Business value by systems thinking

Agreeing on Business Valuewith Systems Thinking

Portia TungPascal Van Cauwenberghe

Introductions

Consultant-Coach and Chief Strategy Officer

Her Blog: www.selfishprogramming.org

Consultant

His Blog: blog.nayima.be

NAYIMA

We make play work

Agile Coach.Storyteller.Games Maker. Consultant.

Project Manager. Games Maker.

(c) emergn and Nayima 2010

http://www.selfishprogramming.org/

http://www.blog.nayima.be/


Session Goals

Understand why we need to agree on Business Value

Show how to do Business Analysis in an Agile way Present a few techniques you can use right away Experience the process of creating a Business

Value ModelHelp you determine if your project is worth doing


Contents

1. Introduction to Customer Value Analysis™2. Building a Goal Table to agree on the goals of

the example project (presentation)3. Building a Business Value Model (exercise)4. Improve the Business Value Model (exercise)5. Customer Value Analysis™ in practice

(presentation)6. Q&A

1. Introduction to Customer Value Analysis™

The Problem We Face

#!?!!#

Customer Value Analysis™

Stakeholders

Goal Table

Business Value Model

Capabilities

RisksProject Level

Stories

Iteration Level Stories

Acceptance Criteria

Development

Release

2. Understanding Project Goals

By building a Goal Table


What will we do?

1. Set the context2. Identify the project sponsor 3. Identify the project sponsor’s goals4. Quantify the project sponsor’s goals5. Identify the customer6. Identify the customer’s goals7. Quantify the customer’s goals

1. Set the Context

Jack, Customer Operations Manager of The Mobile Phone Company:

Customers can port their mobile phone number in or out. Porting in means a customer has a phone or buys one from us; we ensure that their existing mobile phone number is transferred to their account with us. Porting out means a customer leaves us for another provider and wants to transfer their number over.

Customers don't have a good experience doing with porting their number. We know this because porting is the #2 cause of calls in our call center. [Shows spreadsheet with call reasons]. We also know that our Net Promoter Score (NPS, how likely are our customers to recommend us to their friends?) is low compared to our competitors.

Also (and this is a big concern for me) our cost of operations is too high: all those calls to the call center cost us £X on average per call. I'm under pressure to lower this, to increase our profitability.

We think that we can solve all of these problems by offering our services online to our customers.

Consultant: First we have to understand your goals. Then we need to determine how to test that the goals have been achieved, so that you will know that we've delivered what you need. We use something called a "Goal Table" to summarise the goals of the project.


Goal TableStakeholder Goal Capabilities Tests and

MeasuresRisks

Stakeholder, n: Role, Team or Organisation involved or affected by the projectGoal, n: What a stakeholder wants to achieveCapability, n: Something we need to achieve the goal. Necessary, but maybe not sufficientTest, n: A way to decide if a goal has been achievedMeasure, n: A way to determine how close we are to a goalRisk, n: Negative consequences of achieving the goal

Identify key stakeholders and their goals

Project SponsorCustomer(s)


Goal TableStakeholder Goal Tests and

Measures

Let’s agree on the goals first and worry about the means later

2. Identify the project sponsor

Project Sponsor

Sets the goalsSpecifies deadlines and constraints

Pays for the project


Identify StakeholdersStakeholder Goal Tests and

Measures

Jack: That makes me the project sponsor. As Customer Ops Manager.Consultant: We’ll start by adding you to the stakeholder list, as you'll be the most important stakeholder during the whole process. We'll also add the customer to the list, as we need to ensure that their goals are met.

Jack: Of course. We should always focus on the customers’ needs.


Identify StakeholdersStakeholder Goal Tests and

MeasuresCustomer Operations ManagerCustomer

Glossary

Customer, n : Those who buy, install and/or use the product or service produced by the project

Project Sponsor, n: Sets the goals, deadlines and constraints of the project. Pays for the project.

Project Customer, n: Represents the project sponsor. Works closely with the project team. Implements the goals of the Project Sponsor

3. Identify the project sponsor’s goals

For the project


Identify GoalsStakeholder Goal Tests and MeasuresCustomer Operations Manager

Customer

Consultant: We'll fill in the goals in no particular order and prioritise them later. The first goal you mentioned was "Customer experience". The second was how likely customers are to recommend you, the Net Promoter Score. We'll add them to the list.

Project Sponsor: Yes, because when customers recommend us our revenue increases.

Consultant: Let’s add increasing revenue as a goal to the Goal Table.


Identify GoalsStakeholder Goal Tests and MeasuresCustomer Operations Manager

Provide good customer serviceCustomers recommend our service to friendsIncrease revenue

Customer

Agree on the definition of goals by specifying tests and measures

Consultant: Can you explain what you understand by “good customer experience"?

