Quantify the Economic Value of Stories Once Deployed

Michael D. HarrisThroughout my blog posts over the past several months, I’ve talked about the “Value Visualization of IT” and shared my Value Visualization Framework (VVF) concept. It is a 5-step VVF process that runs in parallel to the process that creates the business case for a project and then breaks the project down into epics and stories. It provides a comprehensive way for organizations to communicate business value information for software development projects.

In previous blogs, I have covered the first four steps of the VVF, including: 1. Defining the units of value delivery; 2. Defining the value of the project in specific units; 3. Defining the “size”; and 4. Defining the cost of delay. Today, I will cover the last step: Quantifying the economic value once deployed.

Once you understand the value of each unit and the potential costs of delays in the project, you need to quantify the economic value of each unit once the project is deployed. Delaying the assignment of actual market value to deployed functionality until it is actually deployed allows fluctuations in value due to market forces or environment changes to be taken into account. The following graphic provides an example for a website development project. It assumes that the value of website subscribers increases as the subscriber base grows. Hence, in week 9 each subscriber is worth $10. This goes up to $15 in week 12 and $20 in week 15. This is based on advertising revenue per subscriber increasing as the number of subscribers increase. Of course, the value could just as easily fall!

Economic Value of Stories

With a process such as the Value Visualization Framework, we can get more value out of our software development initiatives by using business value as the most important consideration in prioritizing flow of work through software development. Prioritizing based on difficulty of project, how many and which resources are required and who is shouting the loudest might seem logical in the short-term, but will not maximize the true value of a software development effort. By measuring and tracking value throughout the software development initiative, using all or even just some of the steps in the VVF process, you will be better able to prioritize workflow, hence, value flow.

Michael D. Harris
DCG President

Written by Michael D. Harris at 05:00
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