Concepts
A Certified Scrum Product Owner (CSPO) carries significant responsibility in the process of product development. One of the vital tasks a CSPO performs is evaluating the value of work performed, which influences their decision-making process and impacts the project’s success in terms of meeting the business objectives and delivering maximum value to the stakeholders. In this context, “value” generally refers to tangible or intangible gains achieved from the product like increased revenue, enhanced user experience, improved efficiency, or business transformation. Identifying and measuring this value can be a bit complex, but there are a variety of techniques that can be applied. Here are three primary techniques to measure value:
Business Value Points (BVP)
This technique involves the assignment of points to each product backlog based on their business value. Features that contribute the most towards achieving the business objective or providing direct benefits to the stakeholders are assigned more points. This aids in the prioritization of tasks for the team. A simple, comparative method may also be used where each item in the Product Backlog is compared to a baseline item and assigned relative points.
Customer Satisfaction KPIs
These index values help gauge the value a product delivers from the perspective of the end-users who utilize it. These Key Performance Indicators (KPIs) may be derived through user surveys, feedback mechanisms or actions like app ratings or net promoter scores. High scores would represent high value since these indicate a higher level of user acceptance, satisfaction, and dependency on the product.
Return on Investment (ROI)
This financial measure evaluates the economic return on a particular product or feature in contrast to the cost of developing it. The ROI calculation comprises of both tangible (like revenue or cost savings) and intangible (like customer satisfaction or brand value) benefits. Higher the ROI, higher is the value provided by the product or feature.
Let’s delve deeper with some examples
| Technique | Example |
|---|---|
| Business Value Points | A new feature in a software product that directly results in increased sales would be high on the business value points, while a smaller UI enhancement might score lower. |
| Customer Satisfaction KPIs | A food delivery app’s success would depend on customer satisfaction levels. This can be measured using a KPI like the Net Promoter Score (NPS), which captures customers’ willingness to recommend the app to others. |
| Return on Investment | If a business has spent $1,000,000 on developing a software feature and gained $1,500,000 in return as increased sales, the ROI would be a positive 50%, denoting a high value return. |
Each of the aforementioned techniques requires a specific set of skills and knowledge and have their own strengths and drawbacks. A CSPO must be adept at selecting, implementing, and interpreting the appropriate technique based on the nature of the product, business context, and the goals of the project. A combined approach involving multiple techniques can often provide a comprehensive understanding of value leading to better decision-making and enhanced product outcomes.
Answer the Questions in Comment Section
True or False: Cost-benefit analysis is a technique that can be used to measure value.
- True
- False
Answer: True
Explanation: Cost-benefit analysis is a process of comparing the costs and projected benefits of a project, product or decision to assess its value.
Which of the following are techniques for measuring value?
- a) Net Present Value
- b) Return on Investment
- c) Cost-benefit analysis
- d) User feedback
Answer: a, b, c
Explanation: Net Present Value, Return on Investment, and Cost-benefit analysis are recognized techniques for measuring value. While user feedback is invaluable in assessing user satisfaction, it doesn’t directly measure financial value.
True or False: A Scrum Product Owner doesn’t need to know different techniques to measure value.
- True
- False
Answer: False
Explanation: Part of a Scrum Product Owner’s role is to ensure the product delivers value. This necessitates understanding various techniques to accurately measure value.
Which technique of measuring value helps to understand the amount of cash inflow an investment will return after considering the cost of investment?
- a) Return on Investment
- b) Net Present Value
- c) Cost-Benefit Analysis
- d) Customer Satisfaction
Answer: a) Return on Investment
Explanation: Return on Investment (ROI) measures the gain or loss generated on an investment relative to the amount of money invested.
The technique that compares the value of a dollar today to the value of the same dollar in the future is known as:
- a) Net Present Value
- b) Return on Investment
- c) Cost-Benefit Analysis
- d) Market share gains
Answer: a) Net Present Value
Explanation: The Net Present Value (NPV) technique is used to estimate the profitability of potential investments.
True or False: Cost efficiency analysis is a technique used in Scrum to measure value.
- True
- False
Answer: False
Explanation: Cost efficiency analysis is not a recognized tool for measuring value in Scrum. Scrum uses techniques like ROI, NPV, and Cost-Benefit Analysis.
True or False: Single select questions are one of the techniques to measure value.
- True
- False
Answer: False
Explanation: Single select questions are not a technique to measure value, they are a type of survey question.
The scrum product owner primarily uses which of the following tools to assess the value of a product?
- a) User feedback
- b) Return on Investment
- c) Net Present Value
- d) Market share gains
Answer: b) Return on Investment
Explanation: Although all listed tools are useful in assessing aspects of a product, the direct financial value is best examined through the Return on Investment.
True or False: The ‘return on investment’ technique can be used to measure both financial and non-financial returns.
- True
- False
Answer: True
Explanation: Although traditionally used for financial returns, ROI can also indicate non-financial returns like customer satisfaction, market penetration, and other such metrics.
Which technique for measuring value includes subtracting the initial cost of a product from the benefits it provides?
- a) Net Present Value
- b) Return on Investment
- c) Cost-Benefit Analysis
- d) None of the above
Answer: c) Cost-Benefit Analysis
Explanation: Cost-Benefit Analysis involves comparing the costs and benefits of a decision, policy, or project, usually expressed in the form of a ratio.
Great post about measuring value in Scrum! Can anyone share some real-world techniques used in their projects?
I often use Customer Satisfaction Surveys to gauge value. It’s simple but effective.
We rely heavily on Net Promoter Score (NPS) in our Scrum framework. It helps us track the loyalty of our customers over time.
I use a combination of Value Stream Mapping and ROI analysis. It helps identify bottlenecks and areas where we can increase efficiency.
We implemented a feature usage tracking system. It helps us understand which features are actually being used by our customers.
Appreciate the detailed post!
Using OKRs (Objectives and Key Results) has been a game changer for my team.
I don’t think Customer Satisfaction Index is always reliable.