This post is a sequel to my talk on the same subject in APGI conference in Pune on 18th May, 2018.
Delivering Business Value is something all scrum teams target. Product Owner defines the Product Backlog Items prioritizes with the perspective of maximizing Value. The development team being able to complete them helps deliver Business Value.
The scrum guide talks of it in its definition of Scrum as "A framework within which people can address complex adaptive problems, while productively and creatively delivering products of the highest possible value."
It further talks of the Product Owner being responsible for maximizing the value of the product and Optimizing the value of the work the Development Team performs.
In case of the Scrum Master the guide talks of helping everyone [stakeholders] change these interactions [with scrum team] to maximize the value created by the Scrum Team.
In the section on Scrum Master Service to the Product Owner, it again talks of
• Ensuring the Product Owner knows how to arrange the Product Backlog to maximize value;
In the section on Scrum Master Service to the Development Team
• Helping the Development Team to create high-value products;
There are references to Value in Sprint Review, Scrum Artifacts and Product Backlog.
Beyond these references, the Scrum Guide does not explicitly talk of what Value means.
If this the focus of the Scrum team, let us examine what is meant by Value.
In his book The Art of Business Value, author Mark Schwartz talks of the distinction between three types of Value - Business Value, Customer Value and User Value. Typically customer is the one who pays for the value or service and users are the ones who ultimately work on the software. In a general sense, Business value is treated as equal to revenue or profits. Users represent the end-users. Depending on whether who pays for it is the one who uses it, these 3 roles will differ.
In any Agile system development context, understanding how these three types of Value play out is critical to formulating it for the product / application at hand and translating it into PBIs for translating into working software.
Let us examine how these roles play out in differing contexts.
Case 1: Captive in-house centers
This is where a company has an in-house set-up to develop software for its own use. The customer is internal and hence Business is the same as customer. The users are the internal users of the software.
Case 2: B2C businesses
This is where a company has an business targeting retail customers. The customer is external and hence Customer is same as the user. There may also be users internal to the company and consume functionality related to finance, logistics and retail analytics.
Case 3: B2C businesses with agents or suppliers
This is a variant of Case 2, but there is a significant constituency of suppliers or agents which the company works with. There is significant functionality targeted at these users.
Case 4: Software Product company.
This is where a company has an business targeting corporate customers. Business is represented by the Product house and the customer is the corporate house and users of the software (internal or external to the customer) form the third category.
As Mark Schwartz explains in his book, it is quite possible that what is of value to the customer may not be valuable to Business and vice versa.
Ideal scenario is where Business Value and Customer Value converge.
What when they diverge? There is customer value and little Business Value?
Like a hotel taking a conscious call to discourage low-staying customers or telcos weaning away low-value customers. Legitimate business strategy but but not all customers are happy. Or what I myself have experienced with Ola a cab aggregator in india and a market leader.
I have opted for a Select package paying a rental fee for a month. That means I get cabs on priority, high rated drivers and peak rates are not applied. That applies to just couple of vehicle types and couple of others are out of the rate cap. In evenings when I return from work, when demand is at its peak, I never get vehicles even though vehicles appear to be available. Then I found out why, for Ola it makes better business sense to allocate its vehicles to customers without rate cap - where they have maximum profitability. So even I get vehicles when I opt for two vehicle types outside of Select. And yes, I pay peak rates. More business value, but they are losing trust big time.
As this article in Bieberlabs argues, over reliance on Business value reduces the customer connect in the longer run and reduce the revenue and profitability in longer run.
Alternately, there are many cases where there is a clear case of customer value but little business value. I use the Indian Railway booking site IRCTC. Tickets are booked well in advance and many a time its a long wait list which greets the customers. What if IRCTC, based on the historical data pile it sits on, gives an indication of a particular wait-listed position to get confirmed? Prior to a customer / user booking a ticket. Great customer value but poor business value. IRCTC will lose out holding cash for so many tickets for a quite a few days - which adds to its working capital. In addition it loses out on ticket booking fee and likes.
Tough choice really.
Now where user is a customer as in a B2C case, the voice gets heard. In case of internal users or internal users of a customer using a software product, there is a certain lag before the voices could be heard. As Mark Schwartz illustrates in his book, user value may be in divergence with customer / Business value. For instance, the management may go in for optimized processes through the new software implementation but users may not be for it. May be a huge change for them.
