How to demonstrate the business value of software
Most organizations are far from maximizing the value of their software development initiatives. Their discretionary spend is not as large as it could be, and they're not focused on what the business units want.
IT departments don’t have the information or metrics readily available to make prioritization decisions, based on business value, that would change direction or stop a project altogether. Too often, project prioritization is driven by other factors, such as the technology being used, the time to completion, resources required, the difficulty of the project, or even who is shouting the loudest.
IT staffers are seldom focused on the value the initiative will deliver—not because they don’t want to, but because they are not brought into the conversation about the value of the software to the business. It doesn’t have to be this way. Collaboration is the key. If the IT team is provided with ongoing information from the business unit on the expected economic value that is to be delivered from a project, their decisions throughout the software development lifecycle can stay focused on the target economic outcomes.
Including the IT team in these important discussions will allow them to deliver a higher ROI for the organization. With clear prioritization criteria and transparency, both the business unit and IT will have a clear understanding of the end goal and all team members can be held accountable for specific outcomes.
Five key steps to value visualization
Understanding the business and economic value might seem challenging. Finding a way for all stakeholders to visualize the value will help ease the process. I have developed a five-step Value Visualization Framework (VVF) concept to help everyone understand the economic drivers for a project.
By following just five steps, the business unit and IT team will have a clear directive to discuss, define, measure, and prioritize their software development initiative based on their ability to deliver the expected value. The following five steps will provide the stakeholders with a tool to enable continuous alignment between the IT team’s decisions and the business unit’s end goals:
- Define the units of value delivery (e.g., number of subscribers, hours saved in the process).
- Define the value of the project in specific units (e.g., 17 new subscribers once deployed).
- Define the “size” (e.g., $2,000 penalty for a missed deadline).
- Define the cost of delay of the implementation challenge, including level of complexity, duration, etc. (e.g., 100 story points).
- Quantify the economic value once deployed (e.g., $30 per subscriber).
The VVF is not meant to replace other methodologies. It can prove valuable when used in conjunction with practices such as agile, Scaled Agile Framework (SAFe), etc. Such approaches do consider and prioritize value; however, they are limited when measuring the value throughout the entire software development process. By using the VVF model, the value will be determined at the beginning of the software development project and will serve as a metric for IT and the business unit to measure against through to completion. With the ability to track actual versus target values, timely modifications can be made to get the project back on track to achieve the desired objectives.
The five-step process enables organizations to optimize value streams that improve cost efficiencies and enhance an organization’s competitive edge. And the open communications strengthens alignment between the IT and business unit teams and provides a means to hold all parties accountable for achieving the desired goals.
If the steps seem overwhelming, I recommend starting small. Using some of these VVF metrics is better than not measuring value at all, and utilizing relative metrics when absolute numbers are difficult to uncover is better than not tracking any data.
Visualizing the value from top to bottom
It is not uncommon for those individuals or departments with the greatest involvement in a project to be most concerned about the value. In the case of a software development project, the development team is often caught up in the day-to-day activities of meeting deadlines, staying within budget and maximizing utilization, making it difficult to also focus on software’s business value. Since they are the closest to the project, you would think they should be the ones most focused on the value they are delivering, but, as in life, other factors tend to get in the way.
The question is, Who should be responsible for focusing on the software value? Some may say it should be the CIO. Others may say it should be the managers of the business units who are driving the requirements. Ideally, it should be both, and they should have an open dialog in which they jointly develop, communicate, and measure against their goals, with the end goal being to maximize the value flow.
The IT team and business units shouldn’t be the only ones that care about maximizing the value of a software asset. The C-suite, and even the board, should be concerned as well. Most organizations rely on software today to run their operations, and if it is not at its maximum value, it could negatively impact the bottom line.
Therefore, as with any initiative within an organization, it is best if the goals are communicated from the top down. With upper management communicating the importance of focusing the business value of a software project, those entrenched in the project on a daily basis will be more likely to make educated decisions to favorably impact the flow of the software value.
A better approach: Maximizing value flow
Software development projects will be most successful if business value is used as the most important consideration in prioritizing flow of work. Once the business value goals are established, the IT team and business unit need to jointly monitor their progress, tracking against the defined goals and making modifications accordingly. The VVF concept will help organizations to visualize the value throughout the entire software development lifecycle: maximizing the value flow.
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