1. Value Stream Mapping:
A Value Stream Map is a lean management tool that illustrates the flow of materials and information from supplier to customer. It focuses on identifying the value-adding activities in the process flow to remove waste. Here is a simplified example of how a process flow might look:
[Supplier]->[Product Owner]->[Development Team]->[Customer]
Each arrow corresponds to an activity or set of activities that add value to the product. By analyzing and streamlining these individual activities, the Scrum Product Owner can model the product’s value more efficiently.
2. Business Model Canvas:
The Business Model Canvas is another essential approach to modeling value. It is a strategic management and lean startup template for developing new or documenting existing business models. It visually depicts elements such as key partners, key activities, customer segments, value propositions, channels, relationships, cost structure, and revenue streams. By thoroughly examining these aspects, CSPOs can better understand the product’s value to the business and stakeholders.
II. Techniques to Measure Value
1. Net Present Value (NPV):
Net Present Value is a financial metric that is widely used in capital budgeting and investment planning. NPV measures the excess or shortfall of cash flows, discounted back to their present value, above the cost of funds. For a Scrum Product Owner, it can be used to assess the financial value of ongoing projects or product initiatives.
To calculate the NPV of a Scrum project, the Product Owner must first identify the future cash inflows and outflows generated by the project. These cash flows are then discounted back to their present values using a discount rate, which represents the potential returns if the invested capital were put to use elsewhere.
2. Return on Investment (ROI):
Return on Investment is another popular financial metric used for measuring the probability of gaining a return from an investment. It is calculated as a ratio of the profit from an investment to the cost of the investment.
The ROI can be applied to measure value in a Scrum environment by calculating the business value delivered per sprint, per release, or per feature. This can help a Scrum Product Owner prioritize features based on their return and make strategic decisions about the product backlog.
Irrespective of the technique applied, modeling and measuring value are crucial practices for any Scrum Product Owner. They ensure that the Scrum team’s efforts are continuously aligned with the business’s strategic objectives and the product delivers optimum value to the stakeholders.
Practice Test
Techniques for value modeling in Scrum include Relative Weighting and Cost of Delay.
- a) True
- b) False
Answer: a) True
Explanation: Relative Weighting and Cost of Delay are well-established techniques for value modeling, helping prioritize product backlog based on value.
Return on Investment (ROI) is a method to measure software value.
- a) True
- b) False
Answer: a) True
Explanation: ROI is a traditional business indicator used to understand the return gained from an investment, or to compare efficiencies of different investments.
The Kano model is useful for measuring value.
- a) True
- b) False
Answer: a) True
Explanation: The Kano model is a theory for product development and customer satisfaction, which classifies customer preferences into different categories, thus measuring value to the customer.
Which of the following are methods to model value in Scrum? (multiple select)
- a) Relative Weighting
- b) Cost of Delay
- c) Net Present Value
- d) Internal Rate of Return
Answer: a) Relative Weighting, b) Cost of Delay
Explanation: Both Relative Weighting and Cost of Delay are widely accepted methods to model value in Scrum.
Which of the following are methods to measure value in Scrum? (multiple select)
- a) Return on Investment
- b) Net Present Value
- c) Kano Model
- d) Pareto Analysis
Answer: a) Return on Investment, b) Net Present Value, c) Kano Model
Explanation: ROI, NPV and Kano Model are all methods to measure value in Scrum Project Management.
Net Present Value (NPV) is a method for value modeling.
- a) True
- b) False
Answer: b) False
Explanation: NPV is a method for value measurement, not modeling. It calculates the value of a series of future cash flows based on an assumed rate of discount.
NPV can be used to compare the profitability of different product features.
- a) True
- b) False
Answer: a) True
Explanation: NPV can rank the profitability of different features or projects, making it a valuable tool for prioritization.
Agile Modeling focuses on value modeling techniques.
- a) True
- b) False
Answer: b) False
Explanation: Agile Modeling focuses on effective practices for modeling and documentation in an agile software development.
Internal Rate of Return is a technique used for measuring value in Scrum.
