Determining Business Value in Agile Development

AW2
Session
6/8/16 11:30 AM

Determining Business Value in Agile
Development

Presented by:

Ken Pugh
Net Objectives

Brought to you by:

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Ken Pugh
Net Objectives

A fellow consultant with Net Objectives, Ken Pugh helps companies transform
into lean-agile organizations through training and coaching. His special interests
are in communication (particularly effectively communicating requirements),
delivering business value, and using lean principles to deliver high quality quickly.
Ken trains, mentors, and testifies on technology topics from object-oriented
design to Linux/Unix. He has written several programming books, including the
2006 Jolt Award winner Prefactoring and his latest Lean-Agile Acceptance Test
Driven Development: Better Software Through Collaboration. Ken has helped
clients from London to Boston to Sydney to Beijing to Hyderabad. He enjoys
snowboarding, windsurfing, biking, and hiking the Appalachian Trail. Reach Ken at
ken.pugh@netobjectives.com

Determining Business Value 3/30/2016
1
info@netobjectives.com
www.netobjectives.com
1 Copyright © 2007 Net Objectives. All Rights Reserved. 30 March 2016
BFBMBVSP
Determining Business
Value In an Agile
Environment
Kenneth Pugh
Fellow Consultant
Net Objectives
March 2016
Ken Pugh
ken.pugh
@netobjectives.com
Photo
Size:
Height: 2.25
Position:
from top left corner
Horizontal 0.75
Vertical 1.
Picture Style: Simple Black
Frame
No code goes in till the test goes on.
A journey of two thousand miles begins with a single step.
Fellow Consultant
OOA&D, Design Patterns, Lean, Scrum, Kanban,
Test-Driven Development
Over 2/5 century of software development
experience
Author of seven books, including:
– Prefactoring: Extreme Abstraction, Extreme
Separation, Extreme Readability (2006 Jolt Award)
– Interface Oriented Design
– Lean Agile Acceptance Test-Driven Development:
Better Software Through Collaboration

2
Outline
Agility focuses on rapidly delivering business value
– What is it?
– How do we estimate it?
– What do we do with it?
3
The Product (Project) Team
The Product (Project) Team consists of:
– The Customer Unit
Provides requirements
Provides business value estimates
– The Developer Unit
Provides implementation estimates
Implements requirements
– The Quality Assurance Unit
Validates requirements are the right ones
Verifies manifestation implements requirements

3
Business Value – What Is It? (1)
"I can't define it, but I know it when I see it“
5
Business Value – What Is It? (2)
Business Value can be:
– Increased revenue (sales, royalties, fees) ($$)
– Decreased expenses ($$)
Less resources
More efficient use of resources
– Customer satisfaction ($$ ??)
Promoters / Satisfiers/ Detractors
– Staying in business ($$ ??)
– Staying out of jail ($$ ??)
– Avoiding risk ($$ ??)
6

4
Requirement Prioritization
Every requirement has a business value
– Or else why is it required?
Need to prioritize requirements
– If multiple product owners, need agreement on priorities
– Priorities should be partially based on business value of
requirements
Example priorities
– Must have
– Should have
– Could have
– Might have
– “In your dreams”
7
Business Value Measurement
Customer should estimate business value for
requirement stories
– Could use $$
Often difficult to do or compute
Question: Can it be measured?
Business value is unit-less
– Allows comparison between non-$$ and $$
As requirement is "done", business value achieved
8

5
Business Value Chart
Shows increase in business value
What does this tell us?
9
BV
Iteration
Business Value Chart
Business value not delivered linearly
50% of effort usually delivers more than 50% of BV
– 40% / 60%
– 20% / 80%
Need to estimate how to get BV quicker
Often for new team / project
– Velocity is initially slower (stories / iteration)
– Or some overall issues are dealt with
– Therefore BV delivery is slow

6
Project Example
Sam’s Lawn Mower Repair and CD Rental Store
Wants to replace existing manual system
Issues
– Current system requires too much time to check-out CD
– Hard to get a report on what’s in inventory
– Can’t notify customers that CD is almost late and they’ll be
charged an enormous late fee.
What’s it worth to you (Sam that is)?
– Determine an overall $ cost savings
Business Value Example
Example - Sam’s Lawn Mower Repair and CD Rental
Shop
– Keep track of where each CD is – in store or on rental (and
with whom) (100)
– Report when CDs are overdue (40)
– Have a catalog so the customer can see what CDs are
available and what songs are on what CDs (13)
– A charge system to bill customers monthly, rather than by
each rental (20)
– Be able to offer discounts to frequent renters (5)
– When multiple stores, the system should show which stores
have a particular CD (3)
12

