Evaluating product options and capabilities is an integral part of the business analysis process. In preparation for the PMI Professional in Business Analysis (PMI-PBA) examination, it is essential to grasp the subtleties of decision-making and valuation techniques used to determine which requirements are accepted, deferred, or rejected.
1. Requirement Evaluation:
Requirement evaluation is a process that helps determine the importance and prioritization of every requirement. This process takes into consideration the project’s scope, stakeholders’ expectations, available resources and the operational constraints. The Requirements Traceability Matrix (RTM) can be a helpful tool to track requirements throughout the project lifecycle. The RTM usually includes:
- Requirement ID and description
- Requirement’s source (stakeholder or document)
- Requirement’s status (accepted, deferred, or rejected)
- Requirement’s priority (high, medium, low)
Let’s examine three techniques that can be used for requirement evaluation: MoSCoW analysis, Decision Analysis, and Monetized Net Present Value.
2. MoSCoW Analysis:
MoSCoW stands for Must have, Should have, Could have, and Won’t have. This model helps prioritize the requirements in each category.
- Must have: These are the non-negotiable requirements that the product cannot function without.
- Should have: These requirements are important but not vital. Their absence won’t affect the basic functioning of the product.
- Could have: These are desirable requirements but not necessary. They can be implemented if the budget and time permits.
- Will not have: These are the requirements that have been deemed as not feasible and are not part of the current release or iteration.
3. Decision Analysis:
Decision analysis is a systematic, quantitative, and visual approach to address and inform strategic decisions. Decision trees and decision tables commonly represent this.
A decision tree is a graphical representation of possible solutions to a decision based on certain conditions. It helps determine a strategy most likely to reach a goal. A decision table is a matrix representation of the logic of a decision. Each row represents a unique combination of conditions, resulting in corresponding actions.
4. Monetized Net Present Value:
This approach compares the estimated monetized benefits and costs of an option over time to aid decision-making. The time value of money is considered, with future cash flows being discounted back to their present-day values. An option offering the highest net present value (NPV), or the most significant difference between benefits and costs, would generally be selected.
5. Decision-making:
These techniques need to be complemented by effective decision-making. Consider techniques like consensus, voting (majority, supermajority, unanimity), or decision authority. Consensus refers to a decision everyone agrees on, voting involves a majority decision, while the latter refers to delegating the decision to a single authority.
Conclusion
In conclusion, successful evaluation of product options and capabilities involves a combination of well-defined requirements, proper valuation techniques, and decisive decision-making. Utilizing techniques like MoSCoW analysis, Decision Analysis, and the calculation of Monetized Net Present value, will not only help pass your PMI-PBA exam but will also equip you with the tools necessary for effective business analysis and successful project implementation.
Practice Test
True/False: In business analysis, the evaluation of product options and capabilities is unnecessary.
- True
- False
Answer: False
Explanation: The evaluation of product options and capabilities by using decision-making and valuation techniques allows you to decide which requirements are accepted, deferred, or rejected.
During the process of evaluating product options, the accepted requirements are those that:
- A. Have the least cost.
- B. Are the most feasible.
- C. Meet the specified criteria.
- D. Have the most features.
Answer: C. Meet the specified criteria.
Explanation: Accepted requirements are those that meet the specified criteria after a thorough evaluation of different product options.
What is a critical factor in business requirement acceptance?
- A. The personal interest of the project manager.
- B. The opinions of the project team.
- C. The cost of the product.
- D. The alignment with business goals.
Answer: D. The alignment with business goals.
Explanation: Business requirement acceptance is strongly tied to how well the requirement aligns with the overall business goals.
True/False: Deferred requirements are those that will never be implemented.
- True
- False
Answer: False
Explanation: Deferred requirements are simply those that cannot be implemented currently due to factors such as time, cost, or complexity but may be revisited in the future.
True/False: Rejected requirements are generally those that are too costly to implement.
- True
- False
Answer: False
Explanation: While cost can be a factor, requirements are generally rejected because they do not meet specified criteria or align with business objectives.
Which of the following valuation techniques can be used to evaluate product options?
- A. Net Present Value
- B. Return on Investment
- C. Cost-Benefit Analysis
- D. All of the above
Answer: D. All of the above
Explanation: All of these valuation techniques can be used to evaluate product options and their associated requirements.
