The Liberators
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The Liberators

Five Types Of Value

A simple model to better understand why and when something is valuable to your team and its stakeholders (in commercial organizations)

Thinking about what is valuable, and why, isn’t easy. Here, a Scrum Team and stakeholders explore what makes their product valuable with an exercise called “design the box

Maximizing Value In Scrum

In the Scrum framework, it is important for Scrum Teams to deliver a valuable Increment as frequently as they can — at least once per Sprint. Each Increment brings the team and its stakeholders one step closer to a valuable Product Goal. Without this, it is difficult to learn about what else is needed and to reduce the risk of complex work. The Product Owner is responsible for maximizing the value of the work done by the developers. While that sounds like a great idea, what does that actually mean in the real world?

  • Should all the work that your team delivers be immediately valuable to the stakeholders? Or can there be some delay?
  • What does “maximizing value” mean in terms of behavior and decisions that a Scrum Team makes?
  • How does the Product Goal inform what is valuable?
  • How does a Scrum Team decide which items on the Product Backlog are more valuable than others? What do they base these decisions on?
  • Whose perspective do you take when deciding what has “value”?

Value & Stakeholders

Whenever the Scrum framework talks about “value”, it refers to transactions between the Scrum Team and its stakeholders. In other words, something can only be valuable when it is delivered to and validated by stakeholders — until then any value is purely hypothetical.

“ This also highlights one of the challenges that Scrum Teams [ …] often face. Their actual stakeholders are often hidden behind layers of organizational fat, the question of what is valuable is often ignored altogether, and thus the focus shifts to getting as much work done as possible”

Value & Longevity

This perspective on the transactions between stakeholders and Scrum Teams also draws attention to the sustainability of future transactions. After all, if a Scrum Team gives all their work away for free they, or their product, won’t be around for long. Similarly, the budget probably doesn’t allow a team to answer any potential need from stakeholders. This is obviously more of a concern for stakeholders that invest in the development of the product (e.g. investors or the organization that pays the salaries of the Scrum Team) than for those primarily using it. But ultimately, both groups benefit from sustainable development.

“This perspective on longevity also explains why the 2020 Scrum Guide formalizes a singular Product Goal to bring focus to the development over a large number of Sprints.”

Now all these considerations are still abstract. It will not help us when we get into the nitty-gritty details of setting up a Product Backlog and determining the business value of every item on it. How you can determine if something on the Product Backlog is “the right stuff” or “the wrong stuff”?

Five Types Of Value

With this in mind (stakeholders & longevity) in mind, we went ahead and analyzed the Product Backlogs for (commercial) products we have developed with Scrum Teams. We categorized the items into separate types of value and ended up with five that seem to describe most cases quite well. We’ll discuss these in no particular order below.

Download a high-resolution PDF of this model for free here

Commercial Value

Commercial value is the most direct type of value and consists of all the items on the Product Backlog that directly generate revenue for the organization that develops the product. When all other things are kept equal, the work would result in a net profit.

“The key questions to ask here is: ‘(With the Product Goal in mind) How does this item increase our revenue or profit?’”

Efficiency Value

Not all items on Product Backlog will generate revenue. But items can also influence profit directly by decreasing the costs of production, maintenance, and delivery. These are the items that represent work that simplifies, automates, reduces, or smoothens other work that happens for the product; it makes other work more efficient. In economic terms, these are the items that improve your cost efficiency by spending less money for the same amount of value that is delivered to stakeholders. Or, if you’re not a commercial venture, how much time it saves you. This is efficiency value.

“For each item, the key question to ask is ‘(With the Product Goal in mind) how does this item save us money or time?’

Market Value

A product is only as successful as the number of potential users and customers that is aware of it. More often than not, product development involves a lot of work to increase this awareness, to move into new markets, or to distinguish from competing products. This work represents market value.

“For each item, the key question to ask is ‘(With the Product Goal in mind) how does this item allow us to attract more users or customers?’”.

Customer Value

Even when your product is generating revenue, has high cost-efficiency, and is well known to users, it is still hard to be successful when customers don’t stick around or switch to a competitor the first opportunity they get. So there is value in work that makes your product more useful and valuable to its customers. This effectively increases the “stickiness” of your product, as Eric Ries calls it in The Lean Startup. This is customer value.

“For each item, the key question to ask here is ‘(With the Product Goal in mind) how does this item increase the likelihood that a customer continues to use our product?’

Future value

Finally, there is inevitably going to be some work for your product that doesn’t deliver any clear kind of value upon completion but might cause huge problems or significant costs in the (near) future when it isn’t done. This is future value.

One of the risks of future value is that all time is spent on something that could be valuable in the future, without considering what is valuable right now

“For each item, the key question to ask here is ‘(With the Product Goal in mind) how does this item save us money or time in the future?’”

What about compliance?

When we first shared this taxonomy, one of the most common questions was how to deal with compliance with existing regulations, protocols, and certifications. Shouldn’t “Compliance Value” be its own type, as some suggested?

Start A Conversation About Value

The taxonomy we propose here is certainly not complete. The various types overlap in several ways, and some items may not fall clearly into any type — and still be valuable.

Start a conversation about what types of value appear on your Product Backlog. For example, the Liberating Structure User Experience Fishbowl can work for that

“After all, how does a Product Owner maximize the value of the work done by the Scrum Team by keeping items around that are seemingly non-valuable?”

We hope that this post inspired you to start a conversation around value with your stakeholders and to make purposeful decisions about what to keep on your Product Backlog and what to discard.

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Christiaan Verwijs

I liberate teams & organizations from de-humanizing, ineffective ways of organizing work. Passionate developer, organizational psychologist, and Scrum Master.