7
Business Value Points (1)
Could set highest priority story at a value (e.g.
100) and estimate relative points
Or could use triangulation
– Compare stories to multiple other stories
– Group like stories together
Values (unit-less)
– 0, ½, 1, 2, 3, 5, 8, 13, 20, 40, 100, etc
– 0 is little business value
13
Game Play
Place Story Cards in pile
– Place top card on playing surface
Next player places top card relative to first card
– (left easier, right harder, below equal)
In succession, each player can either:
– Play top card from pile
– Moving a played card
– Pass
Repeat above until:
– No more cards remain in the pile, and
– No player wishes to move a card
Then assign points to each column
– (1,2,3,5,8,13, 20, 40, 60, 100)

8
Starting Point Ending Point
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
As a <user> I want
<capability> so
that I get <value>
1 2 3 5 8
Business Value Workshop
Sample
– Mow lawn
– Take out trash
– Repair leaky faucet
– Clean basement
– Tune up auto
– Set clock on VCR
– Watch basketball finals
16

9
Business Value and Story Points
Business value is one-half of equation
Need cost estimate as well
Time/cost estimates are frequently WAG's
– Story points are relative measure of time/cost
17
Time Estimating Example
Shop
with whom) (5 – comparison)
– Report when CDs are overdue (2 - comparison)
available and what songs are on what CDs (3)
each rental (20)
– Be able to offer discounts to frequent renters (13)
have a particular CD (5)
18

10
Story Points (2)
Estimation Poker
– Each estimator has deck of cards
– Decide on one story that’s average – 5 or 8 - for comparison
– Read story
Each person pulls a card
Turn all cards over
Discuss differences
Redo until agreement
19
Story Point Workshop
Instead of cards, we'll use hand signals
Sample
– Mow lawn
– Take out trash
– Clean basement
– Tune up auto
20

11
Bang for the Buck
Once business value and time estimated
– Determine “bang for the buck”
Bang = Business value points / Story points
– Represents roughly “return on investment”
– Don’t get into differences of 1.3 versus 1.4, but
rather 1 and 2 or 3
May want to prioritize high Bang stories
21
Bang for the Buck Example
Shop
with whom) 100/5 = 20
– Report when CDs are overdue 40/2 = 20
available and what songs are on what CDs 13/3 = 4
each rental 20/20 = 1
– Be able to offer discounts to frequent renters 5/13 = .5
have a particular CD 3/5 = 1
22

12
Bang for Buck Workshop
Compute "Bang for the Buck"
Sample
– Mow lawn
– Take out trash
– Clean basement
– Tune up auto
23
Business Value Chart (Revisited)
Slope is roughly "Bang for the Buck“
– (If SP per iteration constant)
24
BV
Iteration

13
Bang for the Buck
When Bang for Buck decreases
– Consider project termination
– Look for other projects with bigger BfB
25
Weighted Shortest Job First (1)
WSJF uses Cost of Delay (CoD) which combines
– Business value
– Time Criticality
Does value decay over time?
Fixed deadline?
Will customer wait for us?
– Risk reduction / opportunity enablement
What else does this do for us?
Reduce risk?
Open up opportunities?

14
Weighted Shortest Job First (2)
Estimate (on 1 to 20 scale)
– Business value
– Time Criticality
– Risk reduction / opportunity enablement
Then combine into CoD
– At least two ways to do this:
– CoD = BV + TC + RR_OE
– CoD = BV + TC*TCWeight + RR_OE * RR_OEWeight
WSJF = CoD / SP
WSJF
Shop
28
Item BV CoD RR_OE Unweighted CoD
Keep track of
where each CD is
100 100 20 220
CDs are overdue 40 1 1 42
catalog 13 8 1 21
Charge system 20 5 13 38
Discounts 5 1 5 11
Multiple stores 3 1 13 17

