Reflections on The Art of Business Value

The Situation

Often teams and leaders don’t work from a common understanding of business value. Without aligning to what is valuable, individuals will have an impaired ability to make trade-off decisions such as “Where should we focus our finite resources and attention”, and “What does good look like? And for whom?”.

Too often we don’t think in business value terms. We’re simply here to get the job done and move onto the next assignment or project. There’s a keenness to show output – the busy work which demonstrates effort and speed.

However, it’s important to pause and ask “Why is this project more important than these other projects? Who is it for? What’s the source of our confidence that it’ll benefit them?”

Business Value is elusive

The Art of Business Value. A 2016 book by Mark Schwartz

The Art of Business Value, by Mark Schwartz, helps overcome the lack of understanding of what business value is. With refreshing wit and insight, Schwartz challenges the assumptions of many, such as those in leadership, financial accounting and within the agile community. He offers sound guidance that’ll help many determine the elusive meaning of business value that’s contextual to their organisation.

The book explains that when we consider business value we often turn to financial accounting measures such as Return On Investment or Net Present Value. Schwartz states such measures tie poorly to strategies and don’t sufficiently factor-in risk and uncertainty. Neither do these short-term measures do well at accounting for the inherent value locked-up in enterprise infrastructure and the business agility that such assets should enable.

Schwartz says that business value can be hidden in an organisation’s rules and processes. So rather than disregard bureaucracy, we should examine it to discover the values held within an organisation. If we consider bureaucracy as a product of institutional memory, its rules and processes can become a rich source to discover what an organisation values.

If we consider bureaucracy as a product of institutional memory, its rules and processes can become a rich source to discover what an organisation values.

The book also unpicks the thorny issue of who should be charged with establishing business value versus those who execute and deliver that value.

What is Business Value

Schwartz defines business value as a hypothesis held by the organization’s leadership as to what will best accomplish the organization’s ultimate goals or desired outcomes.

This definition recognises firstly that business value is not the same for all organisations, secondly that it cannot be boiled down to one measure, and thirdly determining business value necessitates a journey of discovery, dialogue and collaboration across many business areas.

Introducing Business Value thinking

With my support, many of my clients have taken such a journey. This has often started with a leadership envisioning workshop – an approach which sets out the organisation’s vision and which creates an open debate about the worthiness of strategic initiatives.

With such approaches leaders create a mindset and process which shifts the conversation away from endless horse-trading and towards organisational learning through iterative execution and review.

In a dynamic and uncertain world, the approaches I’ve shared and the thinking conveyed in The Art of Business Value will create a common understanding of business value. Doing so enables teams and leaders to align on what’s valuable and create a responsive organisation.

Conclusion

With The Art of Business Value, in a little over a hundred pages, Mark Schwartz has done a fantastic job to help challenge convention and offer guidance that’ll help our organisations and clients define what it values and achieve success.

Workshop: Wardley Mapping

This workshop introduces Wardley Mapping as a technique to understand the chain of components an organisation needs to serve user needs. It creates situational awareness by mapping the maturity of each component, and the visibility of the component to the user. It allowing organisations to better strategise and improve their effectiveness and competitiveness.

The workshop can be delivered in 60 to 120 minutes. It’s team-based and can be run for any number of teams.

Slidedeck

photos from workshops

Thank you

Thank you to Philippe Guenet for working with me in developing the workshop.

Wardley Mapping is conceived by and is kindly shared by Simon Wardley.

Envisioning workshop: Co-create shared Vision and Strategies

The envisioning workshop is a group facilitation activity which:

  • Co-creates a shared business vision to unite behind
  • Identifies and prioritises strategies which are faithful to the vision
  • Generates the momentum to test and execute the strategic objectives

It helps ensure the co-created vision, strategic alignment and execution are in keeping with the elements described in Starting an Engagement.

Setup and Agenda

Participants should be the leadership team, stakeholders and key representatives from the execution team (aka delivery team). Ideally, there should be between five and nine participants, plus the workshop facilitator(s).

