How does managing by value change the way that your organization will operate?
Every organization needs to be able to deliver value to survive. Value however will differ as to the unique nature of that organization, its goals, mission, vision, and strategies for growth. Agile has sought to optimize value delivery by driving efficiency at the team level. Though this has value to the organization, we have not yet maximized the investment into agile sufficiently to move the needle on how we deliver value with our technology investments.
The investment in technology can span from a few million to over a billion dollars annually. Whether we want to admit it or not, the majority of what we spend every year is not aligned with quantifiable outcomes. Instead, we rely on words like benefits or improvements, without quantifying what those mean. Why? Because it’s hard and leadership has not defined a value model for the functional leaders to follow when identifying new technology investments. What we are left with is an annual planning function that relies on the operational leaders to decide what they think will be valuable to them, which may not align well with the strategic direction of the company and worse may be at direct odds with what another leader in the organization is wanting to do.
Value is the equalizer for planning in that it causes us to have hard conversations regarding what the investment cost will yield in real quantifiable value. Taking an investment mindset, based upon proven money management approaches, we need to balance the expected outcomes with the anticipated cost of investment. Moving to an investment mindset means that the organization will now look at the Product/Technology Portfolio as a whole and not as individual parts. Investments being considered in one area of the organization will now be transparent to the rest of the organization. We will apply investment theory here to change our mindset so that we look at our investments as securities, such as a stock or bond, which will have an expected return associated with it. The organization can then set portfolio objectives based on the overall value return or ROI desired.
Some of the immediate benefits of moving to an investment mindset centered around value intake include:
1. Managing intake by value supports the move to continuous planning as new ideas that potentially have a large value return can be considered immediately over waiting for the next annual planning cycle.
2. Architecture can see potential investments as soon as they are known. This provides your PMO (APMO, LPM, whatever you have) the ability to start to answer the three key questions in our investment cycle:
a. Should we, do it? Does this idea even make sense from an investment perspective? Does it align with our strategies? Is it operationally feasible?
b. Can we, do it? Once we decide something looks like a good investment, we need to then determine if we can even do it with our current product/technical capabilities. This provides the important early architecture of a potential solution. This does not mean that we are going to do big upfront analysis. Rather we want to understand just enough to know if the investment needed will exceed the expected value return.
c. Will we, do it? Once we have answered the first two questions then we make the all-important decision of whether to invest or not. Every investment comes with risk, so we need to balance the risk, which is equated to the maturity of our delivery teams. If there is low maturity, then estimates of the cost may be higher due to a lack of organizational maturity in our delivery capability. An important aspect of teams’ delivery maturity is that in many cases their inability to predictably deliver solutions is due to organizational impediments, political silos, or technical dependencies they can’t control. In most cases, it is the leaders who own the changes that are required to improve delivery maturity.
Managing by value starts a systemic change in both the culture and the organization at large. With a transparent and holistic interpretation of value, everyone in the organization understands how they can support value delivery. Managing by value improves your ideation efforts, focuses on effective Discovery prior to making an investment, and identifies quantifiable outcomes via strategically aligned value factors that are applied at the highest level of our portfolio down to our individual teams.
Managing by value also has the benefit of not aligning to a single agile framework and instead asking leaders to focus their attention on optimizing the operations of their organization so that everyone is aligned to value delivery. Managing by value will help break down their inevitable silos. We see this when leaders who traditionally have the power to have projects approved for their functional organization now must align their projects to value outcomes that are managed via value scores. Low-value score projects require that the leader attempt to justify the investment, it doesn’t take long to realize they are burning their political capital unnecessarily.
