Tools for Benefits Management

By Kjetil Strand, Verdix AS

HIT meetup with Steve Jenner

September 28, 2017

Me

• kjetil.strand@verdix.no

• In software development since1988

• From July 2017 co-owner and CEO in Verdix AS

• Special interest in agile and leandelivery methods, benefits and change management

The Gilb legacy

• Every quality may be quantified and measured (even love)!

• Small, incremental value deliveries

• Tools: EVO, Planguage, ImpactEstimation Tables

• From 2015 a dedicated tool: needs&means by Richard Smith, RSBA Technology Ltd

«Direct Quantification of all benefits, so they are unambiguous clear and trackable in agile delivery steps»Tom Gilb, September 2017

Benefits quantification

The numeric relation between ends and means

Agile and Lean delivery methods

Henrik Kniberg from Crisp, Sweden:

Scrum and XP from theTrenches

Lean from the Trenches

Kanban and Scrummaking the most of theboth

Minimum Viable Change

Product Owner and the Backlog

Stakeholders

Product Owner

Bac

klo

g

Cross functional team(s)Based on Geir Amsjø, Smidigkonferansen

Epics, stories and planning poker

Other tools for benefits management• A benefit and a cost parameter on each backlog item (Value

Breakdown Structure)

• Benefit Points on each backlog item assessing the relative contribution to impact goals (Benefit poker)

• Model for Integrating Soft and Hard Return on Investment (MISHRI)

• Reporting on benefits production during execution of the initiative, applying EBVM (Earned Business Value Management) and BPI (Benefit Performance Index)

• The Value Matrix to score initiatives against strategic goals

Impact goals

Epic

Story Story Story

Epic

Strategic goals

Initiatives

Customer

satisfaction

Digital

channels

Time to

marketAutomation

Increased

sales

Internal

growth

Sum

Benefit

points

Costs in

Story

points

Benefit/

Cost ratio

Weight 75 25 50 25 100 75

Initiative X 6,0 3,3 1,0 3,3 20,0 3,8 37,3 70 0,53

Initiative Y 30,0 2,0 5,0 2,0 5,0 3,8 47,8 228 0,21

Initiative Z 0,0 -2,0 4,0 0,0 20,0 9,8 31,8 120 0,26

Benefit points

• The concepts of Benefit Points and EarnedBusiness Value Management have beendeveloped through the years 2011 – 2017

• Documented in two papers published in IEEE Software 2017

Benefit poker

• Group sessions with stakeholders• Pairwise comparison• Relative contribution to each impact goal• Benefit points with slightly revised Fibonacci numbers• Lowest and highest bidder explain their bids• Reveal different assumptions, knowledge and opinions

Impact

goals and

epics

Customer

satisfaction

Digital

channels

Increased

Sales

Time to

marketAutomation

Internal

growth

Weight 2 2 4 3 1 4

Epic 1 13 5 8 5 20 3

Epic 2 20 20 5 2 5 8

Epic 3 20 2 5 5 13 3

Epic 4 8 8 2 3 2 2

Epic 5 1 3 20 3 3 5

Epic 6 5 5 5 1 8 8

Epic 7 13 8 8 8 2 20

Epic 8 2 8 13 3 1 1

Copyright © 2015 Jo Hannay, ExpertWare AS

60 30M EUR 20M EUR

Training time for new users reduced by 40%

Release man-hours100M EUR

0.5 0.3 0.2

Impact goals

Benefits

Weights(pr. impact goal)

Increased service for users of the agency

0.3 0.7

1. Judged as 50/50: Improved service is as important as the financial benefit

2. This benefit may now be quantified to a value of 100M EUR

3. These may be converted to money

0.50.5

50M EUR 90

4. And benefit per impact goal can be aggregated –applying the weights per impact goal

Number of incorrect decisions reduced by

70%

Average time to reach decision reduced by

30%

50/200=0.25 60/200=0.3 90/200=0.45

MISHRI* in action

* MISHRI = Model for IntegratingSoft and Hard Return onInvestment (Benestad and Hannay)

Concepts for progress reporting

• AC = Actual Cost (in hours or story points)• EV = Earned Value (in hours or story points)• BAC = Project Budget (in hours or story points)• CPI = Cost Performance Index (= EV / AC)• EAC = Cost forecast (= AC + ((BAC – EV) / CPI))

• EBV = Earned Business Value (in benefit points)• BVAC = Benefit Budget (in benefit points)• BPI = Benefit Performance Index (= (EBV / BVAC) / (AC / BAC))• The Benefit Performance Index tells us «how much benefits have we produced so far» in relation to

«how much of the cost budget have we spent»

Progress metrics from «Ny prosjektmodell» (Lånekassen 2016) and Hannay, Benestad and Strand 2017

Story lifecycle and earned value

1) Each story passes through 5 well defined stages2) Earned value and earned business value = Adding the shares of budgeted value on each

story3) Only progress on stories count as earned value and earned business value4) Activities are useful only to the degree they support story progress

