Factors for Making Value-Based Product Decisions

The Importance of Value Delivery

Making value-based decisions on what to deliver and when it needs to be delivered is one of the most important responsibilities of product ownership. What exactly is value? Value is fair return in goods, services, money, or some other benefit in exchange for something.

Value is what you get in exchange for what you give. In software development, we tend to identify value in terms of features. They are related to be sure, but quite different. Features as cohesive bundles of functionality that align with business goals and objectives. Features can come in various formats and levels of granularity, including user stories, minimum marketable features, minimum viable product, epics, and so on.

Value represents the ends and features are the means to those ends.

Providing value is a mantra recited as the rationale for using agile and lean. And yet, it’s often not well understood. [1] To make smart product decisions, value needs to be clear, explicit, testable, and transparent.

How clear is value in your team and organization? Do you know what both the vision and value is for your product? If not, it’s time to pause and rethink what you need to do to create value.

Because any given feature includes possible options, clarity on value is needed to make decisions about product delivery and to slice features. This applies to epics, stories, or whatever you want to refer to the chunks of capability that your product provides.

Value can be both tangible and intangible. For example, additional revenue or an increased customers base is tangible. Customer good will, brand projection, and positive reputation are intangible. Strong product owners and agile product managers consider both, taking into account two key elements:

  1. Value is in the eyes of the beholder. The beholder refers to product partners: customers, business, and technology stakeholders. [2]
  2. Value changes with time. As time marches on, value changes based on a number of factors including: competitive threats, market and economic conditions, and internal factors (like changing leadership, budget cycles, and impact of customer feedback).

Decision Factors for Focusing on Value

There are common decision factors that a product owner must balance when considering product options.

Each decision factor is summarized below. In our book Discover to Deliver, [3] Mary Gorman and I reference the first three decision factors as IRACIS (increase revenue, avoid cost, and improve service). All three focus on business value and not from a customer or technology perspective.

Increase Revenue: What is your revenue, or net profit using financial analysis such as return on investment, net present value, or break-even analysis? These gains can be achieved in a number of ways including new revenue, higher fees, and increased sales.

Avoid Cost: How will the product options enable you to reduce expenses, protect revenue from regulatory non-compliance or loss of reputation, or reduce waste? And how will it reduce the costs of acquiring, serving, or retiring customers?

Improve Service: What ways could your product options increase customer happiness or help to retain delighted customers?

Cost: How much money will be spent to discover and deliver the feature?

Time: How long will it take to develop and deliver? What impact could timing have on your product acceptance, success, or value considerations?

Value Considerations: What are the variables used to assess your product options from the point of view of each product partner? For example, saving time would be a customer’s value consideration, providing consistent customer service would be a business partner’s value consideration, and leveraging modern technologies to grow technical skills would be a technology partner’s value consideration.

Mission & Strategy: How does a product option align to your core mission answering the question, “Why does your company exist and what do you do for your customers?” Do the product options you are valuing align to your strategy, which answers the question, “How will reach your desired position and sustain a competitive advantage?”

Market: Who is your customer and what is the market segment you play in (profiles, cohorts, and geographies)? Who are your competitors and, based on competitive intelligence, what are they doing in the market? How do you differentiate in the market? What trends are taking place in your market?

Product Lifecycle Stage: Where is your product in its lifecycle starting with introduction then transitioning to growth, maturity, and finally to its decline?

Regulations: Does your product have to confirm to legal and compliance imperatives?

Dependencies: What people or business partners are you dependent upon to deliver the product option? What other product options or existing capabilities does a given product option depend upon to be delivered? Product dependencies are typically the data needed to provide those capabilities.

Risk: What do you need to consider that might impede, reduce, or slow down successful discovery and delivery? These risks could come from a variety of sources: customer, business, or technology.

Combining Decision Factors

Many of these decision factors need to be combined to assess value. For example, you could assess cost of delay, the value of not delivering something based on a combination of time with potential revenue. You could also use a matrix to summarize the value as revenue with risk and cost. Alternatively, you could use the purpose alignment model that categorizes backlog items according to two decision factors: organizational mission and market differentiation.

Value is Foundational for Product Decisions

Value is not just about money—the list shows that a broad, holistic set of factors are needed.

By considering and selecting applicable decision factors, you are more likely to make smart product decisions. By keeping delivery of value front of mind, Structured Conversations [4] will improve your effectiveness and efficiency. It all comes down to healthy, collaborative conversations based on clear decision rules and processes. [5] Be sure you share your decision factors and decision rules as you collaborate to discover and deliver the right product for the right customer at the right time.

Learn More

Value is an anchor topic in publicly offered training on how to amplify discovery to accelerate delivery. Contact us to bring these practices to your organization.

References

  1. Ellen Gottesdiener. “Value: The Lynchpin in Agile Product Management.” EBG Consulting (blog). September 9, 2016. https://www.ebgconsulting.com/blog/value-the-lynchpin-in-agile-product-management.
  2. Gottesdiener, Ellen and Mary Gorman. “The Product Partners.” 2012. http://www.discovertodeliver.com/image/data/Resources/visuals/DtoD-Product-Partners.pdf.
  3. Gottesdiener, Ellen and Mary Gorman. Discover to Deliver: Agile Product Planning and Analysis. EBG Consulting. 2012.
  4. Stafford, Jan. “Agile process: Structured conversations build business-ready software”, TechTarget Search Software Quality, April, 2013. http://searchsoftwarequality.techtarget.com/tip/Agile-process-Structured-conversations-build-business-ready-software.
  5. Ellen Gottesdiener. “Decide How to Decide: Empowering Product Ownership.” EBG Consulting (blog). December 15, 2015. https://www.ebgconsulting.com/blog/decide-how-to-decide-empowering-product-ownership.
One Response to “Factors for Making Value-Based Product Decisions”
  1. Five Ways a Product Owner Can Build Trust

    […] your backlog. In a recent post, I listed twelve decision factors a product owner might use to make value-based product decisions. [4] Defining them, and sharing the ones you will use to evaluate and filter backlog items builds […]

Leave a Reply

Your email address will not be published. Required fields are marked *