The first principle in the Agile Manifesto is:
“Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.”
In the Scrum Guide we read:
“Scrum (n): A framework within which people can address complex adaptive problems, while productively and creatively delivering products of the highest possible value.”
But what is Business Value?
At a brainstorm session about Business Value, organised by the Liberators, in which about 40 Scrum Masters from various countries and different kinds of companies participated, we arrived at the following conclusions:
Business Value is complicated because it comprises many things. It is basically a compendium of what all stakeholders experience as value. It includes both quantitative and qualitative components. And to make it even more interesting, it includes both a rational and an emotional component. And did I mention that it also varies over time?
Last but not least, not all value is created equal, so the different types of value need to be weighed according to their importance. For example, user value is usually the most important.
source: Harvard Business Review. Different Kinds of value.
This often makes Business Value subjective and difficult to measure: how do you include all the components in a meaningful way?
One way is to translate the value of all components into Euros. After all, if you are building something that has value, you should be able to determine how many Euros it's worth? This sounds reasonable. However, how would you translate something like employee satisfaction to Euros? I often hear people say they buy Apple products because they are so beautiful. How would you translate that esthetic component to Euros?
First of all, you probably would need an army of accountants to continuously monitor and calculate the value of the different components, experts in the different kinds of value involved. This would probably cost more than the product itself, I would imagine.
So maybe you could develop an algorithm to do it automatically? Considering the importance of Business Value, I would expect that if some company had managed to develop such an algorithm, they would have gone the way of Google, towards world domination. The fact that no such company exists suggests that developing such an algorithm remains quite the challenge.
Second, and probably more important, value is not some kind of higher truth. In essence, it is an abstraction that we create ourselves.
Maarten Dalmijn’s favourite example would be tulips in 17th century Netherlands. A whole country managed to convince itself tulips were so valuable that you could buy a house for a handful of bulbs.
Trying to determine absolute Business Value is such an abstract endeavour that the result risks having no meaning. It is a bit like attempts to value Nature, or our Environment. The cyphers are impressive enough, but they have no practical relevance in our lives, and therefore they have little impact on our relationship with either.
The result is that Business Value is usually estimated. Which is, in fact, a first step towards measuring it as a relative concept, just like we do with User Stories. Which is not a bad thing. After all, what is the purpose of Business Value other than to make choices? Why go to all the trouble of measuring it accurately, when all you really need it for is to judge the value of different items, so you can prioritise them better?
source: Running Lean by Ash Maurya. One way of visualising Business Value. Read this article for an explanation of the Lean Canvas.
This results in a lot of freedom regarding how to measure it. Companies are free to determine which objectives and components they wish to include in their Business Value. They are free to choose how to measure them. And how to add them up.
This concept is summarised well in Andre Zaminski’s formula:
BV = mBV1 + nBV2 + ... + pBVn
So there you have it. That is basically our current preferred way of measuring Business Value.
Personally, and I hope the idea may have been triggered in your mind by some of the things I’ve said so far, I find measuring Business Value suspiciously control-minded. I think it doesn’t really fit in the Agile mindset and the attitude we would like to encourage when working with Scrum.
I feel that often when we look at Agile concepts we don’t understand, we tend to fall back on our natural tendency to try to make them clear, quantifiable, predictable. We forget that is not how Agile works. Things are not clear-cut, but different shades of grey. And often, the answer is there if we just have the courage to see it. In this case: customer collaboration and interactions between people. Think about it, what is the point of measuring Business Value if stakeholders are properly involved in the conversation? Isn’t Business Value an implicit concept which directs everyone’s perspective in the conversation?
That is what Business Value is to me, an abstract concept which has value not as something to be measured, but as a concept to guide our interactions. It keeps everyone focused on the goal, including stakeholders and clients. Sure, it is based on gut-feeling and everyone's own interpretation of value, but it is the synergy of these various opinions that makes it so powerful. Business Value is a bit like story points, a concept which works surprisingly well, but which has no real form if you really think about it. It defies interpretation. Just like Story Points, Business Value seems to be something which develops organically, by practice and experience. Especially working closely with stakeholders helps to make it blossom. When working with mature Scrum teams, Business Value is the secret weapon whose sheer mention is enough to get any discussion back on track. Business Value is the reference point which allows people with differing perspectives to understand each other and determine what is really important. It is the common currency of Agile, and just like currency, it is only valuable because we all agree to believe it has value, no matter how nonsensical it may in fact be.
Yuval Noah Harari expresses this beautifully:
“We are the only mammals that can cooperate with numerous strangers because only we can invent fictional stories, spread them around, and convince millions of others to believe in them. As long as everybody believes in the same fictions, we all obey the same laws, and can thereby cooperate effectively.”