Who should be involved in the decision-making process when evaluating product options?
- A. Only the project manager.
- B. Only the business analyst.
- C. Key stakeholders.
- D. Only the project team.
Answer: C. Key stakeholders.
Explanation: While others certainly play a role, key stakeholders should be central to the decision-making process as they have a vested interest in the project outcome.
True/False: The decision to accept, defer or reject a requirement is final and cannot be changed in future.
- True
- False
Answer: False
Explanation: As the project develops and changes, so may the decisions regarding particular requirements.
In the event a decision is made to defer a requirement, which of the following steps should not be taken?
- A. Immediate implementation of the requirement
- B. Documentation of the decision
- C. Communication to relevant parties
- D. None of the above
Answer: A. Immediate implementation of the requirement
Explanation: A deferred requirement implies that implementation has been postponed for the time being.
True/False: Cost is the only major factor in determining whether a requirement is accepted, deferred, or rejected.
- True
- False
Answer: False
Explanation: Cost is one of the factors but not the only one. Other considerations may include risk, time, business need, stakeholder preferences, among others.
Interview Questions
What is the first step in evaluating product options and capabilities for decision-making and valuation techniques?
The first step in evaluating product options and capabilities is understanding the project requirements. This process can involve gathering data from numerous sources such as customer feedback, stakeholder input, and market analysis.
What are some of the decision-making techniques used to evaluate product options and capabilities?
Some of the decision-making techniques used to evaluate product options and capabilities include cost-benefit analysis, decision tree analysis, and multi criteria decision analysis.
How does a cost-benefit analysis aid in the evaluation of product options?
Cost-benefit analysis is a quantitative technique that compares the anticipated costs of a potential action against its expected benefits. This helps determine whether a product option will provide a positive return on investment.
How does a decision tree analysis aid in the evaluation process?
A decision tree analysis graphically represents a series of decisions and their possible outcomes. This allows decision-makers to assess potential risks and rewards and make informed decisions.
What role does multi-criteria decision analysis play in evaluating product options?
Multi-criteria decision analysis is a method that helps assess multiple conflicting criteria when examining potential options. It helps organizations choose the most suitable option amongst several possibilities.
How is the prioritization of requirements carried out in the decision-making process?
Prioritization of requirements is generally done based on their impact on the project’s objectives, risk, cost, schedule, and benefits. Tools like the MoSCoW prioritization technique and the QFD matrix are often used.
What does the acronym MoSCoW stand for in prioritizing project requirements?
MoSCoW stands for Must have, Should have, Could have, and Would like but won’t have. It’s a technique for prioritizing the project requirements in a descending order of importance.
How do you determine which product requirement to defer?
The decision to defer a product requirement often depends on its priority, costs, benefits, and the resources available. A low-priority requirement that has a high cost and offers little benefit might be deferred.
When might a project requirement be rejected?
A project requirement might be rejected if it is determined that it does not contribute to the project’s objectives, if it conflicts with other requirements, or if its cost outweighs its benefits.
How can requirements traceability help with the decision-making process?
Requirements traceability helps track the origin and evolution of each requirement. This can assist in identifying and understanding the implications of changing or omitting a requirement, aiding in decision-making.
What are some techniques for valuing products or features in the context of project management?
Some techniques for valuing products or features include Return on Investment (ROI), Net Present Value (NPV), and Internal Rate of Return (IRR).
How does Return on Investment (ROI) contribute to the decision-making process?
ROI provides a ratio of the profit or loss from an investment relative to its cost. This information can be instrumental in decision-making by helping to identify the most economically viable options.
Can Stakeholder analysis assist in the decision-making process?
Yes, stakeholder analysis can be crucial in understanding the influence, interests, and importance of individuals who have a stake in the project. Their input could significantly impact the evaluation and valuation of product options and capabilities.
What is Risk analysis and how is it important in deciding product options?
Risk analysis identifies potential problems that could derail a project or its objectives. Understanding these risks can guide decision-making by indicating which product options are likely to contribute to or mitigate these risks.
What role does prototyping play in evaluating requirements?
Prototyping allows for the visualization of a product or feature before it is fully developed. This can provide valuable feedback and insights that can influence the acceptance, deferral, or rejection of requirements.
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