The Taxonomy of Value Part 3 of 3

You may want to catch up with Part 1 and Part 2 before you read Part 3 below.

In a subscription economy, consumers obsess about value. When they don't get value, they inflict a range of emotions on the producer. This can range from withdrawal to sulking to full-blown tantrums on social media. If the consumer does not get value, he or she does not hesitate to move, bee-stung lips [1] and all. 

To stay relevant and competitive, producers get a bee in their bonnet about value. 

The relationship is smooth when producers and consumers agree on “value.” E.g., the value of a delicious meal, an exciting movie, and an anti-Covid vaccine is obvious. What happens when the value is unclear? How can producers and consumers collaborate to create value?

TL;DR

In an ideal world, producers will confirm [2] "value" with the consumer before creation.  This will help producers and consumers to mindfully target the right value. 

Consumers need to learn [3] how to ask for value. If the ask is unclear or vague, suppliers will find it hard to provide this value in a cost-effective way.

The consumer is the "yin" and the producer is the "yang" [4] of value creation. Together, they can form a "whole" and avoid buyer's or seller's remorse.

Build value into a product or service

In the quest to create value, sometimes there is clarity, and often there is a lot of uncertainty. In both cases, high-performance teams build value into the product or service. They do not inspect the value into the product. 

Teams that use the waterfall method look like busy bees after the project starts. While milestone reviews are the forum for inspection, course correction is painful. Hence, waterfall methods are ill-suited when "value" is unclear.

The goal of Agile teams is to reduce the trial and error in value creation. Agile teams create a Minimum Viable Product (MVP) to create "value" in increments [5]. Yet, if the Agile team does not understand the value needed by the consumer, even an MVP can miss the mark. 

Waterfall teams frustrate executives by missing milestones, and creeping scope and cost. Agile teams frustrate executives by not delivering amazing results faster and cheaper. In both cases, executives soon tire of teams that “put the bee on” [6] for creating value. 

How to predict value creation

When I coach teams to become Agile and high performance, I challenge them by asking, “What is the end game? What value is being created?” I feared the Agile team ceremonies (planning, sprints, stand-ups, etc.) would be a distraction.

The real purpose of Agile is to create value for the customer, faster, cheaper, and in cadence. 

I’ve observed what I describe below in both a startup as well as a multi-billion dollar corporation.

As Sun Tzu said, “Every battle is won or lost even before it is fought.” Organizations and teams must focus on the right thing, and then do things right (see Part 1). This means they need an effective business strategy. When Agile teams execute the wrong strategy, they will efficiently deliver the wrong things faster. 

Once they get their strategy right, organizations cannot afford to lower their guard. They must pivot on strategy, without mercy or guilt [7] to stay focused on value.

Startups begin their journey with a direct focus on innovation and creativity. Job one is to get and keep a competitive advantage. This quickly becomes challenging as even the best-managed startup will accumulate technical debt. 

Organizations with a heritage (and legacy) have mountains of technical debt. This debt is an impediment to innovation and creativity. Organizations that reinvent themselves have figured out how to overcome their technical debts. 

The below diagram describes the three types of value creation in an organization. The horizontal axis shows the time to market (i.e., time to deliver value). The vertical axis shows the cost to create value. Some takeaways from this diagram are:

• There is a direct correlation between cost and time to market. 
• Technical debt and waste in internal processes will slow down time to market. Such companies are soon overtaken by competitors who adapt better. 
• Eliminating waste is a low-hanging fruit activity. While it brings some benefits, Architecture and process re-engineering will bring even more benefits.

To win customers, organizations need to deliver value faster and at a lower cost (or a higher profit). Organizations have two choices:

• They can reduce their technical debt and internal waste to improve time to market (a.k.a. Operational Effectiveness), or 
• They can focus on innovation and creativity, to get to market faster and at a lower cost. Innovation and creativity is the way to deliver value better than competitors.

As Michael Porter points out [8], operational effectiveness (types 1 and 2 above) is not a strategy. Companies that focus solely on operational effectiveness risk becoming irrelevant in the marketplace. This is not to say organizations should not eliminate waste. Becoming lean is table stakes in the eyes of the customer. Customers will pay a premium only for innovation and creativity.

