The value of knowing value
Figuring out what to do next or even where to start is alway a challenge.
Scrum and XP both have an iteration planning method in which the team gives each unit of work (story) an estimation of effort. We typically call these story points. Story points are essentially an order of complexity against a baseline story.
The typical format is the Product Owner brings stories to the Team for estimation. The Product Owner and Team talk about each story until the Team feels comfortable giving an estimate. In the beginning of the iteration the Team decides how many story points they can get done and the Product Owner lines up the stories in priority order/ The team then pulls into the iteration as many stories as will fit based on the sum of the story points.
Teams will carry on like this using the sum of the story points they complete in each iteration as a measure of their productivity. Increasing this measure of productivity, called Velocity, is supposed to be a sign of a team getting better and delivering more business value each iteration. This is where I think we mess up: equating velocity with business value.
Why is equating Velocity with Business Value bad? I think we can draw the same distinction here as we draw between Activity and Action. Velocity is a measure of effort or cost. I say it will cost 5 times as many story points to complete story B as it does story A. So story B is more complex and will take more time to complete than story A. We presume that the stories on which we’re working are of the highest business value as compared to the stories remaining. As such we presume that if our Velocity goes up then we’re providing more Business Value.
This may be the case, but what if we could do even better? What if we could say that story A has a certain amount of Business Value points and story B also has a certain amount. By this I mean a number: 4 Business Value points or 10 Business Value Points. Lets look at that.
| Story Points | Business Value Points | |
| Story A | 5 | 9 |
| Story B | 8 | 7 |
| Story C | 1 | 6 |
| Story D | 3 | 5 |
Here we have four stories ordered by Business Value points. This might seem like a reasonable ordering. In fact it seem like there’s no point in the Business Value column if all you’re doing is prioritizing by it.
For some time the world has had a method for calculating ones return on investment. We divide the value by the cost to get the return on investment. It’s a simple calculation used to bring order out of chaos. Let’s apply it to the above table and order by the resulting ROI numbers.
| Story Points | Business Value Points | ROI | |
| Story C | 1 | 6 | 6 |
| Story A | 5 | 9 | 1.8 |
| Story D | 3 | 5 | 1.67 |
| Story B | 8 | 7 | 0.88 |
Now we get a slightly different ordering. Why would you care about this? Using the ROI calculation you minimize your effort and maximize your value delivery.
You might be looking at this thinking “Well, it’s all got to get done anyway so the order isn’t really important”. To that I would say you’ve taken your first step on the death march and I don’t envy that sort of thinking. Now in this time of economic trouble more than ever we need to concentrate on delivering more business value faster and with less effort than ever before.
On that note I’ll wrap up with a link to a wonderful techbiz parable: Rocks into gold
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Increasing this measure of productivity, called Velocity, is supposed to be a sign of a team getting better and delivering more business value each iteration.
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Velocity, is supposed to be a sign of a team getting better and delivering more business value each iteration.
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you think we can draw the same distinction here as we draw between Activity and Action.
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