Just because we think something has value, does not necessarily mean it is valuable.
Often our perception of what has value is driven by a personal bias, such as that t-shirt from college you just can’t throw away. That t-shirt delivers value in the form of memories, however, you can’t derive anything valuable from the t-shirt outside of your memories.
There is a difference between perceived value and delivered value.
Value cannot be realized unless it can be quantified in some way.
This may sound like a semantic exercise but I think the distinction is an important one that needs to be made as it drives how we fund software development projects.
When organizations go through their annual planning cycles, they ask their functional leaders to come up with software projects that they want to do.
In this context, leaders may often turn to what they perceive will provide value, however, the value they perceive may not deliver the value the organization requires from a strategic standpoint and it often is not quantifiable.
This happens when the organization is not aligned with a shared understanding of the strategic outcomes that will deliver real value to the company.
There is often an inherent imbalance in many organizations, where you have one part of the organization working to eliminate some technology or functionality that another part is actively seeking to implement. These are real cases I’ve seen as a coach.
The way to deliver valuable outcomes (ROI) to the organization is to align your work to your strategies.
My valuation model takes your strategies and converts them into value factors that are applied across your entire software development Portfolio.
Using a portfolio investment approach we then define the organization's risk/return profile which will ensure that we are focused on investing in work that is both foundational as well as aspirational.
If you don’t have balance you will never reach your aspirational goals as your foundation can’t support it.
Software development is an expensive endeavor with annual investment running between 5%-10% of total revenue or more for most organizations.
Not knowing that your investment is delivering real value makes that cost go even higher.