Gaps in architecture and internal processes are systemic impediments to value creation. It makes sense for organizations with legacy processes to eliminate internal waste. These organizations identify how they create value by analyzing Value Streams [9]. This is a powerful method to identify opportunities for value creation, but it still focuses on doing things right, and not on the right thing.

Organizations hunt for strategic advantage with innovation and creativity. Once they are clear about the strategic intent, they “grip and rip” to deliver value.

Publish value to be created in advance

If the value is unclear, teams may generate more waste than value. One way around this is to frame up a hypothesis and test it via an MVP. If the hypothesis proves to be false, start again with a new hypothesis.

When value creation is uncertain, teams need higher visibility to progress and impediments. In the waterfall method, visibility is available only during milestone reviews. This makes course correction harder. Any queries outside the milestone reviews are met with the response, “none of your beeswax.” [10] 

Agile teams provide frequent visibility via the daily standup, reviews, and retrospectives. This means the team has more opportunities to inspect and adapt. At every checkpoint, Agile teams ask, “Are we on track to delivering value?” And “Will we deliver value on schedule and within budget?”

Agile teams embrace the guideline to “embrace changing requirements, even late in development.” Agile processes harness change for the customer's competitive advantage. Uncertainty dissolves when teams learn rapidly with an iterative approach. As a bonus: they do so at a minimal cost. This feedback loop at short intervals is crucial to data-driven course correction.

Teams can set the right expectation by showing a roadmap [11] with the plan to create value. This sets the right expectation of what is possible.

This is useful even if you have an audacious mission statement. E.g. SpaceX mission is "To revolutionize space technology, with the ultimate goal of enabling people to live on other planets.” A roadmap will set expectations about what it takes, what is possible, and in what sequence to get to the final goal.

In conclusion

After reading this 3-part essay, you may conclude that Agile is the “bee’s knees.” [12] The purpose of this 3-part essay is to foster mindfulness and not “convert” the devotees of Waterfall to Agile. 

“A hammer without a good process is a sore thumb waiting to happen.“ [13]

Agile and Waterfall are processes. Once you select a process, trust it and follow it mindfully. This does not mean teams should go on “auto-pilot” when following a process. Unexpected problems tend to arise (Murphy’s Law) [14]. Teams cannot expect the process to solve all their problems, and forget their responsibility to “inspect and adapt.” They need to make data-driven course corrections. Unfortunately, when the process fails, it becomes the scapegoat. 

Ken Schwaber said it best when describing the Agile Manifesto (paraphrased) [15].

“We are not going to tell you what to do because you are doing creative work, but here are some principles, guidelines, and value statements to help you. When you have alternatives, we recommend you do this, instead of that, to avoid blind alleys.” 

I wish you all the very best in your efforts to create value, may you all be successful. I hope this Taxonomy of Value helps you make a “bee-line” [16] to value!

References

[1] A phrase used to describe a pout.

[2] A Journey Map is a popular method to anticipate needs and enhance customer experience.

[3] The author used to religiously read Consumer Reports to seek out the best products and avoid nasty surprises.

[4] https://en.wikipedia.org/wiki/Yin_and_yang

[5] While there will always be exceptions, MVPs reduce cost, accelerates learning via customer feedback, and make course correction easier.

[6] Teams ask for money, often with a piteous, woe-is-me tale.

[7] Scaled Agile Framework. “Lean-Agile Mindset.” Accessed November 15, 2020. https://www.scaledagileframework.com/lean-agile-mindset/.

[8] “What Is Strategy?” Harvard Business Review, November 1, 1996. https://hbr.org/1996/11/what-is-strategy.

[9] Scaled Agile Framework. “Value Streams.” Accessed November 15, 2020. https://www.scaledagileframework.com/value-streams/.

[10] I.e.. “it’s none of your business”

[11] A roadmap is not a release plan It does not have dates when value is available. See Lombardo, C. Todd, Bruce McCarthy, Evan Ryan, and Michael Connors. Product Roadmaps Relaunched: How to Set Direction While Embracing Uncertainty. 1st edition. Beijing: O’Reilly Media, 2017.

[12] Slang for “wonderful”, “excellent”, or “cool”

[13] “Agile Process Proverbs.” Accessed November 15, 2020. https://www.agile-process.org/proverbs.html.

[14] https://www.murphys-laws.com/

[15] Hear how Ken actually said it: https://youtu.be/mfQIjf2TPdk

[16] A straight line between two points.