15
CoD Exercise
Business Value Time Criticality Risk reduction /
opportunity
enhancement
Mow lawn
Take out trash
Repair leaky faucet
Clean basement
Tune up auto
Set clock on VCR
Watch basketball
finals
CoD Considerations
Time Criticality Risk reduction / opportunity
enhancment
Mow lawn Harder to do when higher Neighbors complaining
Win best yard in neighborhood
Take out trash Smell increases Rats
Repair leaky faucet Cost of additional water Possible water damage
Prevent mold growth
Prevent losing job from loss of sleep
Clean basement Loss of pizza due to
cockroaches
Losing significant other after seeing
cockroaches
Tune up auto Loss of resale value Possible car not starting
Possible engine repairs
Set clock on VCR None Missed taping of shows
Annoyance of blinking
Watch basketball
finals
Won’t be real time if
missed
Watching after knowing score

16
Assumptions
Benefits of estimating CoD (or just BV)
– Make explicit implicit assumptions about value
Smaller Picture
Example had “big level stories”
Big level stories turned into stories for
scheduling
BV allocable among stories
– Can use planning poker, card movement, or just
agreement
Example big level story:
– Keep track of where each CD is – in store or on rental
(and with whom) BV 100
32

17
Smaller Picture
Stories with “Allocated BV”
– As the Counter Clerk, I want to check-out a CD for a
customer
BV = 40
– As the Counter Clerk, I want to check-in a CD
BV = 40
– As the Counter Clerk, I want to note that a CD is
damaged on check-in
BV = 5
– As the Counter Clerk, I want to note that the
customer reported the CD as lost or stolen
BV = 5
33
“Right-Sized” Stories
If user story effort (Story Points) exceeds an iteration (or
other limit)
– Break story into smaller stories
– Every story should have BV (minimum of 1)
Example Story
– As the Counter Clerk, I want to check-out a CD for a customer
BV = 40
Smaller Stories:
– As the Counter Clerk, I want to check-out a CD for a standard rental
for a customer
BV = 20
– As the Counter Clerk , I want to check-out a CD for an extended
rental for a customer
BV = 20

18
“Right-Sized” Stories
If story not breakable into stories with BV
– Break story into developer stories
– Developer stories have no BV
Should have developer-supplied acceptance tests
Example Story
– As the Counter Clerk, I want to check-out a CD for a customer
BV = 40, SP = 8
Smaller Stories:
– As the Developer, I need to create a database to support check-out
CD for a customer
SP = 2
– As the Developer , I want to create a user-friendly UI to support
check-out CD for a customer
SP = 2
– Etc.
Achieve BV when all developer stories done
BV to $$
If need $$
– Take total estimated $$ for a project
– BV $ = (Total BV) / (Total $$)
– Using past history, determine estimated SP $
(Total $$ / Total SP for a project)
ROI is BV $ / SP $

19
37 30 March 2016
Bigger Picture
Bigger Picture
Can use"Bang for the Buck" on larger scale
– Determine "Business Value" for project on large scale
– Determine "Story Points" for project on large scale
– Rank projects (or individual features) on "Bang for the Buck“
Issues
– People who have bigger picture view / appreciation
– Need to rank non-homogeneous projects
– Need to adjust effort estimates by different teams
Use past history, if available
Measures
– May use WP (work points) for non-software work
– Need to determine a WP to SP ratio to adjust BfB
38

20
Portfolio Project Example
39
CheckInOut
BV =
SP =
BB =
Website Redo
BV =
SP =
BB =
HR Automation
BV =
SP =
BB =
New Store Layout
BV =
WP =
BB =
Portfolio Feature Example
40
CheckInOut Website Redo HR
Automation
New Store Layout
Keep track of CDs
BV 100; SP 5; BB 5
Menus
BV 100; SP 3; BB 33
Paychecks
BV 5; SP 2; BB 3
Checkout area
BV 20; WP 5; BB 4
Overdue report
BV 40; SP 2; BB 20
Sign up
BV 20; SP 13; BB 2
Vacation plans
BV 1; SP 3; BB .5
New CD shelves
BV 13; WP 20; BB .5
Catalog
BV 13; SP 3; BB 4
Charge system
BV 20; SP 20; BB 1
Discounts
BV 5; SP 13; BB .5
Other Stores
BV 3 SP 5; BB 1
What might be the sequence?

21
41 30 March 2016
Not an Ending,
But a Beginning
Summary
We've looked at business value
– What is it?
Measure of worth to the business
– How do we measure it?
Customer unit estimate sit
– What do we do with it?
Determine bang for buck
Determine requirement priorities
Show business value growth
Prioritize portfolios
42

22
A Last Exercise
If there’s time
– Let’s try it for real
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