How do we measure value without profit?
This is the second in a short series of posts about digital transformation’s need for business models, you can read the introductory post here.
The principles of Agile Manifesto say that value is the most important thing to focus on. But then forgets to explain or define value. We need to plug this gap and figure out what value means for us, so we can check that the stuff we’re building through build-test-learn feedback loops is truly valuable.
We have an additional challenge when doing this within the Civil Service because we’re not foccussed on making a financial profit. People I speak to get stuck on this assumption that value can only be measured financially: how can we think of value when we’re not focussed on financial profit or return to shareholders?
Value is missing from digital transformation
Value is the most critical aspect of working with agility. It’s the focus of the first of the principles behind the Agile Manifesto. If we were to tweak the Agile Manifesto for Software Development so that it works better as am Agile Manifesto for Public Services then the first principle would be that:
Our highest priority is to satisfy the public through the early and continuous delivery of valuable public services.
‘Digital transformation’ is about helping organisations to work with agility, and focussing on value is one of the most important aspects of working with agility. Except that the Agile Manifesto gives us nothing to help figure out what value is. Subsequent frameworks like Scrum also neglect to help us figure out what value is. Most guides seem to assume that ‘value’ is figured out somewhere else by ‘the business’ then presented to delivery teams in a fully-formed stated to be consumed and acted upon. In reality, it’s often the case that ‘the business’ is waiting for delivery teams to present their defintion of value. And so we can end up in a space where we’re all delivering ‘stuff’ early and often without an honest sense of whether it’s truly valuable.
Working with agility makes the promise of focussing on value but then witholds the means by which to define value. This is a tricky state of affairs for a product manager because our focus is on managing value. We are responsible for the outcomes of our products and services. It’s the role of the product manager to define the value of their products and services - so that’s what I’m going to try and do :)
“Leaders create the language of the organisation; they set up incentives and define value in a way that elicits the descired outcomes. They define what is valued in order to deliver on the organisation’s mission.” The Art of Business Value, Mark Schwartz
The main principle I need to remember is that value is context specific. Trying to define ‘value’ in the abstract is a fool’s errand. I work on public services within the Civil Service as a ‘digital’ specialist, so this is my context.
Value in a commercial setting is commonly understood. When the context is ‘commercial’, we’re all familiar with measuring value through things like profits or return to shareholders. We can think of this as ‘private value’.
Lots of guidance on thinking about value is focussed on private value. This can lead us to assume that value is not relevant for public services. But with a few tweaks, we can apply most of it to our context. Understanding the differences between private value in a commercial setting and value in public service helps us to understand the tweaks needed to unlock existing guidance measuring value.
The Civil Service is not a commercial setting so profit or return to shareholders are pretty usefuless ways of measuring our value. Our goal is satisfy the public’s needs through public services, so our context is public value.
How do we measure public value? Public value is defined as two things in the context of public service delivery by the Civil Service:
- mission value: achieving the mission of your department as well as possible whilst hitting financial targets for liquidity
- political value: maintaining the trust of the public in Government
Non-profits measure their value through the extent to which they achieve their mission whilst also meeting financial targets for liquidity. In practice this means doing as much as possible towards their mission within their budget, and trying to increase their budget if they can see the need to do so.
Mission value usefully describes the main priority for everyone in the Civil Service: our main goal is to achieve our mission as well as possible whilst also meeting financial targets for liquidity. Every Department has a different mission, and its important for each Department to specify how the success of their mission will be measured. What’s our one metric that matters (this might change from reporting period to reporting period but it’s important to have one at all times)? What are our other key performance indicators? What’s the benchmark for these metrics at the beginning of the financial year? By how much do we need to improve them by the end of the financial year in order to justify the investment that the public has made in our mission? How do we know if we’ve succeeded or failed?
Things aren’t as simple as that because these public services are delivered through Government. I’m privileged to live in a liberal democracy with a parliamentary system. We also have a constitutional monarchy. These social systems are the foundation of our society and critical for our country to continue to run as it does. This means that it’s important to maintain the trust of the public in these social systems, something that we define as political value.
Political value may not be clearly expressed to us but is often disclosed by bureaucratic rules.
“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 [. . .] [so] 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 [. . .] Blame is quickly assigned within public services so government is highly risk averse, placing high business value on things that mitigate risk.” The Art of Business Value, Mark Schwartz
Good bureaucracy helps maintain the trust of the public in our critical social system and so delivers value.
“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 amongst those needs.” The Art of Business Value, Mark Schwartz
Mission value should outweigh political value
Sometimes it can feel as though policitcal value contradicts mission value. How can we test if this is the case, particularly since political value may not be clearly expressed? The answer is not to get lost. The needs of the public remain paramount and the majority of public value should always come from mission value. We have things like the Civil Service Code to help guide us, and remind us that we must have integrity, honesty, objectivity, and impartiality. Although it is true that civil servants are accountable to ministers, ministers have their own code which stresses that, “Ministers must uphold the political impartiality of the Civil Service, and not ask civil servants to act in any way which would conflict with the Civil Service Code.”
The needs of the public should always be the main focus of our work. We should be able to objectively say that at least 51% of the value of our work is defined by how well we are meeting our mission for the public. We should also acknowledge that maintaining the trust of the public in our core social systems is valuable and a worthwhile endevour. We can always check-in with ourselves and ask the simple question: are we doing good?
We can measure the value of doing good
We’ve established that we can measure the value of public service, and that we can call this public value. We’ve acknowledged that lots of guidance on figuring out value is focussed on private value and geared towards commercial settings. But now we know that if we tweak this guidance, contextualising it for public value, we can make use of it in the Civil Service. We’ll use these principles in the next couple of posts which are about how to measure the value of the software features of public services, and how value changes over time (to be published soon).