Is It Worth It: Using A Business Value Model to Guide Decisions Kent J. McDonald @beyondreqs
Is It Worth It? Using A Business Value Model To Guide Decisions
May 25, 2015
One trait of an effective business analyst is the ability to ask the right questions. One “right” question that applies to just about every projects can sometimes be difficult to ask, let alone answer: “Is it worth it?” This question is difficult to answer, because the answer will change as you proceed through the project and gain more knowledge about the purpose, considerations, costs, and benefits involved in a project.
In this session, we’ll explore a tool you can use to help organize the necessary information to answer the “is it worth it?” question on a regular basis. This interactive session will demonstrate how you can create a value model to make an initial decision about whether to pursue a project, and then utilize that model as your knowledge grows throughout the project to revisit the question and confirm whether the project is on the right course, or if changes need to be made.
Topics discussed during the session include:
Structuring your value model to make decisions about whether to do a project
How to deal with non-financial benefits in your Cost/Benefit discussion
Where measures such as NPV, ROI, TCO, IRR fit into the Cost/Benefit discussion.
The impact of timing of implementation on the Cost/Benefit discussion.
In this session, we’ll explore a tool you can use to help organize the necessary information to answer the “is it worth it?” question on a regular basis. This interactive session will demonstrate how you can create a value model to make an initial decision about whether to pursue a project, and then utilize that model as your knowledge grows throughout the project to revisit the question and confirm whether the project is on the right course, or if changes need to be made.
Topics discussed during the session include:
Structuring your value model to make decisions about whether to do a project
How to deal with non-financial benefits in your Cost/Benefit discussion
Where measures such as NPV, ROI, TCO, IRR fit into the Cost/Benefit discussion.
The impact of timing of implementation on the Cost/Benefit discussion.
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Transcript
Is It Worth It: Using A Business Value Model to Guide
Decisions
Kent J. McDonald@beyondreqs
Discussion Topics
Business Value? Purpose Considerations Costs & Benefits Using the Business
Value Model to decide
The BA 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?
Purpose Based Alignment Model
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
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
Bergman Academy15:1 Student Teacher Ratio
“Personalized” lesson plans
Music Education w/ DSM Symphony
OTM
EnrollmentFundraisingBook keepingCurriculum FacilitiesParent Communication
Decision Filter
If we do this, will it help us provide the best education for every student?
SIS – What’s The Purpose?
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?
Context Leadership Model
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
SIS – Considerations?
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
Specific
Measureable
Agreed Upon
Realistic
Timely
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
SIS – Measures of Success?
50
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
And if you still want numbers…
Is It Worth It?
Move forward? Trash it?
BA FAQ
Do business analysts ever really get the chance to do this?
What if we never get pulled into the project until this is already done?
57
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/isitworthit/
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