Duration: Typically 3-4 hours

Agenda

  1. Co-creation of the vision statement
  2. Identify measures of success
  3. Brainstorm strategies which will help deliver the vision
  4. Prioritise strategies
  5. Setup cadence and move into execution

Co-creation of the vision statement

To gain alignment it’s important that all participants co-create the vision. The vision describes an ambitious and motivational future-state for the business. This vision is written as a vision statement, which has the following qualities:

  • Succinct – one or two sentences
  • Visionary – Drives motivation to create a beneficial future-state
  • Works on the team’s behalf – Help to communicate and gain alignment across the business
  • Aligns the team with their stakeholders
  • Easy for everyone in the business to understand
  • Scoped – removes any erroneous activities such as pet projects

To move with velocity to drive profitable growth and become an even better McDonald’s serving more customers delicious food each day around the world.

McDonald’s Vision Statement

We’ll save money by eliminating impediments to deliver a frictionless customer experience, which empowers our front-of-house colleagues.

A Vision Statement created by a team in a FTSE 100 company

Identify measures of success

Brainstorm and agree on three or four measures of success. These ensure the right benefits, behavioural changes and consequences will be achieved which will support the vision.

Some examples of measures of success:

  • Reduce the cost to serve
  • Increase customer retention
  • Increase customer satisfaction
  • Increase incremental sales
  • Reduce carbon emissions across the vehicle fleet

Measures of success should be found within the vision statement. The following measures of success are implied in the McDonald’s vision statement:

  • Profit growth
  • Customer growth
  • Customer satisfaction
  • Global scope

Brainstorm strategies which will help deliver the vision

Now facilitate the participants to brainstorm a number of strategies which will meet some or all of the measures of success, which they believe will help to fulfil the vision.

If the vision is transformational, encourage the creation of strategies which will test long-held assumptions.

Participants can write their strategies individually or in pairs. Each strategy idea should be written on post-it notes. Once participants have written a few each, remove any which the participants agree are duplicates.

A strategy is something which gives consistency over time and contains the essence of how you’re going to be different

Gary Hamel’s definition of strategy

Prioritise strategies

These strategies should now be ordered relative to each other. They should be ordered by their degree of perceived value towards achieving the vision, and by the perceived complexity of achieving the strategy.

There are a number of ways to understand and measure complexity. For example, consider Liz Keogh’s Estimating Complexity and my RUDE technique.

This stage of the workshop creates a spread of strategies where the following can be identified and discussed:

  1. High-value strategies which are likely to have little complexity to deliver
  2. High-value strategies which are complex to deliver
  3. Low-value strategies which have little complexity to deliver
  4. Low-value strategies which are complex to deliver

Participants should then reflect on the distribution of strategies, and be encouraged to debate, modify, reposition, and possibly remove strategies. This helps the participants create an ordered backlog of strategies.

Setup cadence and move into execution

Since each strategy has a degree of uncertainty, each strategy should be treated as a hypothesis to be proven or disproven through rapid experiments. Therefore, following the workshop, with close support of their leaders and stakeholders, execution teams should test and learn whether the strategies can be achieved.

These strategies should be tested through the innovations, products and services built by the execution teams. A Lean Startup approach should be employed utilising concepts such as the Minimum Viable Product. In partnership with the workshop participants, teams should be disciplined and ruthless in discontinuing ideas which don’t meet the strategic objectives.

A possible set of evaluation criteria can be the one described by the Ash Maurya:

  • Desirability: The innovation, product or service solves a problem for the beneficiaries of the product or service
  • Viability: The innovation, product or service fulfils its strategic objective
  • Feasible: The innovation, product or service can be built and sustained
Ash Maurya (leanstack.com)

Another set of criteria could be testing for problem-solution fit and product-market fit.

A final stage of the workshop is for the participants to agree on how to brief and support execution teams to address two or three strategies from the top of the strategy backlog.

The continuation of existing strategies, innovations, products and services should be judged against their alignment to the vision and its measures of success.

