What is Business Value and how does it impact Agile Projects? Deliverables that meet a standard of high quality in an Agile scrum project are defined as those that meet required business outcomes and acceptance criteria through a continuous cycle of inspect and adapt.
Quality can be further defined in two ways:
- That a product is fit for purpose and
- The scrum team produces exactly that which they understand has been requested.
Well-defined scope supports the business need that the product will deliver. An organization that can provide the needed capability to deliver and manage anticipated market fluctuations stand a greater chance of driving to higher business values.
Measuring Business Value
The business value can be measured by four major components of Agile delivery:
- Concise scope
- Return on Investment
- Sprint execution schedule and
- Reduced risks and Defects.
Agile scrum utilizes a product backlog as the primary definition of scope. The product backlog is best defined as the communications tool where the product owner takes the vision of the product and translates it into high level requirements. Those requirements are labeled features. A feature is a desired element or component of functionality that the product owner believes is required to deliver a product. Features are listed, prioritized and adjusted for release planning based on risks, dependencies, and business value. Management of the product backlog using quality standards for prioritization and risk evaluation will produce greater business value.
A well-managed backlog contains four characteristics classified through the acronym DEEP that Mike Cohn and Rich Pichler accurately categorized. DEEP stands for:
- D –Detailed appropriately. Features should be descriptive enough so that smaller user stories can be created for delivery by the scrum team.
- E –Emergent. The product backlog is a living document and any Agile team will respect the fact that change is encouraged. Not just for the sake of change but, for the benefit of changes needed to embrace fluidity in the market.
- E –Estimated. A high level estimate should be attempted by the scrum team so that release planning can take place.
- P –Prioritized. Prioritization is not a fixed effort. This is another component of delivering business value by embracing change.
Return on Investment (ROI)
The principles of Agile scrum delivery allow business owners to begin realizing the benefit of feature delivery before the project is completed. The project is front loaded with the most profitable features and once the break-even point in the ROI is reached, it is up to the stakeholders and product owner to continue to evaluate the benefit of delivering additional features. The ROI can be produced at both the product level (a compilation of all desired features) and at the feature level. Business value can be defined using a profitability calculation for determining prioritization of each feature-
Revenue – Cost = Priority.
Business Value: Revenue and Costs
The larger the difference between Revenue and Cost, the higher the priority of a feature. It is through these calculations as related to the ROI that business value in Agile scrum is rapidly delivered. The following criteria will provide an opportunity for the Scrum Product Owner to evaluate the quality of the ROI delivered by feature:
- Features are not meeting the projected timeline for driving revenue and the difference becomes smaller in execution and
- Costs increase during the development cycle.
Sprint Execution Schedule
Business value is driven through Agile scrum projects by the management of the sprint execution schedule, starting with the Sprint Planning Meeting and ending with the Sprint Review and Sprint Retrospective Meetings. Unlike traditional projects where features are delivered in a big-bang approach without the ability to evaluate continued feasibility; Agile scrum projects deliver in smaller increments where the value can be measured. User stories are written to ensure that features or smaller components of features over an extended time are delivered within one sprint. This reduces the chance of having projects that are over-budget or late. Over half of all traditional projects overrun budgets and schedules by 200% or more and up to 40% of projects fail prior to delivery of any requirements. Shorter schedules and iterative development through the fail fast model make it possible to reduce fiscal losses and move investment funds to other business initiatives.
Our Favourite Agile Books
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Reduced Risks and Defects
Agile scrum uses an iterative model of inspect and adapt that is useful in recognizing risks to a project earlier in the delivery of features versus at the end in the traditional waterfall approach. A traditional project front-loads risks with an assumption that most risks will be known at the start of a project and that risks that are later identified should not derail the mission to deliver based on detailed requirements gathering. Market conditions require that most companies move quickly in adjusting products that are delivered to end users. Few companies can move fast enough to adjust entire products so Agile scrum delivery methodologies can support modifications in feature delivery for in-flight projects. The reduction of risk in the use of an iterative model takes the front loading of resources away and replaces it with iterative views of the continued value in project execution.
Agile scrum teams (Agile Scrum Master, Scrum Product Owner and Scrum Development Team) are cohesive units of people who remain with a project in a persistent state. This means that as features are developed, individuals with primary responsibility for testing are immediately engaged in the feedback loop. User stories are also developed using programming practices such as test driven development that is outcome based. This focuses the developer on the desired outcomes of the user story versus a reactive development cycle where testing becomes an afterthought. Refactoring and continuous design also help to eliminate defects before the results of a sprint are introduced to the user community in the sprint retrospective. Technical debt is also reduced significantly by constant review of the product backlog and the prioritization of features in a dependent manner.
Business Value: Reducing Risks
Reducing risk and defects throughout the life of a project drives greater business value in use of the product.
The four business benefits reviewed – scope, ROI, sprint execution and Reduced risks/defects – are measurable components in driving greater business value. As organizations evolve and continue in their maturation in the use of the Agile scrum framework, they are recognizing the clearly demonstrated benefits in using Agile with tangible performance improvements.
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