What is Business Value?

(first published on April 10th 2016, migrated from my LinkedIn articles)

I came across this question in the Agile and Lean Software Development group. I thought it might be useful to expand on the answer I gave in a post of its own.

The short answer is quite simple:

Business value is whatever the business values.

For most businesses, this ultimately means operating profit. For non-profit organisations, business value might be social impact or some other non-financial aspiration.

Given the group in which this question was posed, I will now frame it from a product development point of view.

In Agile and Lean, when we talk about “optimising business value” — when in the usual context of a product or services technology company that exists and grows through making profits — this boils down to identifying products, services and features that will serve a customer need, thus leading to maximising operating profit in the long term.

For this goal to be meaningful, the people doing the work need a proxy goal that they can get behind. Making the company’s leaders richer probably isn’t going to inspire Janet the Developer or Bob the Business Analyst.

This is where having a great product vision comes into play, and focusing on creating an awesome working environment. Happy and engaged employees — given an inspiring purpose — will deliver awesome products, services and features for your customer, aka customer value, leading to increased market share and increased revenue.

In Agile and Lean, we aim to deliver value in short learning cycles. That is, we are looking to bring forward the realisation of business value by delivering small increments of something we might otherwise have designed wholly up-front and built out fully before deriving any business value from it.

In short, Agile and Lean approaches aim to deliver value to the customer “early and often”.

By doing this, the I part of ROI is controlled in small boxes of time and decision-making, and we aim to get R as quickly as possible rather than rely on the scheduled delivery of output (aka project plans) as a proxy to the ultimate realisation of all the desired value. Thus we are “optimising business value” by continuously focusing on the things with the most potential customer value, and controlling the spend on them — while reducing our risk and increasing options — by delivering in small increments.

Focusing on customer value is a proven proxy that will lead to increased operating profit (aka business value), keeping the executives (and other shareholders) happy.

How does my definition of “business value” marry up with yours?

Thanks for reading! If you are looking for help with your software or product delivery, I provide agile coaching, public training (both theory and practical) up to executive management level, and more. As well as public events, I can also run training internally in your organisation for a massively reduced cost, so please ✍ get in touch.