Project Sponsor: Good customer experience means that the customer can do what they set out to do, simply, efficiently and without surprises.

Consultant: How can we measure improvement in customer experience?

Project Sponsor: That's simple: we know how many complaints there are related to porting today. If the number of complaints goes down we can conclude it’s because customers are happier.

Consultant: I'll add "Number of complaints" to the way we measure that the goal has been attained. We can take the numbers from your spreadsheet with call reasons. What would it take to make this project a success?

Project Sponsor: We've set ourselves a goal of reducing the number of calls by 50% within one year. It's an ambitious goal, but if we all work together I'm confident we'll get there.

Consultant: Okay, we’ll add that goal to the tests and measures.


Specify Tests and MeasuresStakeholder Goal Tests and Measures

Customer Operations Manager

Provide good customer service

50% reduction of customer complaints within a year

Customers recommend our service to friends

Increase revenue

Customer

Glossary

Measure, n: How to get the numbers to verify that a goal has been met.For example: Number of complaints as reported in monthly call summary report => A number

Test, n: How to verify that a goal has been met.For example: Number of complaints as reported in monthly call summary report reduced by 50%, relative to situation on DD/MM/YYYY => Yes/No

Target, n: Specifies by when to achieve a goalFor example: By next year, number of complaints as reported in monthly call summary report reduced by 50%, relative to situation on DD/MM/YYYY => Achieved/Not Achieved

Consultant: One way to reduce the number of calls would be to have fewer customers.

Project Sponsor: That’s not funny. We mustn't do anything that drives people away!

Consultant: I'll add "Retain customers" to the list of goals. It may seem obvious, but it’s important to make the goals crystal clear. Going back to the Net Promoter score. How can we measure this and what do you want to achieve by increasing it?

Project Sponsor: We get quarterly NPS ratings. At the moment they're around 8%. I'd have to look up the exact number. Our competitors are typically above 10%. To achieve our revenue targets we need to get this number up to 15%.

Consultant: You mentioned you're under pressure to reduce cost. Will you tell me more about that?

Project Sponsor: Our cost of operations is vital to our profitability. If we reduce complaints, I expect our cost to go down, but I want to look into other ways we can reduce our costs. Reducing call center cost is one of my major objectives this year.

Consultant: How would you measure that cost?

Project Sponsor: Well, we can count the number of people working there. That's our biggest cost factor. We can look at the monthly OPEX report to get the full cost.


Identify More Goals andMore Measures

Stakeholder Goal Tests and MeasuresCustomer Operations Manager

Provide good customer service

50% reduction of customer complaints by next year


Increased NPS from 8% to 15%

Increase revenueRetain customersLow operations cost Reduced number of call

centre staff and call centre costs

Customer

Consultant: [Summarises contents of the Goal Table]Did I understand your goals correctly?

Project Sponsor: Yes, but there’s more. We're under pressure from the regulators. It’s come to the attention of the regulators that the porting process is too slow and fails frequently.

Consultant: If I understand correctly, you need to reduce the cycle time to port a number. Is that correct?

Project Sponsor: Yes. Now it can take as long as two days. To keep the regulators off our backs we need to bring this down to one day. And fast. Customer expectation is two hours, as that's what's being offered by most of our competitors. We expect the regulators to make this mandatory in the near feature, so we need to be ready to port numbers more quickly.

Consultant: How many complaints do you get about the speed of porting numbers?

Project Sponsor: It’s the second-largest reason for number porting complaints. We think that by offering this service as online self-service option we will speed things up a lot AND we'll be able to save on call centre costs.

Consultant: I see. We already have the decreased cycle time and cost reduction goals in the goal table. What else would the online self-service option provide? How does the customer benefit?

Project Sponsor: Well, the customer would benefit greatly from having those services available to use when and where they choose. It's much more convenient than calling our call centre. And our brand would benefit: we're in the communications and internet sector; we need to be seen to embrace the latest communication channels and technology.

Find the goals behind solutions requested by the stakeholders

What benefits will the solution bring to the customer, the CFO and the CEO?


Goals Identified So FarStakeholder Goal Tests and Measures


Provide good customer service 50% reduction of customer complaints by next year



Increase revenueRetain customersLow operations cost Reduced number of call centre

staff and call centre costs

Short cycle time to port number

Adhere to Regulator regulations

Consumer convenience and availability of services

Quality brandCustomer

4. Quantify the project sponsor’s goals with tests and measures


Goals Identified So FarStakeholder Goal Tests and Measures





Increase revenueRetain customersLow operations cost Reduced number of call centre

staff and call centre costs

Short cycle time to port number

Adhere to Regulator regulations


Quality brandCustomer


Quantified GoalsStakeholder Goal Tests and Measures





Increase revenue ???Retain customers ???Low operations cost Reduced number of call centre staff

and call centre costs

Short cycle time to port number Reduced from 2 days to 24 hours, eventually to 2 hours

Adhere to Regulator regulations Regulator directives met and no fines paid


Increased # of people making online transactions

Quality brand ???Customer

Use question marks to indicate missing information

Identify the stakeholders who have the information

Gather the missing information

5. Identify the customer(s)

Who uses the services and products we deliver?