- a) True
- b) False
Answer: b) False
Explanation: While IRR can be used in financial analyses, it is not a standard technique for measuring value in Scrum.
Cost of Delay can be used to prioritize features by their potential business value.
- a) True
- b) False
Answer: a) True
Explanation: Cost of Delay intimately links the timing of work with its associated value, proving beneficial to prioritize backlog items by business value.
The output from value modeling techniques doesn’t help in creating a roadmap for Scrum projects.
- a) True
- b) False
Answer: b) False
Explanation: Contrary to the statement, value modeling contributes crucial input for creating the product roadmap in Scrum projects.
Customer Journey Mapping is a technique for value modeling.
- a) True
- b) False
Answer: a) True
Explanation: Customer Journey Mapping understanding the product from the customers’ perspective and hence contributes to value modeling.
Techniques like Return on Investment and Net Present Value are used for value modeling.
- a) True
- b) False
Answer: b) False
Explanation: ROI and NPV are techniques meant for measuring value, not for modeling.
All forms of the Kano Model act as value measurement techniques.
- a) True
- b) False
Answer: a) True
Explanation: All forms of the Kano Model categorize customer preferences into different categories, assisting in value measurement.
The Relative Weighting method is a common technique used to model value in Scrum.
- a) True
- b) False
Answer: a) True
Explanation: Relative Weighting is a technique used to compare and prioritize items in the product backlog by assigning a value score and an effort score.
Interview Questions
What are two techniques the Product Owner could use to model value?
Techniques to model value include Cost of Delay (CoD) and Weighted Shortest Job First (WSJF).
Explain the Cost of Delay (CoD) technique for modeling value.
The Cost of Delay (CoD) technique aims to quantify the financial impact if the implementation of a feature or product is delayed, thus helping prioritize tasks that have the most significant financial impact if delayed.
What is the Weighted Shortest Job First (WSJF) technique?
The Weighted Shortest Job First (WSJF) technique is used in SAFe to prioritize jobs based on their cost of delay and job size. Jobs with a higher cost of delay and smaller size are prioritized.
Name at least two techniques to measure value.
Two techniques used to measure value are Net Present Value (NPV) and Return on Investment (ROI).
How does Net Present Value (NPV) measure value?
Net Present Value (NPV) measures the profitability of a project or investment by calculating the difference between the present value of cash inflows and the present value of cash outflows.
How does Return on Investment (ROI) measure value?
Return on Investment (ROI) measures the profitability of an investment by comparing the magnitude and timing of expected gains to the magnitude and timing of investment costs.
How do these techniques help an A-CSPO in decision-making?
These techniques can help an Advanced Certified Scrum Product Owner (A-CSPO) make data-driven decisions. They provide a quantitative method to prioritize, plan, and make investment decisions, thereby minimizing risks and optimizing ROI.
Is business value always monetary?
No, business value isn’t always monetary. It might also include intangible values like brand recognition, customer satisfaction, or strategic alignment.
How might the Cost of Delay (CoD) factor into prioritization of a product backlog?
Using CoD, items that would cost more when their delivery is delayed would get a higher priority in the product backlog.
How can ROI help determine the success of a Scrum project?
ROI can be used to measure the effectiveness of the project by comparing the benefits received, or value created, against the total costs of the project.
How is the Net Present Value (NPV) of a project calculated?
The NPV of a project is calculated as the present value of its cash inflows minus the present value of its cash outflows.
How can an A-CSPO use the Weighted Shortest Job First model?
An A-CSPO can use the WSJF model to prioritize features or items based on their value and size, and ensure that the most valuable and easy-to-implement features are developed first.
Who is responsible for the measurement and modeling of value in a Scrum team?
The Product Owner is primarily responsible for the measurement and modeling of value in a Scrum team.
What is the role of stakeholders in value modeling and measurement?
Stakeholders provide inputs, such as business requirements and priorities, that influence value modeling and measurement decisions.
Why is it important to verify value measurements in Scrum?
Verifying value measurements ensures that they accurately reflect the project’s objectives and provides a clear indicator of progress and success.
extutorials.com