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Understanding Value

25 Jan 2018

| Author: Stan Wade

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Understanding Value

If you ask anyone working in the Agile community, "What are you trying to achieve?", the word value will almost certainly come up in the response somewhere. But I think there is a problem. This word value and its application is absolutely core to what most of us believe in, but it's not a word I think we all understand in the same way. This isn’t good!

Let me start by looking at the interpretation of words and phrases. I have blogged before about a bugbear I have with the use of names and labels. People can have a view about what a specific word or label means and unless this view point is aligned within a conversation, some pretty unfortunate things can happen.

A colleague of mine recently asked me what ‘on deck at 9:00’ meant to me. Being a Brit, I replied that it was a statement about being ready for duty at 9:00. This is because virtually all our colloquial idioms in the UK come from the Royal Navy and being on deck means on duty and ready for action. That’s obvious isn’t it? Well, not to Americans who don’t have the same history and call on the cultural foundation of baseball. On deck in baseball terms means next up to bat. The difference is significant. It's action now, or action soon. The point I am trying to make here is words can come with interpretational baggage derived from personal history and although the words themselves can be common, we may be talking about quite different things.

I think the word value often falls into this trap. For many business people, it represents revenue or cashflow or something tangible that the business can see. We ran into this challenge years ago when we tried to get some business people to prioritise stories by value and some couldn’t see where the value was in some of the stories because nothing tangible was created at a business level. In other words, they perceived the story as having no value at all. The techies didn’t see it that way at all, for them the value was real. Different viewpoints created different perceptions of value. It's contextual and can vary based on who evaluates the level of value and the circumstances they are currently in.

Another example. What is the value of a 2018 World Cup final ticket? For Rob, my CEO, it’s worth a lot. He loves football and a trip to the World Cup would be a life event for him. For me, well, its probably a tick on the bucket list, but that’s about all. I am not a great fan of football. OK, so now we have two evaluations of the value of the same item. That’s a pretty important point.

There is another factor to consider here and that’s based on the volume item delivering value we receive. Let’s think about chocolate bars. The first bar is great, and as long as you like chocolate, it will give us some value. But a second bar will probably be not as good. The value received will be less for the second bar and by the 25th bar well, that’s another story and consumption would go from a pleasant experience to an ordeal.  It could be perceived as far as a negative evaluation of value. So, the interpretation of value can also vary with volume.

These variable concepts of value are well known in economics and called utility. The utility is the benefit that someone gains by consuming a unit of product and it is dependent on circumstance.  The utility of the football ticket to Rob is much higher than it is for me. The consumption of an additional unit and its perceived value is called marginal utility. This covers the chocolate bar scenario and the marginal utility of another bar will change depending on how many you have already scoffed.  

Oh dear! That makes things all a little more complex now doesn’t it? Well, if you are dealing with a diverse group of users, with varying significance, activity volumes and revenue contribution, it could get pretty difficult to model.

But our evaluation of value is still king! If we don’t understand the complexities of what constitutes a valid interpretation of this, we may not build the right thing at the right time. Yes, the world is complex but if we fail to take these factors into account our model will not reflect reality.

So next time you hear the word value, think about the context and remember how that can make a significant difference. There is real value in assessing value correctly. Well, certainly for me and maybe for you!

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Stan Wade

Stan is a highly experienced Agile mentor, with almost two decade's experience of Agile over a number of market sectors, primarily in the financial sector. He takes a business-led approach to IT, complemented by a strong development and operations background.

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