From the PERFORM project in SPK, described in Strand and Karlsen: «Agile Contracting and Execution», Promis 2014

Analysis ofneeds

Solution Description

Construction Approval In production

Ready Done Go-Live

Analysis ofneeds

Solution Decription

Construction Approval In production

10 % 30 % 85 % 95 % 100 %

Reporting example (Lånekassen 2016)Project

Budget

Period

Time budget

(BAC)

Time budget

(resource

plan)

Earned

hours

Hours

spent

Acc

CPI

Earned

business

value

Acc

BPI

Time budget

(resource

plan)

Earned

hours

Hours

spent

Local

CPI

Earned

business

value

Local

BPI

Forecast with

acc CPI

Forecast

with local CPISprint 1 4 280 856 633 970 0,65 2 785 2,87 856 633 970 0,65 2 785 2,87 6 564 6 564

Sprint 2 4 280 1 712 1 268 1 780 0,71 4 832 2,71 856 635 810 0,78 2 047 2,53 6 011 5 623

Sprint 3 4 280 2 568 1957,5 2 575 0,76 6 415 2,49 856 690 795 0,87 1 583 1,99 5 630 5 251

Sprint 4 4 280 3 424 2812,5 3 545 0,79 7 580 2,14 856 855 970 0,88 1 165 1,20 5 395 5 210

Sprint 5 4 280 4 280 3772,5 4 558 0,83 8 256 1,81 856 960 1013 0,95 676 0,67 5 171 5 094

Accumulated so far in the project This period Forecast

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

1 2 3 4 5

LocalBPI

LocalBPI

The Value Matrix for portfolio management

Strategic goals

Initiatives

Customer

satisfaction

Digital

channels

Time to

marketAutomation

Increased

sales

Internal

growth

Sum

Benefit

points

Costs in

Story

points

Benefit/

Cost ratio

75 25 50 25 100 75

Initiative X 6,0 3,3 1,0 3,3 20,0 3,8 37,3 70 0,53

Initiative Y 30,0 2,0 5,0 2,0 5,0 3,8 47,8 228 0,21

Initiative Z 0,0 -2,0 4,0 0,0 20,0 9,8 31,8 120 0,26

• Scoring initiatives and change proposals against strategic goals• Using weights on the strategic goals• Builds heavily on Gilbs concept of Impact Estimation Table• Applies Benefit points and Benefit poker• Exploits MISHRI for integration of hard and soft benefits

The Value Matrix – origin and ownership

Strategic goals

Initiatives

Customer

satisfaction

Digital

channels

Time to

marketAutomation

Increased

sales

Internal

growth

Sum

Benefit

points

Costs in

Story

points

Benefit/

Cost ratio

75 25 50 25 100 75

Initiative X 6,0 3,3 1,0 3,3 20,0 3,8 37,3 70 0,53

Initiative Y 30,0 2,0 5,0 2,0 5,0 3,8 47,8 228 0,21

Initiative Z 0,0 -2,0 4,0 0,0 20,0 9,8 31,8 120 0,26

• The Value Matrix was developed in the Norwegian State Educational Loan Fund (Lånekassen) as part of their new project model in 2015-2016

• The concept was developed with external assistance from Promis AS

• By August 2017 Lånekassen has transferred theownership rights to Verdix AS

References• Amsjø: PO-rollen – 7 fallgruber. Smidigkonferansen 2009

• Benestad: Nyttevurdering av brukerhistorier: Hvor gode er vi? Seminar for launching ITPP, 27.10.2011

• Benestad, Hannay, Strand, Karlsen: A Product Owners road to Enterprise prosperity. Scrum Gathering, Berlin 2014

• Cohn, Mike: Agile Estimating and Planning. Prentice Hall 2006

• Gilb: Competitive Engineering. Butterworth-Heinemann 2005

• Hannay and Benestad: A comparison of model-based and judgment-based release planning in incremental software projects. ICSE, 2011

• Hannay, Benestad, Strand: A framework for optimizing the return of software investments. HIT breakfast seminar, August 2014

• Hannay, Benestad, Strand: Inntjent forretningsverdi. HIT breakfast seminar, February 2017

• Hannay, Benestad, Strand: Benefit Points: The Best Part of the Story, IEEE Software 34(3), 73-85, 2017

• Hannay, Benestad, Strand: Earned Business Value: See That You Deliver Value to Your Customer, IEEE Software 34(4), 58-70, 2017

• Lånekassen: Ny prosjektmodell 2016

• Olving and Grimstad: Nyttestyring i praksis. HIT breakfast seminar, March 2016

• Strand and Karlsen: Agile Contracting and Execution, Promis 2014

• Strand: Verdimatrisen – verktøy for nyttestyring i og på tvers av tiltak. HIT breakfast seminar, March 2016

• Vogt: Erfaringer med nyttestyring på styringsgruppenivå i et smidig utviklingsprosjekt. Smidig digitalisering, mai 2017

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