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Culture, Practices

How to Measure Value

One of the most asked questions I get from clients is “What is value” or “how do we measure value.” Interestingly, in my poll on the Scaling Agile To do List it appeared as a favorite too.

What I have learned is that this question’s context is very different from its words. I mean, value is the thing that your customers pull from your organisation. So it is really easy to find. But it is hard to measure. So, in most circumstances, I have found that what is being asked is either ‘how do we show we are being valuable’ or ‘how do we show that what we are delivering is of value.’

So there are three value measures implicit in this; measuring improvement (are we good?), measuring if we met our commitment (did we deliver the benefit?) and the true measure of value; was it of value to customers? Each is a different question and measure, none of which are standard.  This creates an enterprise rub as many corporate structures demand broad sweeping quantitative measures that can be benchmarked and compared.

Here in lies my epiphany, true value is not a quantitative measure, it is a yes/no question and, as such, needs to be asked each time and is dependent on the transaction at hand.  So now, many people are thinking something like “OUCH… that sounds hard, difficult, time consuming and objective. It will never be accepted as a KPI or success metric. So what is the vanity measure we can use instead??” And that’s the real issue. We tie value to KPI’s because the world says value is important to measure so there for it should be on our score cards.

What if we could separate measuring value from the KPI’s? I think you would find it easier to answer ‘what is value’ and work out how to measure it. I’ll look at each of the three measures briefly.

Are we improving?

Classic metrics apply here. Using measures for quality, productivity, throughput, predictability and financials all point to areas where performance can be tracked. I’m actually comfortable with this set as it is aligned with how we measure most things today and are common regardless of method.

Are we meeting commitments?

The ‘gamed’ category. Because we tie it to the bidding war for budget purposes, we end up with fictional commitments and spend a large part of the time managing the message to justify our failed progress toward them. In reality we could make this a very powerful and insightful category by making the environment ‘safe to fail’. Finding incentives for transparency and visibility is probably one of the more productive cultural changes a company can go through. This would allow the business to understand the relationship between the outcome desired, money spent and value delivered along the way. Of course Agile is king here as it is based on the incremental delivery of consumable value through appropriate design slicing, so value and money burn can be better compared. Understanding this relationship means trade offs can be made such as when is enough enough, pivot because the outcome is not emerging or stop as its not feasible anymore. In summary, a safe environment where we track the progress toward a realised outcome.

Was it of value to customers?

A much harder thing to measure but a nut worth cracking. Understanding what matters to customers and then knowing if they were able to achieve this after the fact is a tough gig, largely because of the time lag involved between the transaction and the realisation of the value. So a combination of the first two categories and this one to allow for a degree of certainty upfront mixed in with validation later to help us learn and improve is the go. At a minimum we should be asking ourselves if we have made anything worse for customers as a result of what we did. Too often I hear stories of companies doing projects full of green dashboard lights, on time, in scope and on budget only to find that we have paralysed our ability to serve customers or for customers to pull the value from our organisations. A popular anecdote I like to give is that of a bank who, when asked what customers want from them, replied “our research tells us that 70% or customers want a mortgage from us.” ….. Really!?……. does anyone know someone who actually wants a mortgage?? Of course a simple adjustment in thinking tells us customers want a home. This presents a much different approach to measurement and what success is; mortgages sold versus customers in a home.

The starting point for any of the three categories??? Well, I have had good success using a very high level rudimentary version of Seddons purpose, measure, method. First define the purpose and then use this to understand what would change if your were meeting it or not meeting it and design the measures of those things, then apply work in a way that positively impacts those measures… The end point?? ACT, do something, measures are their to learn from and improve not for achievement and retribution.

I hope that takes you a small step forward!!

You can listen to more on the topic by watching the Lean Enterprise talk I did with Barry O’Reilly at Thoughtworks Live, viewable here

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About Gary O'Brien

A Principal Consultant with 20 years experience in ICT and a diverse background as an IT Business Strategist and People Manager. I specialise in helping executives, teams and individuals to adopt and improve Agile methods, principles and practice. Using a strong emphasis on facilitating organizational change, and the role of management and leadership in an Agile world. As an Agile Coach I look to help teams adapt Agile and Lean thinking to their specific environment and impediments they face. Experience includes working with CIO’s and senior leaders to create and execute a vision and strategy for and adopting Agile as an enterprise approach to improving outcomes for delivering customer value and optimising IT.

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