A pivot is a change in strategy without a change in vision

Eric Ries

A cadence structure should be agreed and set-up for the participants to regularly meet, review and adjust the strategic fit to the vision. This should be done in union with the execution teams.

To ensure on-going alignment and support for execution teams, execution teams should be encouraged to make use of visual management techniques which demonstrates how their current and future work is testing the agreed strategies. The Cone-shaped Backlog is one such visual management technique.

The cone-shaped backlog ensures alignment to the vision, strategies and measures of success

The Cone-shaped Backlog

Here’s an approach I’ve found successful when helping teams ensure their backlog supports optionality, handles uncertainty and continuously adjusts so their goals and strategies are aligned to their vision.

A backlog should have these qualities

The backlog is made-up of backlog items. Each item represents a business goal, which when delivered by the team, will provide a beneficial outcome to the business and its customers/stakeholders.

Qualities of the backlog:

  • Easy to update by the product owner
  • Should be available to everyone in the business
  • Shows the backlog items for the next sprint
  • Conveys a vision of the future with a tangible path to the present
  • Reflects vagueness and options
    • If a distant backlog item is too vague to describe in words, consider drawing a picture, as shown in the photo below
  • Self-explanatory to anyone in the business

The cone-shaped

I often encourage teams to visualise the backlog in a cone-shape in this manner:

  • The neck of the cone shows the current sprint goals
  • The widest point of the cone shows the furthest goals which may be months or years from now.
  • The centre of the cone shows the goals for the intervening time periods. This area can be divided into sprints, months, quarters and half-year intervals.
Backlog visualised as a cone, like the cone-of-uncertainty

Reason for the cone-shape

  • It reflects the cone of uncertainty, where the further out the team considers, the less certain they are of the future environment.
  • The narrow neck of the cone reflects the fact the team can only sustainably deliver a small number of goals. Invariably there is more demand than the team can supply, so the team should gradually constrain the number of goals as the time nears the current sprint.
  • The further into the future, the more the team can consider a wide number of options. This optionality allows the team to consider many possibilities and scenarios without having to commit earlier than necessary. However, as time draws nearer, and as the cone gets narrower, the team will need to reduce the number of options based on the insights they have gathered.

Additional information which supports the backlog

As shown in the photo above, to enable continuous alignment across the business, there is additional information I advise teams to use:

  • Vision Statement: This is a short easy-to-understand statement which describes what the team intends to achieve. It’s written by the team, with their sponsor and stakeholders. The vision statement ensures alignment for the team with those they serve and with those whom the team may rely upon.
  • Strategies: These are the current set of approaches the team have reasonable confidence in that, if delivered successfully, will help fulfil the vision statement.
  • KPIs: These Key Performance Indicators are a small selection of measures which indicate whether the team’s strategies and sprint goals are achieving the team’s vision.
  • Epics start and end dates: Epics are goals which span more than one sprint. On the backlog, the likely start time of an epic is positioned with a blue post-it note; the likely end time is positioned with a pink post-it note.

Further Reading

Business Agility

Increasing your organisation’s competitiveness

Business Agility is a competitive capability to rapidly sense and respond to change with the right business initiatives that will benefit the organisation and its customers.

The following are prerequisite to enabling business agility:

  • Gain an awareness of the threats and opportunities from market, social, technological changes
  • Use the Envisioning workshop to close the gap between vision and execution.
  • Create an ambidextrous organisation. Create a flow of initiatives which balances these focuses: 1) continuously improve current offerings 2) retire non-viable offerings 3) innovate new offerings
  • Determine which initiatives provide a strategic fit with the vision
  • Mindset and ways of working. Push authority to individuals by encouraging them to demonstrate greater strategic clarity and competency
  • Co-evolve ways of working to reduce the delay between alignment effort, execution and ROI
  • Create light-weight governance which removes non-value add activities and reimagines the role of the PMO, HR, finance and the role of sponsors

Resource to download, print and share

Presentation slides

Contact me (dean@latchana.co.uk) if you’d like this presented in your organisation or business community.