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Software Value Needs to Start at the Top


I read an article recently, written by Hugo Sarrazin and Paul Willmott at McKinsey & Company, that I thought would be of interest to the readers of this blog. It resonates with my past posts about getting the software value message right to the top of the organization. The article was titled “Adapting your board to the digital age."

Who can argue with recommendations to make board members more informed about the development of technology solutions? I particularly like, “Board members need better knowledge about the technology environment, its potential impact on different parts of the company, and its value chain.”

I would have liked to have seen more stress on the importance of the board being focused on the value delivered by digital transformation. Some of the recommendations (such as having technology committees) could be seen as sufficient in themselves, which they are not. I’m sure that if the board has a “balloons” committee then the company will end up spending more on balloons, even if that is not going to increase the value of the company.

My recommendation to boards? Follow most of the good ideas in this paper, but beware of “digitization” for its own sake. Start and end with business value!

Read, “Adapting Your Board to the Digital Age,” here.

Mike Harris

Written by Michael D. Harris at 05:00
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Simple Metrics to Measure Value – CoD and WSJF

Cost of DelayWhen discussing value, determining how to measure that value is critical. As I write my second book on “The Business Value of Software," I find myself frequently coming back to two simple techniques that help organizations measure the business value of their software development projects: Cost of Delay (CoD) and Weighted Shortest Job First (WSJF).

CoD is the hourly, daily, or monthly cost associated with NOT starting a project. When a project is delayed, there is waste (i.e. wait times, inventory costs, opportunity costs) and this waste can negatively impact the bottom line. 

Cost of Delay =
User or Business Value + Time Criticality + Risk Reduction or Opportunity Enablement Value

WSJF is another metric that prioritizes those projects by putting the project with the highest WSJF at the top of the list. It is calculated by dividing the CoD by the duration of the project. 

These two techniques are extremely helpful in prioritizing software development initiatives based on economics. They enable an organization to prevent the frequent starting and stopping of projects that are extremely common in the software development world and allow for a continuous flow of product development based on metrics that drive business value. 

Donald Reinertsen, the author of “The Principles of Product Development Flow: Second Generation Lean Product Development” has said “If you only quantify one thing, quantify cost of delay." I whole-heartedly agree with Reinertsen, and I also encourage organizations to quantify WSJF. By measuring CoD, software development organizations will eliminate overhead associated with delays, streamline operations, and ultimately, produce more business value. By adding WSJF into the equation, they’ll be able to prioritize their projects such that they’re continuously delivering the greatest value to their business units.

I’m always interested in how software development organizations are using these two techniques. Please share the successes you’ve realized when utilizing CoD and/or WSJF.

Mike Harris

Written by Michael D. Harris at 05:00
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Three (of Many) Perspectives of Business Value

When we think of value, dollar signs often flash in our heads. In business, value typically translates to increased profits. The same can be said when talking about the value of a new piece of software. It is truly the simplest form of the “business value of software."

However, increased profit is not the only way that organizations, or even individuals within an organization, measure a software solution’s value. The CEO, CFO, CIO and the CMO may all be looking at the software from different points of view. Although there could be a laundry list of different perspectives within just one organization, in today’s blog post, we will just focus on three of the more popular views: profit, customer (internal or external) needs and build vs. buy.

With any new piece of software, there is a good chance that it will result in increased profits for an organization. This is often all that the CFO is focused on. Even not-for-profit organizations, such as government agencies that run their operations more like businesses, are looking to new software solutions to positively impact their bottom line.

The second perspective, focusing on the value delivered to the customer, is another view that sometimes can trump profit. Whether the ”customers" are in-house staff or external clients, or both, the cost of adding new features or functionality to a software solution needs to be carefully considered to determine if the intangible benefit outweighs the cost of developing this new feature.

The third view is the build vs. buy consideration. Does it make more sense to develop a piece of software internally or purchase Commercial-Off-The-Shelf (COTS) software? An internally-developed software solution may be more costly and resource intensive, but may fit the needs of the customers more closely. While the COTS software may be the less expensive option, it may require significant customization to provide the desired business value.

These are just three examples of how different organizations or individuals might perceive the business value of software. When a CFO is involved in approving the purchase or development of new software, increased profit is usually the focus. However, we should not always assume the business value of software is increased profit. There are many different interpretations.

Mike Harris
DCG President & CEO

Written by Michael D. Harris at 05:00
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Michael D. Harris to Share His Value Visualization Framework at the IEEE Software Technology Conference

Michael D. HarrisMichael Harris, author and speaker on the Value Visualization of IT and related topics, and President and CEO of David Consulting Group, will present at the IEEE Software Technology Conference taking place October 12-15, 2015 in Long Beach, California.

Mr. Harris will present his “Value Visualization Framework” concept on October 14 at 10:00 a.m. PST. He will discuss how providing IT with the economic data for software development initiatives can lead to improved decision making and ultimately impact an organization’s bottom line. Mr. Harris’ 5-step Value Visualization Framework (VVF) promotes collaboration between the business units and IT in order to prioritize projects based on their value. Mr. Harris will share his framework and offer guidance on how it can be used in conjunction with many of the popular development methodologies in use today, such as Agile.

“When IT functions in a silo, its ability to impact the overall organization in a meaningful way is limited, at best,” said Mr. Harris. “It is imperative that IT work closely with the business in order to prioritize its work based on assigned value. With the value information directly from the business, IT can then produce work that will foster the greatest business and economic benefits, providing increased profitability and an improved competitive advantage.”

The IEEE Software Technology Conference is a leading software conference that provides a forum for software practitioners to share their experiences with the goal of improving the execution of software across the industry. The focus of this year’s event is “Meeting Real World Opportunities and Challenges through Software and Systems Technology.”

More information about the VFF and Mr. Harris is available here: www.valuevisualization.com.

Written by Default at 05:00
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"It's frustrating that there are so many failed software projects when I know from personal experience that it's possible to do so much better - and we can help." 
- Mike Harris, DCG Owner

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