A common assertion in the Agile community is we focus on Value over Cost.
Both are equally needed. Both must be present to make informed decisions. Both are random variables. As random variables, both need estimates to make informed decisions.
To assess value produced by the project we first must have targets to steer toward. A target Value must be measured in units meaningful to the decision makers. Measures of Effectiveness and Performance that can monetized this Value.
Value cannot be determined without knowing the cost to produce that Value. This is fundamental to the Microeconomics of Decision making for all business processes.
The Value must be assessed using...
- Measures of Effectiveness - is an Operational measure of success that is closely related to the achievements of the mission or operational objectives evaluated in the operational environment, under a specific set of conditions.
- Measures of Performance - is a Measure that characterize physical or functional attributes relating to the system operation, measured or estimated under specific conditions.
- Key Performance Parameter - is a Measure that represents the capabilities and characteristics so significant that failure to meet them can be cause for reevaluation, reassessing, or termination of the program.
- Technical Performance Measures - are Attributes that determine how well a system or system element satisfies or expected to satisfy a technical requirement or goal.
Without these measures attached to the Value there is no way to confirm that the cost to produce the Value will breakeven. The Return on Investment to deliver the needed Capability is of course.
ROI = (Value - Cost)/Cost
So the numerator and the denominator must have the same units of Measure. This can usually be dollars. Maybe hours. So when we hear ...
The focus on value is what makes the #NoEstimates idea valuable - ask in what units of measure is that Value? Are those units of measure meanigful to the decision makers? Are those decision makers accountable for the financial performance of the firm?
