Thursday, June 25, 2015

Business Value of Achieving Organizational Agility

Business value is an informal term and could mean different to different people.

Many forward-thinking organizations are scaling their Agile practices from doing Agile to being Agile, what’s the business value in being agile though? Is it to prove out some new technology? Is it to showcase a capability or prototype to a customer? Is it the stepping stone to an order? Is it for faster product delivery? Or is it to better delight customers? Or to put simply, what are the business values of achieving organizational agility?

Business Value must be qualified and quantifiable: What is valuable to the business? It certainly isn't the technology only that keeps business running, unless that technology (including agile/scrum processes, tools, HW/SW, and IT competence) can support the goals of the business. "Quality Attributes" (QAs) help the business identify and prioritize business value. Discussions with the organization's users and management will identify what is important to the organization and should focus on: Reliability, Usability, Scalability, Extensibility, Modifiability, Sell-ability (Profitability), Marketability, Secure-ability, Performability, etc. All must all be identified and PRIORITIZED. The next step is for the business values to be identified by the organization, be quantified by management and worked into the architecture of the system. For instance, how important is time-to-market? How much per week do you lose as a company, if you take a more maintainable (and time-consuming) approach to designing and coding the software, versus getting something out into the market quickly? Every organization fluctuates between prioritizing business values based on revenue/cost versus risk.

Business value is an informal term and could mean different to different people. According to the 80:20 principle, 20% of the task log will carry 80% of the value. In instances where most of the tasks share the same priority, the business value plays a bigger role in determining which task needs to be addressed first. While opportunity value propositions are often expressed in dollar convertible terms, other dimensions of strategic intent may improve positioning and strategic intent and produce usefully measured outcomes related to a business competitiveness, management predictability, process improvement, engineering trustworthiness, and operations dependability. Only time can tell how much business value a product will deliver. However, isolated feature values ultimately do not matter. The business has to decide which features it believes will deliver value relative to other features in order to drive development. It really does not matter how accurate that decision is because the decision needs to be made in order to deliver and then find out if the resulting package delivers sufficient value or not.

Prioritization is key. Business Value works in conjunction with Priority - so if you have some capacity in an iteration, and are looking to pull it from the backlog, you can grab that high value, lower priority item that delivers a lot for hopefully a small amount of effort. Sometimes it’s great to have a strategy to define business value when you have competing priorities, but truly the backlog should be full of generally agreed upon top priorities for the end users. In the end, "successful" metrics are a result building a customer or consumer focused product. Now when you start to shift from doing Agile to being agile, you must be aware of the business values identified to be incorporated into the system, and depending on the priorities of these values, the Agile technique should most certainly form around the goals that align with the values. But many times, the tech teams doing agile don't align with the business values and miss their target. Maybe because it is not well communicated, or the programmers don't know how to modify their processes to address the business values. The system may work, but response time is horrendous, or risk management is an after-thought.

Many experts try hard to figure out the ‘magic formula’ to calculate business value: We always need to adapt to context. For example, one needs to be very innovative when defining "Happy Customer." Would you measure the value of a project required to meet new regulations by how much the fines would be if the regulations were violated? While, for example, you could measure employee retention before and after a project that improved the working environment, you can not say that retention was the only value of improving the working environment, nor can you always safely say that nothing else could have also contributed to the retention rate. And can you really translate employee retention into a monetary amount?  Perhaps there’s no magic formula to calculate the exact value Agile brings in, or the formula can be changed depending on the organization and on the current strategy to express the direction an organization wants to develop itself. Still, many experts try hard to quantify, for example, some think Business Value can be calculated as BV = 2 * (S * 0.3 + AT * 0.3 + CS * 0.2 + CB * 0.2) + DV + RM with
S = strategy alignment
AT = potential for additional turnover
CS = potential for cost savings
CB = potential for competitive advantage
DV = decline in value over time (if I do not implement today)
RM = potential for risk reduction
All these create business value, the key is agreement, in the end, goal and deliverable

Agile needs to be the philosophy to perceive multidimensional business values. Making the effort at the leadership and portfolio level to qualify and quantify value in terms of both strategic value and tactical value; direct revenue and indirect (mission/vision/values) terms is the first step to crafting high-level strategic intents. And at the tactical level, follow Agile principles to deliver customer value is the core in Agile management and methodology.


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