Concepts
Modeling value and measuring value are two critical elements in product ownership, and they are even more critical when you’re aiming to attain the level of an Advanced Certified Scrum Product Owner (A-CSPO). Understanding the multiple techniques available for these crucial steps equips you with the ability to choose the most applicable and effective methods for any given project or product.
Techniques to Model Value:
1. Customer Journey Mapping
Customer Journey Mapping involves creating a visual representation of the steps a customer goes through when interacting with your company, product, or service. It allows product owners to understand customer needs, pain points, and the overall customer experience, which can then inform the product development process.
Example: A mobile app company may map out a user’s journey starting from app discovery, download, registration, use, problem/failure occurrences, to deletion or retention. The insights derived could be critical in making app enhancements that drive user retention.
2. Value Stream Mapping
Value Stream Mapping is a lean-management method for analyzing the current state and subsequently designing a future state for the series of events that take a product or service from inception through to the customer. This technique involves identifying every step in a process sequence and evaluating it for value.
Example: A manufacturing company may use value stream mapping to identify all necessary steps in the production of a product, from raw materials to final shipment, and then work to eliminate steps that do not provide value.
Techniques to Measure Value:
1. Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a simple, powerful tool with which to measure customer satisfaction with a product. The score is derived by asking customers one simple question: “On a scale of 0-10, how likely are you to recommend our product/service to a friend or colleague?” Depending on their scores, customers are categorized as Promoters (9-10), Passives (7-8), or Detractors (0-6). The Net Promoter Score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.
Example: If a software company finds that they have more detractors than promoters, it implies that there is a need to improve their product to increase customer satisfaction.
2. Return On Investment (ROI)
Return on Investment (ROI) is a widely used profitability ratio that can measure the likelihood of gaining a return from an investment. It is calculated by dividing the net profit by the cost of investment, the result is expressed as a percentage or a ratio.
Example: If a company invests $10,000 in a new marketing campaign and sees an increase in revenue of $15,000 as a result, the ROI of the campaign would be 50%.
Both modeling and measuring value are integral aspects of product management, and mastering different techniques provides a robust toolkit for an Advanced Certified Scrum Product Owner (A-CSPO). These models and metrics not only help in strategizing and making informed decisions but also effectively communicate the product’s value to stakeholders.
Answer the Questions in Comment Section
True or False: Value modeling and value measurement often refer to the same process.
- True
- False
Answer: False
Explanation: While they both involve estimating and assessing value, value modeling is the process of estimating potential benefits of development projects often using customer feedback and business objectives. In contrast, value measurement is determining the actual benefits and impact after the project is complete.
In the context of Scrum, which of the following are recognized techniques for value modeling? (Choose two)
- A. Profit Analysis
- B. Cost of Delay
- C. Earned Value Analysis
- D. Cost-Benefit Analysis
Answer: B. Cost of Delay, D. Cost-Benefit Analysis
Explanation: Cost of Delay is a technique often used in Scrum to determine the value of delivering a project now versus at a later date. Cost-Benefit Analysis weighs the potential benefits against the potential costs associated with a project.
In Scrum, what is the purpose of using value modeling and value measurement?
- A. To justify the cost of a project
- B. To assign tasks to team members
- C. To prioritize the product backlog
- D. To track project timelines
Answer: C. To prioritize the product backlog
Explanation: Value modeling and value measurement are used in Scrum to estimate the comparative value of different potential projects. This information serves to prioritize items in the product backlog.
Which methods are most commonly used to measure value in Scrum? (Choose two):
- A. Earned Value Analysis
- B. Net Present Value
- C. Gantt Charts
- D. Burndown Charts
Answer: A. Earned Value Analysis, B. Net Present Value
Explanation: Earned Value Analysis and Net Present Value are helpful methods for measuring the value of features delivered. Gantt and Burndown charts are tools used for tracking project progress rather than measuring value.
True or False: The Cost-Benefit Analysis technique, which is a method of value modeling, does not require estimation of the product’s future benefits.
- True
- False
Answer: False
Explanation: Cost-Benefit Analysis requires one to estimate both the cost and benefits, including potential future benefits, associated with a project to identify net value.
The “Cost of Delay” and “Weighted Shortest Job First (WSJF)” are 2 famous techniques used in Agile for what?
- A. Value Modeling
- B. Value Measurement
- C. Both Value Modeling and Measurement
- D. None of the above
Answer: A. Value Modeling
Explanation: Both these techniques are primarily used to estimate or model the value of different features/ projects before they are developed.
True or False: Net Present Value (NPV) is a technique used for value measurement and not for value modeling in Scrum.
- True
- False
Answer: True
Explanation: NPV measures the value of a feature/project by considering the present value of its future returns. It’s a value measurement technique rather than a value modelling one.
What is the primary purpose of the Earned Value Analysis technique in Scrum?
- A. Estimating the potential value of features
- B. Determining the price of the product
- C. Measuring the actual value of delivered features
- D. None of the above
Answer: C. Measuring the actual value of delivered features
Explanation: Earned Value Analysis is a value measurement technique. It helps measure the actual value of the features delivered based on what has been completed within a certain period.
Value modeling helps in deciding:
- A. What needs to be built
- B. How it should be built
- C. When it should be built
- D. Where it should be built
Answer: A. What needs to be built
Explanation: Value modeling helps in determining what should be built based on the estimated or modeled value of different features or projects.
Value measurement techniques in Scrum are mainly focused on:
- A. Forecasting the cost of future projects
- B. Assessing the market competition
- C. Measuring the actual value delivered
- D. Estimating potential profits
Answer: C. Measuring the actual value delivered
Explanation: While value measurement can contribute to future forecasts and estimations, its primary focus is on assessing the value that has already been delivered by the completed features/projects.
Great blog post! Modeling value is crucial for any Scrum Product Owner. What techniques do you recommend?
I understand that story mapping and impact mapping are good techniques to model value. Can anyone elaborate on how effective they are?
Story mapping helps visualize the whole user experience, allowing you to prioritize and deliver increments of value effectively. Impact mapping aligns your product decisions with broader business goals, ensuring that you focus on high-impact features.
Agreed. Story mapping also helps in engaging stakeholders by making the product backlog more tangible and easier to understand.
Can someone clarify the difference between value stream mapping and customer journey mapping?
Value stream mapping focuses on identifying and eliminating waste in the process to enhance value delivery. Customer journey mapping, on the other hand, maps out the entire customer experience with the product, identifying pain points and opportunities for improvement.
Yes, value stream mapping is more process-oriented, while customer journey mapping is more user-centric.
How effective is ROI (Return on Investment) for measuring value?
ROI is quite effective as it quantifies the financial return of a project. However, it might not capture other qualitative aspects like customer satisfaction or market impact.
Don’t forget other metrics like NPS (Net Promoter Score) and customer lifetime value which capture broader aspects of value.
I usually find WSJF (Weighted Shortest Job First) an excellent technique for prioritizing based on value. Anyone else using it?
Yes, WSJF helps prioritize features based on cost of delay and job size, ensuring you deliver high-value features sooner.
WSJF is especially useful in SAFe (Scaled Agile Framework) environments where prioritizing large backlogs is critical.
Thanks for the explanation. This has been very helpful!
Appreciate the blog post. Very insightful!
One technique for measuring value I use often is customer satisfaction surveys. They give qualitative feedback that’s invaluable.
True, customer satisfaction surveys give direct insights from the users which can guide future product improvements.