Professional Development Blog

Most literature in Agile says something to the effect that it is the goal of the project to add value to the business. I attended an online class where Dr. Harold Kerzner referenced the importance of projects delivering business value. But what is business value? How do we determine it?

I’d like to base this article around the book The Art of Business Value by Mark Schwartz. It is a thoughtful book; I would recommend it if this subject interests you. Schwartz is a chief Information officer. He has been an IT leader in organizations small and large, public, private and nonprofit. He has a computer science degree from Yale and an MBA from Wharton School of Business. He’s been influential in adopting Agile and DevOps wherever he works.

There is “a typical vagueness and imprecision with which business values are addressed in Agile literature,” according to Schwartz. I agree.

What about the Product Owner?

In Scrum, it’s the responsibility of the product owner to prioritize the stories around business value. Many teams don’t have a true product owner — the business analyst fills that role. But how do either the BA or the product owner know what the business value is? And therefore, how to prioritize the stories?

What about Return on Investment? Return on investment is the generally accepted answer. The problem is what is the return on the investment? Is it profit? Earnings? Sales? Revenue? What if you work in government or for a nonprofit? No matter what you use as ROI, it's projected. And the future is pretty fuzzy. I don’t know about you but my Magic 8 Ball is often ambiguous — “Reply hazy, try again.”

Not only does ROI forecast a hazy future, but it doesn’t consider the time value of money. It also doesn’t account for risk. “Even if ROI were a good proxy for business value, it would not be very useful to product owners for prioritization decisions.”

What if the project is being done for an internal customer? That will probably make the ROI even more of a guess.

Wouldn’t value vary by type of organization?

If the organization has shareholders, business value might equate more closely to the value of their shares. Does that share price reflect short-term or long-term profitability?

In a privately held company, business value may be measured through independent assessment or prices offered by acquirers. Are these easy to use to calculate the business value? In the real world, business value will probably equate more closely to the mission and value of the owners, not necessarily the value of the business if they sell it.

Nonprofits have a different set of challenges when it comes to defining business value. For these organizations, it’s all about carrying out their mission. Yet they also see financial stability as value.

How about government entities? Many of them have characteristics that are difficult to measure. They may also see value in things like putting veterans to work or fairness in procurement.

What can we do?

Agile tries to go against the norm of creating requirements and then throwing them over the wall to be completed by the project team. However, if the team is told to maximize business value and then not given indications of what the business value is, it amounts to the same thing.

If we look closely at an organization’s culture and rules, we begin to see what the organization really values. Perhaps we need a team that seeks out information about the customer directly by talking to people both internal and external to the organization. The team, between its members, has multiple touch points to help know what is valued about the project. Each team member should be responsible to bring their understanding of what is valued in their department to the team.

Value is also discovered by the team that does validated learning experiments and hypothesis testing (see Eric Ries’s Lean Startup). Projects inevitably involve change and in trying to change something we discover what the organization values. “Agile approaches attempt to bring together developers and the business in an atmosphere of mutual respect and joint contribution.”

So, defining business value is not as cut-and-dried as ROI. It cannot be left up to the product owner or business analyst. It is the job of the entire project team to bring their piece of it to the team by networking and learning. Sorry, but there’s no quick fix. Just the hard work of discovery.