The importance of understanding value
Every company has many competing ideas on projects which need to be fulfilled in order to run successfully. Departments will usually get a budget and at times try to deliver as many items as possible, in order to say they have been completed. But are the correct items/functions/projects being delivered to really drive value to the customer and/or business?
In working in multiple companies over the years, I have seen many ways of deciding on priorities from who screams loudest to very formal detailed business plans being put forward explaining the rational behind the ask.
When prioritizing one key element we must understand is what value we are adding to the customer or the business by delivering the item.
Value statements are a great tool to clearly define the outcome of the item being delivered. One useful technique to really get stakeholders to think about value is writing SMART (Specific, Measurable, Achievable, Realistic and Timebound) objectives. Instead of writing “We will increase revenue” the new value statement will read “We will increase revenue of the whitening toothpaste product by 2% over the 12 months following implementation of a rotation pane on the toothpaste description page”.
While this seems like a relatively straightforward and logical tool, the fact is, some companies still do not follow this practice of clearly defining value and there are many reasons for this, which can include:
- Stakeholders or product owners may not be comfortable to stand over quantified data
- Stakeholders not believing in the idea but have been asked to progress the idea
- The data may not be available in the company easily enough for stakeholders to quantify
- A culture of blame, funding cuts or sidelining careers if the targets are not met
When value is not fully outlined and decisions are made based on feeling, this can lead to:
- Items being delivered which are not adding value
- Items being creating which are not required and could be culled causing waste
- Potentially higher support and maintenance costs for items not required
- Implementation costs of items not required
- Loss of customers/revenue by not implementing needed functionality
Furthermore, value needs to be defined from the outset in order to measure success/failure of the implementation after the time period stated in the objective. Without this measure there is no way to gauge if the item really added value.