No easy options!
Delivering Business Value is something all scrum teams target. Product Owner defines the Product Backlog Items prioritizes with the perspective of maximizing Value. The development team being able to complete them helps deliver Business Value.
The scrum guide talks of it in its definition of Scrum as "A framework within which people can address complex adaptive problems, while productively and creatively delivering products of the highest possible value."
It further talks of the Product Owner being responsible for maximizing the value of the product and Optimizing the value of the work the Development Team performs.
In case of the Scrum Master the guide talks of helping everyone [stakeholders] change these interactions [with scrum team] to maximize the value created by the Scrum Team.
In the section on Scrum Master Service to the Product Owner, it again talks of
• Ensuring the Product Owner knows how to arrange the Product Backlog to maximize value;
In the section on Scrum Master Service to the Development Team
• Helping the Development Team to create high-value products;
There are references to Value in Sprint Review, Scrum Artifacts and Product Backlog.
Beyond these references, the Scrum Guide does not explicitly talk of what Value means.
If this the focus of the Scrum team, let us examine what is meant by Value.
In his book The Art of Business Value, author Mark Schwartz talks of the distinction between three types of Value - Business Value, Customer Value and User Value. Typically customer is the one who pays for the value or service and users are the ones who ultimately work on the software. In a general sense, Business value is treated as equal to revenue or profits. Users represent the end-users. Depending on whether who pays for it is the one who uses it, these 3 roles will differ.
In any Agile system development context, understanding how these three types of Value play out is critical to formulating it for the product / application at hand and translating it into PBIs for translating into working software.
Let us examine how these roles play out in differing contexts.
Case 1: Captive in-house centers
This is where a company has an in-house set-up to develop software for its own use. The customer is internal and hence Business is the same as customer. The users are the internal users of the software.
Case 2: B2C businesses
This is where a company has an business targeting retail customers. The customer is external and hence Customer is same as the user. There may also be users internal to the company and consume functionality related to finance, logistics and retail analytics.
Case 3: B2C businesses with agents or suppliers
This is a variant of Case 2, but there is a significant constituency of suppliers or agents which the company works with. There is significant functionality targeted at these users.
This is where a company has an business targeting corporate customers. Business is represented by the Product house and the customer is the corporate house and users of the software (internal or external to the customer) form the third category.
As Mark Schwartz explains in his book, it is quite possible that what is of value to the customer may not be valuable to Business and vice versa.
Ideal scenario is where Business Value and Customer Value converge.
What when they diverge? There is customer value and little Business Value?
Like a hotel taking a conscious call to discourage low-staying customers or telcos weaning away low-value customers. Legitimate business strategy but but not all customers are happy. Or what I myself have experienced with Ola a cab aggregator in india and a market leader.
I have opted for a Select package paying a rental fee for a month. That means I get cabs on priority, high rated drivers and peak rates are not applied. That applies to just couple of vehicle types and couple of others are out of the rate cap. In evenings when I return from work, when demand is at its peak, I never get vehicles even though vehicles appear to be available. Then I found out why, for Ola it makes better business sense to allocate its vehicles to customers without rate cap - where they have maximum profitability. So even I get vehicles when I opt for two vehicle types outside of Select. And yes, I pay peak rates. More business value, but they are losing trust big time.
As this article in Bieberlabs argues, over reliance on Business value reduces the customer connect in the longer run and reduce the revenue and profitability in longer run.
Alternately, there are many cases where there is a clear case of customer value but little business value. I use the Indian Railway booking site IRCTC. Tickets are booked well in advance and many a time its a long wait list which greets the customers. What if IRCTC, based on the historical data pile it sits on, gives an indication of a particular wait-listed position to get confirmed? Prior to a customer / user booking a ticket. Great customer value but poor business value. IRCTC will lose out holding cash for so many tickets for a quite a few days - which adds to its working capital. In addition it loses out on ticket booking fee and likes.
Tough choice really.
Now where user is a customer as in a B2C case, the voice gets heard. In case of internal users or internal users of a customer using a software product, there is a certain lag before the voices could be heard. As Mark Schwartz illustrates in his book, user value may be in divergence with customer / Business value. For instance, the management may go in for optimized processes through the new software implementation but users may not be for it. May be a huge change for them.
No easy options!
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