There are many questions that teams should ask about their project and its key functions and features. One question—“Is it worth it?”—is often difficult to ask, let alone answer. It’s even more difficult if you are asked to answer this critical question when you know least about the project. Unfortunately, the answer may change as you proceed and gain more knowledge about the purpose, considerations, costs, and benefits involved. Join Kent McDonald as he introduces the business value model—a tool you can use to answer the “Is it worth it?” question. In this interactive session, Kent demonstrates a business value model to help you make your initial decision about whether to pursue a project or include certain functions, and then to update that model as your knowledge increases throughout the project. Learn how and when to revisit the question and confirm whether the project is on the right course or if you need to make changes. Help your organization get away from relying solely on estimates and guesses, and instead have meaningful conversations about whether your projects are worth starting and continuing.

1. Business Value Modeling:
Guiding Key Project Decisions
Kent J. McDonald
@beyondreqs

2. Discussion Topics
 Business Value?
 Purpose
 Considerations
 Costs & Benefits
 Using the Business
Value Model to decide

3. The Prime Directive:
Deliver Business Value!
*The organizers
wish to apologize
for any gratuitous
trekkie references
that may appear
in this
presentation.

4. What is Business Value?
I’ll know it
when I see
it
Justice Potter Stewart, concurring opinion in Jacobellis v. Ohio 378 U.S. 184 (1964), regarding
possible obscenity in The Lovers.

5. Determining Business Value?
Costs
Benefits
Business Value

6. Determining the inputs?
Estimate
Guess
Business Value
Common Practice

7. Why do we want to know
Business Value?
To make decisions!

8. Use business value model and guiding
questions to decide if a project is worth it.

10. Purpose = What problem are
you trying to solve?

11. Solution
without a
problem

12. Guiding Questions
Exactly what
problem will this
solve?
Why are we best
suited to pursue
this?
For whom do we
solve that problem?

13. Purpose Based Alignment Model
13

14. Purpose Based Alignment Model
Do we take this Innovate,
on? Create
Achieve and
Minimize/ maintain parity,
Eliminate Mimic,
Simplify
14

15. Decision Filters
 Simple rules to guide
decision making
 Disperse throughout
the organization
Used for (among others)
 Strategy alignment
 Scoping
 Design approach

16. “To be the low cost airline.”
- Southwest Airlines

17. “Will this help us be
the low cost airline?”
- Southwest Airlines

18. Purpose and Decision Filters
To be the
low cost
airline
Will this help us be
the low cost airline?

19. The Billboard Test
Order new
pages by
2pm and get
them tomorrow!

20. Student Information System
Yes, it has been abbreviated to “SIS”

21. SIS “Requirements”
In search of a "Student Information System" that
will be used to manage student and parent data,
enable interactive communication between
teachers and parents, as well as online enrollments.
Requirements:
 Student/Parent Directory
 Staff Directory
 Calendar
 Online Enrollment
 Parent/Classroom Portal

22. Des Moines Academy
15:1 Student Teacher
Music Education w/ Ratio
DSM Symphony
“Personalized” lesson
OTM
plans
Enrollment
Fundraising
Book keeping
Curriculum
Facilities
Parent Communication

23. Case Study – Purpose
 What problem are we trying to solve?
 For whom are we trying to solve this problem?
 What are the decision filters?
 Are the capabilities identified
parity, differentiating, partner, or who cares?

24. Considerations
= What could impact value?

25. Guiding Questions
What alternatives
are out there now?
What factors are
critical to success?

28. Guiding Questions
How will we get this product to market?

29. Uncertainty
 Market uncertainty
 Technology uncertainty
 Number of customers
 Project duration
 Approach to change

30. Complexity
 Team size
 Mission critical
 Team location
 Team maturity
 Domain knowledge
gaps
 Dependencies

31. Context Leadership Model
31

32. Guiding Questions
Why Now?
Do we have the right people to solve this?

33. Constraints
Constraint Fixed Flexible Accept
Scope X
Time X
Cost X
Quality X

34. Case Study – Considerations
 What alternatives already exist to solve the
problem?
 What factors are critical to this project’s
success?
 What is the risk profile?
 How do you think the constraints should be
prioritized?

