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Understanding Business Value

by Mike Bria on Mar 10, 2008 |
Recently Joe Little posted his thoughts on what many people might say is among the most commonly used but also widely misunderstand of the core agile concepts -- Business Value.  Little's take is that when people refer to "Business Value" they mean a wide array of varying things.  In hopes of bringing a broad clarity to the subject, Little presents his view on why Business Value is useful, what concepts drive the theory of Business Value, and an approach for effective Business Value management.

Little begins his reasoning of why one cares about Business Value by asserting its use in helping to accomplish something "truly meaningful":
In the world, my hypothesis is that there are an infinite number of good things to do. The problem is not finding a set of good things to do, but in deciding which are the most important things to do. So one reason we care about BV is to, in this short lifetime, accomplish something truly meaningful.
Little's second reason for Business Value is to ensure that members of a team can share a common goal to justify their operational choices:
...business value draws upon our natural motivations, and gives us a basis for putting a natural order into all the arrangements involved with a team's work (eg, who does what, the architecture of the system, etc., etc.).
A third justification Little presents for Business Value is it's ability to provide stability and consistency in the midst of an otherwise chaotic environment of change:
...change is incessant. This means that people forget, customers change, customers' needs change, past estimates (if they were accurate) are no longer accurate, etc. To the degree we understand BV appropriately, it can act as a guidepost in this swirl of change. We do not build new products for mere technical success. We do it to provide business value to specific people, so we must adapt to this change.
The post goes on then to briefly discuss four concepts he finds fundamental to an understanding of Business Value.
  • Cost-Benefit Analysis: any given option is evaluated based on its perceived cost and benefit relative to all other available options
  • Pareto's 80-20 Rule: within a population, 80% of the value is gained from 20% of the population
  • Knowledge-creation: knowledge is self-organizing and creation of it is energized by putting people together in a place and providing a context ("Ba")
  • Learning Methods: learn by acting on theories and observing results; learn through feedback
Little concludes with a suggestion as to what he sees as a minimal approach one should take to gain effective control and understanding of Business Value for their project. His suggested approach consists of the following eight elements:
  • a well-communicated high-level definition
  • a well-communicated operational definition
  • a clear way to measure the effectiveness of these definitions
  • a confirmation that these definitions energize behavior and allow for incremental adjustments
  • a clear set of practices for applying these definitions
  • a clear way to modify these practices
  • a common understanding about the time-boxes around these practices
  • a set-out way to enable people to effectively use these practices
For another of Little's takes on Business Value, see his article on "killing low priority projects". Also see Luke Hohmann's suggestion regarding Business Value, and this InfoQ post on customer-centric success measurement.

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Hi by Joe Little

Hi Mike,

Thanks for your kind comments. Glad to see Business Value talked about more. WOuld even be happy if you strongly disagreed with me (eg, on what BV really is).

BTW, you might have told me you were interested in the subject. I would have read your article sooner.

Regards, Joe Little

Re: Hi by Mike Bria

Hi Joe --

Yes indeed, I find 'Business Value' to certainly be an important subject to get straight. The term goes far beyond use by just the team itself, particularly in larger enterprise organizations, and as a result its definitely problematic to be misunderstood..or worse, an empty buzzword.

Thanks for your thoughts! Cheers..
--Mike

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