, producing high-quality software, fostering interaction, being responsive to change, and nurturing an engaging work environment.

 Below are some business change indicators that help to access the business value as well

a)Measuring Team Members –

b)Measuring Team Behaviors –

c)Measuring Team Behaviors – Team Engagement

d)Measuring Team-to-Team Engagement

e)Measuring Outcomes – Business Value

Defining proper KPIs is crucial for project success and the team should work collaboratively with the business to jointly define “what constitutes success?”.

This will help us to inspect and adapt the process for establishing business value and ways to access it as well.