35. Costs & Benefits
= What’s the impact on business objectives?

36. Guiding Questions
How much could we spend on this?

38. “Gut Feel” or “Ball Park”
How long, and
how much? About a year and
$2.5 million.

39. Comparison to Past Projects
$1,000 $100K $10M
??
$1M

40. Extrapolate
Assumptions:
 2 week iterations
 Overall backlog size: 600 points
 Planning Velocity: 30 ?
 5 Person Team
 Avg Cost/person/wk: $4,000
Estimate: $800,000

41. Guiding Questions
How big is the opportunity?

42. Benefits
A consequence of the
action that contributes
to meeting business
objectives.
Can be identified in
financial or non
financial terms, but
should be measurable
Soft Benefits in a Hard Business Case: Legitimacy and Value for Difficult Benefits
Solution Matrix Ltd By Marty J Schmidt

43. Guess

44. Increase
Revenue

45. Reduce
Costs

46. Guiding Question
How will we measure success?

47. Objectives
Specific
Measureable
Agreed Upon
Realistic
Timely

48. Financial Objectives?
 ROI
Return on Investment
 NPV
Net Present Value
 TCO
Total Cost of Ownership
 IRR
Internal Rate of Return

49. Financial Objectives = Cash Flow
Costs Benefits
Year 0 Year 1 Year 2 Year 3 Year 4

50. Non Financial Objectives
By Dec 2012 increase By Dec 2012 reduce paper
inventory turns from 5/year apps from 1,000/month to
to 10/year 500/month

51. Case Study – Costs & Benefits
 Identify at least two options to solve the
problem
 Identify the costs incurred by each alternative
 Identify the benefits provided by each
alternative
 How would you measure success?

52. But Wait!
How can I possibly
calculate a number
for my business
value with that
stuff?
What ever should I
do?
52

54. The Conversation Room
Thanks to Nigel Dalton

55. Is It Worth It?
Move forward? Trash it?

56. Case Study – The Conversation
Is the project worth pursuing?
If so, which approach will you take and why?
If not, why not?

57. In what order should we deliver?
Release 1 Release 2 Release 3 If time…

58. Timing Can Be Key
Costs Benefits
Period 0 Period 1 Period 2 Period 3 Period 4

59. The only constant is change
 Change in assumptions
 Change in constraints
 Change in
understanding
 Change in business
conditions
 Change in objectives

61. How often do you reevaluate?
 Definitely after each
release/implementation
 If you become aware of
any big changes
 Ask at retrospectives:
“Is it still worth it?”

62. Is It Still Worth It?
Move forward?
Change it?
Trash it?

63. Case Study – The Conversation Redux
Based on the new information…
 Is the project still worth it?
 Would you change your approach? If so, how?

64. If you remember nothing else…
 Business Value guides
decisions
 Purpose &
Considerations impact
Business Value
 Costs & Benefits focus
on objectives
 It’s a conversation, not a
number
64

65. Guiding Questions
1. Exactly what problem will this solve?
2. For whom do we solve that problem?
3. How big is the opportunity?
4. How will we measure success?
5. What alternatives are out there now?
6. Why are we best suited to pursue this?
7. Why now?
8. How will we get this product to market?
9. What factors are critical to success?
From Inspired: How to Create Products Customers Love by Marty Cagan

66. Additional Guiding Questions
1. Is the problem worth solving?
2. Do we have the right people to solve this?
3. How will we encourage adoption?
4. How much could we spend on this?

67. Questions?
Kent McDonald
kentjmcdonald@gmail.com
@BeyondReqs
www.beyondrequirements.com
Slides available from:
http://www.knowledgebridge
partners.com/presentations/b
usinessvaluemodeling/