Should product managers and innovative agile teams measure business value?

How to measure business value is a question many agile teams ask me, given how much rigor I ask them to put into estimating and capturing story points. Should product managers and product owners have an equivalent responsibility to define a business value metric, use the metric for prioritization, and be held accountable for actual business value delivered versus estimated?

My quick answer is yes, we need a way for product managers and owners to capture and track business value, but no, I don’t believe in asking them to estimate this at a user story or even at a feature level.

Business value is a better metric to capture top-down, starting from strategy and vision. 

Estimating business value helps align stakeholders on priorities and guides product managers in defining their roadmaps. Articulating what goes into measuring business value is also important so that compliance, operational, security, technical debt, and other non-functional requirements receive priority in the roadmap, along with features with more direct customer and financial benefits.  

The question of business value is about whether and how to create a data-driven and transparent process around four key product manager accountabilities:

1. How do product managers align their priorities to strategy and vision, and what level of investment should leadership allocate to their initiative?
2. To what extent is the product manager presenting an operationally balanced roadmap and considering the input of stakeholders, feedback from customers, and priorities from operational considerations?
3. Are product managers communicating with their product owners and agile team(s) to guide smart decision-making around what scope to include in their releases and features?
4. Whether product management’s investments deliver measurable outcomes?

So, let’s dive into these four objectives and see how we can create a simplified approach to capturing business value. In this post, I’ll concentrate on (1) and (2), which focus on the planning aspects of an initiative, and will follow up on (3) and (4) in another post. Please sign up for the Driving Digital Newsletter to be notified of all my writing!

Is their alignment to strategy and vision?

Organizations using StarCIO’s Vision Statement Template have a simple one-page tool for capturing an initiative’s vision, and the template includes several questions about strategic alignment. I advise using this tool and drafting vision statements for multiple timeframes: the long-term vision, the current roadmap (6-18 months), and the upcoming releases (2-6 months).

The alignment comes when the product manager presents this vision statement to executive leadership and stakeholders. It can be quantified when a Drivers Group (similar to what many organizations call a PMO steering committee) votes on these initiatives, and an aggregate score is computed. I describe this voting mechanism in my book, Driving Digital. (Note: StarCIO has workshops and tools to support the vision and voting process. Contact me if you’d like to learn more about them.)

Does the roadmap represent stakeholder needs?

Vision statements should articulate KPIs, OKRs, or both. The ones defined at the roadmap and release level should help create balanced priorities against multiple objectives. Here’s how.

1. Define OKRs: Here are some examples of roadmap-level OKRs.
• Operational: Improve performance service level objectives by reducing error rates by 5%
• Security: Contribute to a 20% improvement in the organization’s NIST protect and detect scores.
• Customer: Improve Customer satisfaction (CSat) scores by 10 points.
• Revenue: Grow revenue for the digital sales channel by 10%

In these examples, I simplified the language around formal OKRs. For other examples, see my related posts on three meaningful KPIs to focus agile development, DevOps, and IT Ops to deliver business outcomes, my CIO.com article on digital KPIs, and my InfoWorld article on DevOps KPIs. I would also recommend my posts on the most important agile KPI and three ways to define digital transformation KPIs.

2. Discuss and agree on a timeframe and mechanism for measuring these outcomes. Keep in mind the productivity dip and the time required for change management activities. I’ll discuss this in part 2 of this post.
3. Have stakeholders vote on the OKRs and create a composite score that Product Managers should use to prioritize their roadmaps.

By putting the OKRs to vote, the product manager receives a balanced set of objectives where all concerns have non-zero scores. Their product owners should use these weighted objectives as guidelines, but not necessarily guardrails, as market, customer, and employee-driven metrics (VoM, VoC, and VoE) should be considered separate from the strategic, stakeholder-driven objectives.

How much to invest in the initiative?

Let’s recap:

• The product manager has a vision statement for the initiative that the Drivers Group scored – this helps leadership weigh this initiative against others in the program management office’s (PMO’s) portfolio.
• The product manager has a roadmap-level vision statement with recommended OKRs/KPIs and a timeframe for measurement. Stakeholders vote on the OKRs/KPIs, and your organization uses a tool to capture the data and calculate composite scores. (Note: StarCIO’s tool facilitates this process and captures the scoring.)

If you follow my Driving Digital practice, the next step involves breaking down objectives into epics, features, and exploratory questions – a process described in Chapter 6 of Driving Digital. Part of this process includes asking the initiative’s leadership a simple question: What do you need to accomplish your stated goals?

In self-organizing businesses, the initiative’s founders should propose the investment requested. The request should include who they need to be on their teams (i.e., resource requirements), what support they require from other departments (see Chapter 9 of Digital Trailblazer for more on asking for executive support), and what infrastructure is required. They should also estimate investments to develop new partnerships, build capabilities, support change management, or buy other assets.

In other words, the founders should propose a realistic budget.

It’s up to leadership (i.e., the Drivers Group) to decide whether they want to invest and agree with the proposed vision, targeted OKRs, and proposed budget. They can also review the initiative’s requested budget in context with the other portfolio initiatives.

I’m veering into budgeting processes, and many antipatterns and missteps can come from intersecting StarCIO’s Agile PMO Practices with legacy budgeting processes (i.e., yearly) and traditional mindsets (fixed deliverables versus agile experimentation).

But it’s best to contact us if your organization needs help in these areas. This post, as in every agile feature, the product manager must define when it’s done.  

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