Allan Kelly says that ideally, companies should put a dollar amount on each planned business decision. But pinning down financial value can be hard, and besides, there are many other factors to consider, such as sustainability and customer service. He looks at various ways to assess the business value of user stories.
Some years ago I worked with an airline that was writing some new booking pages for its website. Following good practice, the airline’s team tested the pages with sample users to see what they thought of the new design. On the whole the feedback was good, except one thing: The sample group of customers said the new pages made it harder to find the lowest price for a flight. The airline decided to go ahead with the new content anyway.
When the pages went live, naturally, the airline’s revenue went up. Customers were spending more money, but they might have been upset about that fact.
Ideally, I’d like to see companies put a dollar amount on each planned business decision, but to be fair, pinning down the financial value can be hard—especially in a corporate IT setting. And as this airline example highlights, it is not just a question of how much value is anticipated, but also how sustainable it is. One could argue that while the airline increased revenue in the short term, in time, customers would start to consider their flights more expensive and take their business elsewhere.
I want to look at ways to assess business value and some of the considerations to think about.
Calculating Business Value
The obvious way to put a business value on an agile user story is to consider what difference it will make and what financial benefit that will bring. Typically, we would expect new technology to either increase revenue or reduce costs.
Let’s consider the following story:
As a widget seller, I would like to sell my widgets online.
That might look easy, but some analysis is needed. For a start, how many widgets might we expect to sell online? That requires us to ask, do people buy widgets online? And if the answer is no, we need to ask, would people buy widgets online?
Once we get through these questions, suppose we determine that a hundred thousand people might buy widgets online. Then we need to ask what the selling price is likely to be. We might know what a widget sells for in a shop, but would people expect to pay less online?
When we eventually reach a figure, that breeds more questions, such as: If we sell widgets online, will we lose offline sales? This known as cannibalization: when one product or channel takes sales from another of your products or channels.
Answering these questions may well involve some guesswork, but herein lies another problem: Guesswork is open to questioning. If someone doesn’t like your answer, they can attack the guesses you made to get to it.