Business Value Modeling: Guiding Key Project Decisions Kent J. McDonald @beyondreqs
Business Value Modeling: Guiding Key Project Decisions
May 25, 2015
There are many questions that teams should ask about their project and its key functions and features. One question—“Is it worth it?”—is often difficult to ask, let alone answer. It’s even more difficult if you are asked to answer this critical question when you know least about the project. Unfortunately, the answer may change as you proceed and gain more knowledge about the purpose, considerations, costs, and benefits involved. Join Kent McDonald as he introduces the business value model—a tool you can use to answer the “Is it worth it?” question. In this interactive session, Kent demonstrates a business value model to help you make your initial decision about whether to pursue a project or include certain functions, and then to update that model as your knowledge increases throughout the project. Learn how and when to revisit the question and confirm whether the project is on the right course or if you need to make changes. Help your organization get away from relying solely on estimates and guesses, and instead have meaningful conversations about whether your projects are worth starting and continuing.
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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?
13
Purpose Based Alignment Model
14
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
31
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?
52
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 [email protected]@BeyondReqswww.beyondrequirements.comSlides available from:
http://www.knowledgebridgepartners.com/presentations/businessvaluemodeling/
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