Estimating the Business Value of Stories

  • Posted on: 5 January 2017
  • By: leor
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The business value of a product is defined by the product owner as part of the process of developing the product vision and initial product roadmap.

Business value is very specific to the type of product being developed but examples may include:

  • Increasing customer satisfaction
  • Reducing cost and risk in the supply chain
  • Attracting and retaining top talent
  • Customer acquisition
  • Revenue generation

A key principal of agile is maximizing the delivery of business value in every sprint, and estimating the potential business value delivered in a story helps prioritize stories to deliver that maximum value.

One approach is to assign value points to stories. Similar to how story points can be used to estimate level of effort, product owners can use value points to estimate the business value delivered by a story. Using a relative sizing approach, business value for a story can be estimated relative to business value assigned to other stories.

Value points also allow you to measure the business value delivered each sprint, the business value delivered by each feature and the business value delivered by a release as a whole. This can be a powerful tool for providing visibility and optimizing how a team delivers value.

Introducing value points Assigning business value points helps determine feature worth against every item on the backlog. Consider the value of a small bit of functionality vs the total value of the product. The relative value of a feature is determined where the sum of the points can be mapped to the overall predicted value as a whole, and each value point is worth some fraction of that overall value. Since stories are things completed within a sprint, the first features to be delivered within a release should be divided into stories which deliver some proportion of the feature’s business value on their own.

An example of this using Fibonacci could function as follows:

  • 8 Value points = Critical, there would be no point in having a product without this functionality
  • 5 value points = Very High, this delivers a lot of value to our customers and our business
  • 3 Value points = Line Item, these items deliver linear value to our product, the more of these we have, the more valuable our product will be
  • 2 Value points = Low, these items don’t deliver as much value as they cost to build, we should have as few of these as possible
  • 1 Value point = Bad Idea, we encourage people to capture User Stories during conversations about the product, but not all ideas are worth building. It’s important for the creative process to be able to have a bad idea and throw it away without attachment.

Planning poker is an excellent tool to use in these conversations about Business Value. Make sure to include your technology partners and stakeholder groups in order to facilitate a holistic picture of your product strategy. Here are a few more tips: Base value points on a concrete measurement of business value – e.g. conversion of visitors to registered users, revenue generation, costs reduced

  • Identify the stories that are easiest to estimate value points
  • Estimate value points of other stories relative to those initial stories
  • During backlog refinement review and update the value points assigned if necessary
  • Use value points divided by story points as a mechanism for prioritization
  • Build mechanisms into features to allow for measurement of value after the feature is delivered
  • Measure, track and analyze the actual value delivered by the feature and used that to recalibrate your value point system