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Measuring the Business Value in Agile Projects

| by Savita Pahuja Follow 3 Followers on Mar 27, 2015. Estimated reading time: 1 minute |

The purpose of any software development effort is to create the features that deliver business value. Value is a mantra in an agile environment. In order to drive success and realize goals, the notion of the value needs to be more specifically defined. Therefore, two main questions are:

  • How do we know we are delivering value, and
  • How do we know we are doing the right thing?

To answer these questions, Paul Ellarby, Chief Agile Pragmatist at Tortillis Group, explains a technique of “value points” in his recent blog. He defines "value points" as relative measures of the value returned by each user story.

When we assign value points to each story, we can now allocate financial benefits to each story too. Let’s say our project is worth $1 million in additional revenue. If we sum up the number of value points (let’s just assume they total 250), we can distribute this additional revenue to each story ($1m / 250 = $4,000 per point).

Paul explains the technique further as to calculate the fixed cost of the project and so the cost of each iteration. Then plot a graph of the value delivered in each iteration (value points per story x $4,000), and the cost of delivering that story.

Paul explains that in many projects after a few sprints value delivery starts to plateau. If the team continues work on this project, then the cost becomes higher than the value.

Paul clarifies that these value points are estimates. We have no way of tracking the real impact of the software until it is released.

As per Accu journal, the value delivery approach is:

  • Defines what 'delivering value' means within the teams
  • Measures value as progress towards the stakeholder objectives
  • Prioritizes design ideas according to ROI
  • Integrates with their existing Scrum method

Sean McHugh mentioned in the Axosoft blog to ask your product owner to give each user story a value that represents its impact to his stakeholders. The team can enumerate this with an actual dollar amount. At the end of each sprint team will have a number that can tell how much value team has delivered to its customers.

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