Tuesday, October 11, 2016

How to Measure Value

Agile is about delivering value, so it is important to understand the value you are delivering within an iteration or release. However, I seen many teams that focus on how many story points they deliver but not really thinking about the value of those story points.

So are there ways to measure value? The answer is, of course there is. One way would be to use the Planning Poker approach, but instead of estimating the effort for each story you can estimate the value of the story. In this case, the team doing the work would include the product owner, any sponsored users, and other users or subject matter experts. Just as you would start with estimating effort, you would pick one feature or user story and assign it an arbitrary value, such as eight points. Then you would go through and assign values to each of the remaining features or user stories relative to that one.

From here, there are a couple more things you can do to refine your value measurement. One approach would be to divide the value of a story by the story estimate. For example if you had a three story point story with a value of three, you would have a feature of 1 value point/story point. Likewise if you had a one story point story with a value of three you would get a answer of three value points/story point, which would indicate that this would be a more valuable story based on the value per points.

Another approach would be to calculate the cost of each user story. If you have a team that is pretty stable you can estimate how much it cost to perform an iteration. You should also know your velocity, so it's a simple math equation to come up with your cost per points. So for example if you had a five person team and average cost per person of $200/hour, you work that out for a two-week iteration you're looking at $80,000. if your velocity is 50 points then your cost per store is $1600 so an eight point story would cost $12,800.

So these are just a couple ways in which you can measure the value of what you're delivering. You could do something as simple as the T-shirt sizing approach, where a story may be small, medium, large, or extra-large in value. In any case you should look at someway to ensure that you are measuring the value you are delivering and not just the effort being completed.

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