Consultant: Who are the users of these services?

Project Sponsor: They’re our customers. Or to be more exact, there are two types of customers: Existing customers who leave us and want to port their number out. New customers who want to port their number in.

6. Identify the customer’s goals

Just like we did with the project sponsor

Consultant: What do these customers want?

Project Sponsor: They want to port their number, obviously.

Consultant: What’s the benefit of porting for the customer?

Project Sponsor: They can keep their existing number. That means their contacts can keep calling them without having to update the number. These contacts shouldn’t notice that the customer has changed provider.


Goals of the CustomerStakeholder Goal Tests and Measures

Existing Customer Remain contactable when porting out

New customer Remain contactable when porting in

7. Quantify the customer’s goals

Just like we did with the project sponsor


Quantified Customer goalsStakeholder Goal Tests and Measures

Existing Customer Remain contactable when porting out

No perceivable outage

New customer Remain contactable when porting in

No perceivable outage

Now we’ve got an initial Goal Table...

We have what we need to createour initial Business Value model


What have we done?

1. Set the context2. Identify the project sponsor 3. Identify the project sponsor’s goals4. Quantify the project sponsor’s goals5. Identify the customer(s)6. Identify the customer’s goals7. Quantify the customer’s goals

Exercise 1

Build a Business Value Model


Building a Business Value Model

• Work in groups per table• Use Post-Its to make model easy to change• When you have a question or an issue– Write it on a red Post-It– Continue working– Resolve issues and questions when we come

round to your table



1. Choose a small (4-6) number of measures– Balanced: financial, people, organisation

2. Identify relationships3. Build a model that you can use to:– Determine successful outcome– Steer the project

4. Add more measures if needed

Generic example

A B C

D

Organisation People Financial

For example

Unit Test coverage

# of Issues found by customer

Customer Satisfaction

Velocity Project CostUnit Test Quality

Organisation People Financial



1. Choose a small (4-6) number of measures– Balanced: financial, people, organisation

2. Identify relationships3. Build a model that you can use to:– Determine successful outcome– Steer the project

4. Add more measures if needed

Time’s up! 6 min

Present your model

A few examples of Business Value Models

Exercise 2

Improve your Business Value Model


Improving a Business Value Model

1. One person per table goes to the next table– To bring fresh perspective and ideas

2. Ensure we have indicators to– Determine successful outcome (late, lagging)– Steer the project (early, leading)

3. Identify constraints, things we can’t change– Regulations, goals of other projects, company values– How do you measure them?

4. Add constraints them to the model– How are they related to the goals?

For example

Unit Test coverage




LaggingLeading/LaggingLeading

For example

Unit Test coverage




LaggingLeading/LaggingLeading

Speed of ServiceMust integrate

with System XYZ


Improving a Business Value Model

1. One person per table goes to the next table– To bring fresh perspective and ideas

2. Ensure we have indicators to– Determine successful outcome (late, lagging)– Steer the project (early, leading)

3. Identify constraints, things we can’t change– Regulations, goals of other projects, company values– How do you measure them?

4. Add constraints them to the model– How are they related to the goals?Time’s up! 6 min

Present your model

A few examples of Business Value Models

Exercise 3

More stakeholders and goals


More stakeholders

• Who else is involved to provide porting in/out service to customers?

• What are their goals?• How do we know we’ve achieved them?• How does that impact our Business Value

Model?

Time’s up! 6 min

Customer Value Analysis™ in practice

The Logical Thinking Process

The Logical Thinking Process

Intermediate Objectives

Map

Current Reality Tree

Conflict Resolution

Diagram

Future Reality Tree

Prerequisite/Transition

TreeWhat is our goal?What are we missing?

Why don’t we have what we need?

What could be done to resolve the underlying fundamental conflict?

Would that work?What could possibly go wrong?

How do we get there?In small steps.

Using the Logical Thinking Process

Intermediate Objectives

Map

Current Reality Tree

Conflict Resolution

Diagram

Future Reality Tree

Prerequisite/Transition

Tree

Business Value Model

Stakeholder Goal Capabilities Tests and Measures

Risks

Plan

Context Diagram

Writing stories made easy

Stakeholder Goal Capability Test and measure

Risk

TO ACHIEVE ...

AS A ...

I NEED ...

IT’S DONE WHEN ...

TO NOT ACHIEVE ...

