Build a Value Measurement Framework

Focus product delivery on business value–driven outcomes.

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ANALYST PERSPECTIVE

A meaningful measurable definition of

value is the key to effectively
managing the intake, prioritization,
and delivery of technology-enabled
products and services.

Cole Cioran,
Senior Director, Research – Application Development and Portfolio Management
Info-Tech Research Group

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Our understanding of the problem

This Research Is
is Designed For: This Research Will Help You:
CIOs who need to understand the value IT Define quality in your organization’s context
creates from both business and IT perspectives.
Application leaders who need to make good Define a repeatable process to understand the
decisions on what work to prioritize and value of a product, application, project,
deliver initiative, or enhancement.
Application and project portfolio managers Define value sources and metrics.
who need to ensure the portfolio creates Create a tool to make it easier to balance
business value different sources of value.
Product owners who are accountable for
delivering value
This Research Will Also
Assist:
Assist: This Research Will Help You:
Them:
Product and application delivery teams who Create a meaningful relationship with
want to make better decisions about what they business partners around what creates value
deliver for the organization.
Business analysts who need to make better Enable better understanding of your
decisions about how to prioritize their customers and their needs.
requirements

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Executive summary

Situation
• Measuring the business value provided by IT is critical for improving the 1. Business is the authority on business
relationship between business and IT. value. While IT can identify some sources
of value, business stakeholders must
• Rapid changes in today’s market require rapid, value-based decisions.
participate in the creation of a definition that
• Every organization has unique drivers that make it difficult to see the is meaningful to the whole organization.
benefits based on time and impact approaches to prioritization.
2. It’s about more than profit. Organizations
must have a definition that encompasses all
Complication
of the sources of value, or they risk making
• An organization’s lack of a shared definition of value leads to politics short-term decisions with long-term
and decision making that does not have a firm, quantitative basis. negative impacts.
• Different parts of an organization have different value drivers that must 3. Technology creates business value.
be given balanced consideration. Treating IT as a cost center makes for
• Focusing solely on revenue does not necessarily result in the right short-sighted decisions in a world where
outcomes. every business process is enabled by
technology.

Resolution
• Standardize your definition of business value. Work with your business partners to define the different sources of
business value that are created through technology-enabled products and services.
• Weigh your value drivers. Ensure business and IT understand the relative weight and priority of the different sources of
business value you have identified.
• Use a balanced scorecard to understand value. Use the different value drivers to understand and prioritize different
products, applications, projects, initiatives, and enhancements.

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Software is not currently creating the right outcomes

38%
of spend on IT employees
Software products are goes to software roles.
taking more and more Source: Info-Tech’s Staffing Survey

out of IT budgets. 18% 33%

of opex is spent on of capex is spent
software licenses. on new software.
Source: SoftwareReviews.com Source: Info-Tech’s Budgeting Survey

34%
Only
However, the reception
and value of software
products do not justify of software is rated as both
the money invested. important and effective by users.
Source: Info-Tech’s CIO Business Vision

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IT benchmarks do not help or matter to the business. Focus
on the metrics that represent business outcomes.

IT departments have a tendency to

measure only their own role-based
activities and deliverables, which only
prove useful for selling practice
improvement services.

Technology doesn’t exist for

technology's sake. It’s in place to
generate specific outcomes.

IT and the business need to be

aligned toward a common goal of
Source: Kerzner
enabling business outcomes, and
that’s the important measurement.

In today’s connected world, IT and business must not speak different

languages.
– Cognizant, 2017
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CxOs stress the importance of value as the most critical area
for IT to improve reporting
N=469 CxOs from Info-Tech’s
CEO/CIO Alignment Diagnostic

80%
60% 51%
53% 52% 49%
40% 53%
20% 32% 23% 24% 22% 14%
0%
s g s s cs
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s in a t P e os
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a ke O
St y
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Significant Improvement Necessary Some Improvement Necessary

Key stakeholders want to know how you and your products or services help them realize their goals.

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While the basics of value are clear, few take the time to reach
a common definition and means to measure and apply value

What is our
Derived from
Often, IT misses the opportunity to business business
become a strategic partner How do I context context?
because it doesn’t understand measure?
how to communicate and measure
its value to the business.

Price is what you pay.

