Agile Business Coach

Business Value

It looks like a revised version of Andy and my article on business value might be published by Cutter.

For me, the most important line of the article is the definition of business value. "An (IT) project creates business value when increases or protects cashflow, profit and return on investment in alignment with the strategy of the organisation.

Lets take the magnifying lens to this statement.

"increases or protects cashflow, profit and return on investment"

Profit is increased/protected by increasing/protecting revenue or reducing costs. Return on investment is increased/protected by increasing profit or reducing investment. What this means is that the project should increase/protect revenue or reduce costs.

"alignment with the strategy of the organisation"

To me this means two views of the strategy. The maturity view and the differentiating/critical view.

The maturity view splits a product / market into three phases. Initially, the market will be in inception. During this phase the focus is revenue and market share. Then during the middle age of the market, the focus is on both revenue and cost. Finally, when the market is mature, the focus is on reducing cost and protecting revenue.

The differentiating/critical view* classifies the businesses within an organisation (or even application) as differentiating or non-differentiating and mission critical or non-mission critical.

If a business is differentiating and mission critical, the organisation should invest and excel. An on-line morganisation's web site should fall into this category.
If a business is non-differentiating and mission critical, the organisation should seek parity with the market. They should do the minimum to comply. General Ledger projects fall into this category.
If a business is differentiating and non-mission critical, the organisation should seek a partner to handle this service or product for them. An example of this would be for an on-line retailer to find a partner to handle foreign exchange transactions for them so that they can offer their products in the local currency of the buyer.
If a business is non-differentiating and non-mission critical, then it should receive the minimum of attention from the organisation. An example of this is the on-line sandwich ordering service offered to staff.

Hopefully this makes things a bit clearer.

*This model was introduced by Niel Nickolaisen of Deseret Books during his presentation at the Agile Development Conference in June 2004

Posted by chrismatts at August 14, 2004 6:54 PM