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Six easy steps to start quantifying value

Holly Donohue

Product Manager

describes six easy steps to start quantifying value

14 December 2017

How can we articulate value? A couple of weeks ago, I gave a talk at Product Tank Manchester to share our experiences.

18 months ago, we at Aquila Heywood started a large-scale transformation of our business. We introduced Agile principles, scrum teams, analysed waste in line with lean practices and put in place a continuous improvement program, amongst other things. Things were great, but...

While doing this, we found that, as well as focusing on our new Agile teams, we also needed to evolve our decision-making process to meet our changing business needs.

As product professionals, we all know that expressing value is core to our activities. Finding a common language that our product teams and stakeholders understand can be something with which we all struggle at times. It is very easy to be swayed by anecdotal opinions and miss the bigger picture. You may already be familiar with 'HIPPO's - Highest Paid Person's Opinion! We wanted to find a way to ensure we were considering all the available data to facilitate our decision making. Building a Value Matrix has been a useful tool to help us with this.

Here's how we did it...

1: Identify your value factors

Determine what overall strategic values drive your business. While goals and initiatives change over time, the core strategic values should be fairly stable. Expect to have around 2-6 value factors, which will usually fall into the following four categories:

  • Increase Revenue: Likely to be delighters that will help you win new customers or sell new elements to existing customers
  • Protect Revenue: Items that are not valuable enough to generate revenue, but will help you to retain your existing customers
  • Reduce Costs: Build and release your products more efficiently
  • Avoid Costs: Avoid fines and deliver obligations, for example, GDPR compliance

2: Add criteria to each factor

Once you have your value factors, you can start to break these down into criteria to enable scoring. For example, if retaining customers is one of your value factors, you might have:

  • Will this improve customer satisfaction and raise your net promotor score?
  • Will this increase customer 'stickiness'/tie in to your solution?
  • Will it improve your standing with your competitors and reduce the likelihood of a customer moving to a competitor offering?

3: Quantify

If someone else were to use the value matrix to score ideas, would they come out with the same score as you? Or even, if you were to score an idea again in a month, would you give it the same score? (In our first iteration, I tried this and it didn't!). A way to build in consistency is to quantify each criterion into bandings. For example, to measure customer satisfaction, you could use 'Increase our net promotor score by 1-2 points, 3-4 points, 5-6 points' and so on. Where quantification is not really possible, think about how else you can describe your scoring bandings in a way to build consistency. For example, 'nominal' affects a small number of customers, 'medium': impacts a single market and 'strong' impacts multiple markets.

4: Score

Decide on a scoring mechanism. We already used the Fibonacci series for pointing user stories and decided to adopt it for scoring ideas as well, from 0 to 8. We then take the highest-scoring criterion in each category and multiply it by a weighting for the category to reach an amalgamated score.

The resulting formula looks a bit like this:
(Value Factor x Weighting) + (Value Factor x Weighting) + and so on / divide by 8 to get to a whole number out of 100 = Value score

In practice:
(Customer Retention (8) x 60) + (Increase Revenue (5) x 40) / 8 = 85

Below is a mock-up of a value matrix:

5: Iterate

As you score ideas and learn about how the matrix is working, you will undoubtedly think of new ideas for criteria and come across oddities that mean you will need to reassess and adjust your value matrix. I found it surprising how quickly we did obtain value from the tool. It did take quite a few months of tweaking to get it to the point where we were fully comfortable with it, but it is worth sticking with it, or trying it and coming back to it again, if need be.

6: Get buy-in

If you want this concept to be adopted by a wider audience, you will need to help others understand and trust your value matrix. Think carefully about how your organisation operates and whom you need to include, and at what point in the maturity of your scoring matrix you are ready to share it with others.

An approach I found successful was to focus senior stakeholders on the results. I scored the last six months' worth of work that we had already prioritised, completed and deferred using the value matrix and laid out the ideas along a table in priority order. I then asked the Board whether they agreed with the order. The value matrix should be on hand to refer to if need be and to show that it is tangible; however, the important thing is whether the resulting priority is something with which everyone is comfortable. This avoids falling into arguments about what criteria should be included in the matrix and ending up with a list as long as your arm!

Try it out!

Introducing a value matrix has provided our Product team with a framework to assess and specify the impact of ideas and present these to stakeholders. This has given us a common language to discuss value with decision makers, teams and customers alike and enabled us to make sound decisions based on data. We would be interested to hear how you get on: please comment here to let us know!

Holly Donohue is a Product Manager at Aquila Heywood, the largest supplier of life and pensions administration software solutions in the UK.

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