Leadership dimensions: value management

02 Mar 2018

In which we realise that working with agility focuses on delivering value but forgets to figure out what value is; product management finds a place to help figure out what value is; and we acknowledge that value is context specific so we figure out what it might be in government.

WTF is value?

A while ago I wrote a post based on the assumption that business strategy is in its infancy, with Simon Wardley saying that ‘organisations often rely on meme copying and gut feel’. Why is this?

One reason might be that the Agile Manifesto talks about value being our highest priority . . . but forgets to define what value is or how to figure it out. Most of the stuff I’ve read that’s based on the agile manifesto also forgets to define value. So what we’re left with is some great guidance on how to build valuable stuff . . . but little help to figure out what ‘value’ is.

The art of business value

The Art of Business Value by Mark Schwartz is the first book I’ve read that attempts to put the fill the ‘value’ gap in the Agile Manifesto. As Mark says:

“A core principle of Agile and Lean theory is that software development should seek to maximise business value. Projects should be judged not on their adherence to cost and schedue milestones, but on their delivery of value to the enterprise. Value should be delivered as quickly as possible - in small increments - and features should be prioritised based on the amount of value they deliver […] The Waterfall model was based on taking a point-in-time snapshot of the information we know and using it to create a long-term plan that we would adhere to. The Agile insight was that we should change our notion of what features will create business value over time as more information becomes available and, in fact, that it can be worth an investment even just to incrase learning, thereby reducing uncertainty and opening a space in which innovation can occur. Agile approaches added a time dimension where previously there was none. But the meaning of business value itself was a given […] known to the business, and that is not good enough.”

In short: we know that working with agility will help us to ‘deliver value’, but it won’t help us to figure out what value is.

Organisations and teams need help to figure out what value is. Enter product management.

Product management puts the value in the agile manifesto

A narrow interpretation of Scrum can lead to a narrow interpretation of product management, in which a Product Owner is told what value is by a ‘senior stakeholder’, and then hoses this into their team. The Art of Business Value poses the question “is it possible that the product owner role feels like a good idea because it helps fit Agile practices into a command-and-control hierarchy?”.

But we should instead see product management in a different light.

“Rather than being the authority of business value, making business value tradeoffs down to the feature level, the product owner can also be seen as the visionary responsible for a product or system, the person who communicates a vision behind a product and steers its development and evolution, the person who establishes a high level business value context in which the team generates solutions.”

You could argue that as product managers it’s rare for us to manage a genuine product, but what is consistent about our role is that we manage value for our organisation and team (hey, maybe we should be called value managers).

As product managers, it’s our job to help our organisation figure out the business value context in which we operate, and to use this to build a vision which helps us to generate solutions. This applies to me as a product leader. Value is extremely context specific, so I’m not going to attempt to create some all-encompassing defition of value - instead I’m going to focus on the context in which I work, which is government. I’m going to attempt to create version 1 of a high-level business value context for government, with help from Mark Schwartz and his book, [The Art of Business Value].

Business value in government

What is business value?

The Art of Business Value suggests that “business value is a hypothesis held by the organisation’s leadership as to what will best accomplish the organisation’s ultimate goals or desired outcomes,” and I tend to agree. At its simplest, an organisation’s leadership assume that ‘if we do X and measure Y then we should see an increase in our value, Z’.

In a private company, you can argue that this hypothesis can be relatively simple because the value context is relatively simple: the goal of a private company is pretty simple, it’s to generate profit and return value to shareholders. Private value can be relatively simple.

Public value

The goal of government is not so simple. We run public services, for the public (which includes ourselves). We’re not trying to generate a profit. We don’t have shareholders. How do we figure out what public value is?

Mission value

We can begin the definition of business value in government by looking at non-profits:

“The ultimate financial objective of a nonprofit cannot be maximising sharedolder value, since it has no shareholders. According to John Zietlow, Jo Ann Hankin, and Alan Seidner in their book on nonprofit financial management, the correct financial concern for a nonprofit should be hitting targets for liquidity: having just enough resources to carry out the mission, but not too much. But even for Zietlow, who’s speciality is financial management, it would be misleading to think of business value solely in financial terms: ‘the public service nature of a nonprofit poses a major challenge in terms of identifying and articulating its mission and and developing criteria for measuring its success.’ The criteria for its success - that is, its definition of business value - is about accomplishing the mission for which it was chartered.” p.27, [The Art of Business Value]

Government is similar to this. Each government department and agency has a mission, and should be given sufficient money to achieve that mission. Our challenge is to define out mission and the criteria for measuring our success, and to achieve that mission whilst hitting targets for liquidity. This can be described as mission value.

So maybe public value can be defined solely by mission value?

Political value

No. Government is massive. Public value is not defined solely by the local mission of one team or agency. Her are some quotes from The Art of Business Value that I share without comment:

“A government agency has other value concerns beyond those directly related to its mission area […] it values fairness in procurement practices: all contractors and suppliers should have equal chances to compete for government business. It values transparency, public accontability, and the political goals of those in power. Clearly shareholder value is not what is meant by business value in the context of a government agency; even mission value might be rather an oversimplification. On the other hand, there are similarities between the public sector and the private sector. As Mark Moore points out, the goal of a public sector organisation can be thought of as delivering public value, just as that of a corporation is to deliver private value. Both types of organisation must make value-based trade-offs in the use of resources for which there is an opportunity cost, typically cash - in one case the cash of shareholders, in the other case the cash from tax-payers. The government is unique in that one of its resources is its authority to compel behaviour, but doing so also has an opportunity cost. The magnitude of the punishment for non-compliance, for example, is a cost to society. Moore examines several ways of thinking about public value […] agencies are generally given conflicting or inchoerent guidance by their political overseers.”

“When you ‘provoke and observe’ in the government environment, you discover what its true values are. The government is based on a system of ‘checks and balances’ - in other words, a system of distrust. The great freedom enjoyed by the press, especially in reporting on the actions of government, is another indication of the public’s lack of trust in the government. As a result, you find that the government places a high value on transparency. While companies can keep secrets, government is accountable to the public and must disclose its actions and decisions. There is a business need for continued demonstrations of trustworthiness, or we might as well say a business value assigned to demonstrating trustworthiness. You find that the government is always in the public eye - the press is always reporting on government actions, and the public is quick to outrage. Government agencies, therefore, place a business value on ‘optics’ - how something appears to the observant public.”

“Public service in an environment that is quick to assign blame, government is highly risk averse (i.e., it places high business value on things that mitigate risk). […] When an agile team self organises to meet business needs and deliver business value, it cannot just consider customer and user needs for its products. It must consider all of the needs of the organisation and all of the things the business values, and then self-organise to meet all of those needs. The needs disclosed by bureaucratic rules are among those needs.”

Business value in government can be thought of as ‘public value’

Based on the above, my initial assumption is that business value in government can be thought of as ‘public value’.

Unlike private value, public value is not simple and consists of:

These two types of value may sometimes conflict with one another, and political value (in particular) maybe unclear, requiring a ‘provoke and observe’ strategy to identify.

To return to an earlier assumption: business value is context specific. So the next challenge is to explore public value in a specific context, that of the team and department in which I work, testing this notion of ‘public value’ in reality.