One of the things that have been consistent with organizations I’ve worked in is that we struggle, whether we admit it or not, with understanding if the technology projects will be a valuable investment. And one of the key reasons is that we don’t look at technology from an investment mindset, but from a cost-benefit perspective, with cost being the way we determine if something ends up ‘above or below’ the line for approval.
We spend millions of dollars annually across the globe, and yet don’t have a meaningful way of identifying what is valuable, and worse we don’t often align our projects to organizational strategies. Agile and the frameworks that are used say your teams should be delivering value every sprint or quarterly plan, but none of those frameworks has a value-based planning component. The value proposition from an Agile perspective is primarily at the team level, which means we are delivering bottom-up value, it’s too isolated and siloed to provide clear strategic growth.
What we need is a holistic intake approach where we begin to quantify the value that we expect to deliver which is aligned with our corporate strategies. We need to start having a value conversation before we move from our idea phase, to have the conversation if this is even something we strategically need to invest in. I assure you that we spend a significant amount of capital every year because someone in the organization wanted to do something that they thought would be important, never having to quantity the value return from their ideas before receiving funding for their project.
Moving to an investment mindset for technology means that we will look at three primary elements:
Value
Cost
Risk
Professional portfolio money managers develop an investment strategy that looks to diversify their investment portfolio across different investment types, such as stocks or bonds, and within these categories, they look to diversify further into small-cap companies, or those that have consistent dividends. As a leader, you need to treat your technology investment in a similar manner. Both business and architectural needs must be balanced, over investing in one leaves the business exposed to higher risk when something bad happens.
Nothing of value comes without a cost and eventually the cost to acquire an investment will outweigh the current and future value of the investment. Investing too much in a diminishing return will result in lower ROI and lower growth long term.
Risk in the context of technology and value is all about developing transparency related to predictable value delivery. If a team is inconsistent in its delivery, the cost of value acquisition will be correspondingly higher. There is a point where the cost to deliver value exceeds the value we have identified and at that point, we should stop the work and look for something else. Investment portfolio managers are constantly evaluating their portfolios to ensure that their investment is performing well, and when it is not, they sell it off so that have the capital to purchase something else. In most organizations we don’t make that trade-off we simply throw more money at new projects; this is good money chasing after bad.
Over the years I’ve developed a model that adopts modern investment theory to technology portfolio management and the result is what I now call QValue, which stands for quantifiable value. What the QValue model does is translate and align a company’s organizational strategies into a set of holistic value factors with associated value outcomes that can be leveraged consistently across your technology project intake process. The model does not favor any one way of project delivery, but will most definitely support any agile ways of working as it is expected that the value being delivered will be tracked via value realization dashboards which will confirm if our ideas are delivering the value, we commit to with the value factors.
In addition to building out a strategically aligned way to quantify value, we also assess the organization’s delivery capabilities to create a delivery risk dashboard. When making an investment we need to assess the expected outcome correlated to the expected cost and then risk adjust that cost to reflect the delivery confidence we have in the teams tasked to take on the work.
Having implemented QValue at several organizations here are some of the key outcomes we have seen:
1. Leaders begin to have investment conversations that ask if this is a strategic investment.
2. They begin to see that many of their projects fall into lower value higher cost categories, making it harder to justify the investment.
3. Leaders are able to make hard decisions on investments they have been reluctant to make in the past.
4. People are more connected to why they are doing the work that they do, leading to better solutions and higher quality.
If you would like to transform your technology intake, funding, and planning capability to focus on value delivery, contact me at michael@soundagile.com to set up some time to talk.