PASSES

I NEED ... Another capability

AS A... TO ACHIEVE... I NEED... I KNOW I GOTIT WHEN...

GOTCHAS

User Story Carpaccio

Goal Table Project Level StoryProject Level Story

Project Level StoryProject Level Story

Release Level Story

Release Level Story

Release Level Story

Release Level Story

Iteration Level Story








Kanban board

TODO BUSY RFT DONEIterationReleaseProject

Work in Progress limits

TODO BUSY RFT DONEIterationReleaseProject

Yeah-but, no-but, yeah-but!


Objections to Customer Value Analysis™

• “We’ve spent 6 months on analysis already”• “Business Value is impossible to measure”• “All stakeholders must be identified upfront”• “It’s too structured”• “This is waterfall analysis, it’s not agile”• “This is too hard”• “Doing this with the whole team is a waste of

time”

Why we do Customer Value Analysis™

The Startup Bank

Situation• It’s December 1999• “It has to be in java” (why?)• We have to build an online

bank• The launch press

conference is booked for end of February 2000

• We have 2 developers

Outcome• We launched on time• Full-featured frontend• Combination of manual and

automated processes• One country at first, then

expanded to Europe• All manual processes were

automated gradually as customer base grew

A Commercial Bank

Situation• Mythical belief in the value

of the project • Project attempted 3 times

previously• Estimated development

cost continued to go up during analysis

• Unclear project goals • Competing stakeholders

Outcome• Determined the validity of

the existing business case of the project

• Reduced the scope by 40% making it eligible for the existing program

The Phone Company

Situation• Already spent 2 months on

analysis• Identified 60 features• “We need web-based self-

service”• Reluctantly agreed to do a

few days of Customer Value Analysis™

Outcome• Only 10 out of those 60

features delivered value• Identified 4 new features

crucial to the success of the project

• 25% of the value could be delivered within one month; no need for a web application


Benefits of Customer Value Analysis™

Objection : “We’ve spent 6 months on analysis already”

Answer:“Given a project costing $1,000,000 a few days invested in Customer Value Analysis™ is a worthwhile investment”

Benefit:Reduced scope, clear and common goals, earlier delivery more than paid back the investment



Objection : “Business Value is impossible to measure”

Answer:“If it’s important, we’ll find a way to measure it. If it’s not important, why are we doing this?”

Benefit:We talk about value before cost; we have unambiguous goals and we see we’re getting closer



Objection : “All stakeholders must be identified upfront”

Answer:“Correct. By starting with the goals of the sponsor and the customer(s), we’ll discover everyone who needs to be involved”

Benefit:We don’t “forget” stakeholders.



Objection : “It’s too structured”

Answer:“Structure liberates rather than constrains creativity. The techniques provide all the right questions. The answers are still up to you.”

Benefit:Provided guidance and visibility into the analysis work. We don’t have to remember too much, the models show us what we don’t know yet.



Objection : “This is waterfall analysis, it’s not agile”

Answer:“We’ve found that this work reduces implementation time significantly and ensures that we identify what we really need”

Benefit:A day of analysis can cut weeks of implementation time. No more “It’s what I asked for”. Instead “Great! This is exactly what we need.”



Objection : “This is too hard”

Answer:“Let’s try it on (part of) one project, you’ll be surprised how much we’ll get done in a few days”

Benefit:The small steps make analysis work accessible to everyone involved in the project, so we can use the intelligence of the whole team



Objection : “Doing this with the whole team is a waste of time”

Answer:“We all have to understand the goal. The fastest way to do this is by building the model together”

Benefit:The whole team knows why they’re doing the project; developers and testers come up with unexpected product ideas


A Business Value Model is a Hypothesis

• The Business Value Model is one of many models we build. None of them are perfect.

• Our model is a hypothesis, what we think will happen.

• We re-evaluate and improve the model regularly based on feedback

• It’s not a static business case. We won’t be punished if we get it wrong.


Summary

• We build a Goal Table to understand who needs what and why they need it

• We build a Business Value Model to come to agreement on our definition of value

• We use the Business Value Model to prioritise the goals to be achieved

• We use the Business Value Model to know where we are, see whether we’re going in the right direction and know when we’ve arrived


Session Goals Revisited

Understand why we need to agree on Business Value

Show how to do Business Analysis in an Agile way Present a few techniques you can use right away Experience the process of creating a Business

Value ModelHelp you determine if your project is worth doing



The Agile Extension to the BABOK

• Business Analysis Body of Knowledge• International Institute of Business Analysts• Methodology-neutral• The Agile extension gives guidance on how to

perform business analysis on Agile projects• Open Space workshop: Thu 10:30

Introductions

NAYIMAWe make play work

www.emergn.com www.nayima.be

For courses and workshops on Customer Value Analysis™

http://www.emergn.com/

http://www.nayima.be/