Generating or delivering Business Value is the purpose of a business. Typically, a commercial business will measure Business Value financially however public sector organizations, charities, open source communities and others will measure value differently.
From the work of Mizuno and Akao:
Value is recognized when Business Customers or Product Customers perceive one or more of the following:
- A problem of theirs is solved or minimized
- An opportunity they desire is seized, maximized or enabled
- That they “feel good” about themselves
- That they “look good” to significant others
Value can only be defined from the end customer’s point of view of specific products and specific outcomes.
We call this the “POFL” model as a way of remembering it (Problem, Opportunity, Feel Good, Look Good) and apply it to both commercial and non-commercial organisations.
In commercial terms the opportunity mentioned can be a profit opportunity, but often other aspects of Business Value will be relevant such as reputational impact (both positive and negative).
For non-commercial organizations we recommend looking at the end customer and qualifying their needs in the terms above (POFL). This qualification gives an understanding of the Business Value for each major end-customer or end-stakeholder. If there are many Business Value statements then the business may be fragmented, there may be advantage in greater cohesion or even separation into spin-off businesses.
We recommend incorporating feedback into interactions with end-customers/stakeholders as a primary driver for “creating pull” in the organization and identification of value streams. Creating a top level feedback cycle is one of the best drivers of quality, productivity and success in an organization. This feedback is an excellent way of aligning Strategic Direction with Business Value.
Value must be defined from the customer’s point of view or at least from the holistic business’ point of view when operating in an open market. Organizations that are heavily structured often find that teams, including teams of teams, will describe their customers as other teams in the organization. This undermines understanding of value from the end-customer’s point of view and leads to the normalization of wasteful work. Instead we recommend transparent communication of customer focused business value based on than a holistic assessment using the it using the Problem, Opportunity, Feel Good, Look Good (POFL) model. Misidentification of customers as other teams/departments leads to requirements problems resulting in a significant risk that delivery teams build the wrong products.
Considering value in this way is crucial in the definition of successful products and sometimes requires a realignment of how an organizations internal departments work. We have seen several dysfunctional instances of organizations producing products where the value is defined by the engineers and delivery teams (or worse proxy Requirements Managers). As a result, when products inevitably don’t meet customers’ needs or product adoption is slow the typical response from the engineers is that the customers did not understand, or were not mature enough, for the product. This is a symptom of value not being consistently understood in an organization. Agile/Iterative and Continuous Flow ways of working are expected to identify this problem early during early deliveries to the Customers, which is why involving the actual Customers, early and often, is critical.
A killer product is any product that is so necessary or desirable that it proves the core value of some larger technology.