Value is what you get.
A measure of Value Enabled
through

– Warren Buffett
achievement
is… governance
and strategy

Being able to understand the

value context will allow IT to The Who sees
articulate where IT spend supports How is value underlying
the strategy
business value and how it enables context for
applied to decision through?
business goal achievement. support making
decisions?

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Determine your business context by assessing the goals and
defining the unique value drivers in your organization
Competent organizations know that value cannot always be represented by revenue or reduced
expenses. However, it is not always apparent how to envision the full spectrum of sources of value.
Dissecting value by the benefit type and the value source’s orientation allows you to see the many ways
in which a product or service brings value to the organization.

Business Value Matrix Financial Benefits vs. Improved Capabilities

Outward
Financial Benefits refers to the degree to which the value source can
be measured through monetary metrics and is often quite tangible.
Reach Increase
Human Benefits refers to how an product or service can deliver value
Customers Revenue through a user’s experience.

Human Financial Inward vs. Outward Orientation

Benefit Benefit Inward refers to value sources that have an internal impact and
improve your organization’s effectiveness and efficiency in performing
Enhance Reduce its operations.
Services Costs Outward refers to value sources that come from your interaction with
external factors, such as the market or your customers.
Inward

Increase Revenue Reduce Costs Enhance Services Reach Customers

Product or service functions that Reduction of overhead. They Functions that enable business Application functions that enable
are specifically related to the typically are less related to broad capabilities that improve the and improve the interaction with
impact on your organization’s strategic vision or goals and organization’s ability to perform customers or produce market
ability to generate revenue. more simply limit expenses that its internal operations. information and insights.
would occur had the product or
service not been put in place.

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See your strategy through by involving both IT and the
business
Buy-in for your IT strategy comes from the ability to showcase value. IT needs to ensure it
has an aligned understanding of what is valuable to the organization.
Business value needs to first be established by the business. After that, IT can build a
partnership with the business to determine what that value means in the context of IT
products and services.

The Business IT
Keepers of the organization’s Technical subject matter
mission, vision, and value experts of the products and
statements that define IT Business services they deliver and
success. The business Value of maintain. Each IT function
maintains the overall ownership works together to ensure
Products
and evaluation of the products quality products and services
along with those most familiar
and Services are delivered up to stakeholder
with the capabilities or expectations.
processes enabled by
technology.

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 Measure your product or services with Info-Tech’s Value
Measurement Framework (VMF) and value scores
The VMF provides a consistent and less subjective approach to generating a value score for an
application, product, service, or individual feature, by using business-defined value drivers and product-
specific value metrics.

Key business stakeholders Products + Services Specific business

define the overarching stakeholders and IT conduct
priorities the individual measurements
are composed of
one or more

Value Drivers Value Sources Value Fulfillment

(Category) which align to (Outcome) which have (Metrics)
corresponding
Broad categories of Instances of created Units of measurement
values, weighed and value expressed as a and estimated targets
prioritized based on “business outcome” of linked to a value source
overarching goals a particular function
de s
te
rm mine
ine t er
s de

Importance of Value Source X Impact of Value Source

= Value Score

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 A consistent set of established value drivers, sources, and
metrics gives more accurate comparisons of relative value

Value Drivers Value Sources Value Fulfillment Metrics

Broad categories of values, Instances of created value Units of measurement and
weighed and prioritized based on expressed as a “business outcome” estimated targets linked to a
overarching goals of an particular function value source

Customer Satisfaction Net Promoter Score

Reach Customers
Customer Loyalty # of Repeat Visits

Data Monetization Dollars Derived From Data Sales

Create Revenue Streams
Leads Generation Leads Conversation Rate

Team Collaboration Number of Interactions

Operational Efficiency Workflow Management Cycle Time

Adhere to regulations & compliance Number of Policy Exceptions

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A balanced and weighted scorecard allows you to measure
the various ways products generate value to the business
The Info-Tech approach to measuring value applies the balanced value scorecard approach.

Importance of value source X Impact of value source = Value Score

Which is based on… Which is based on…

Alignment to value driver Realistic targets for the KPI

Which is weighed by… Which is estimated by…

A 1-5 scale of the relative A 1-5 scale of the application

importance of the value driver or feature’s ability to fulfill
to the organization that value source

+ Importance of Value Source

x Impact of Value Source

+ Importance of Value Source

x Impact of Value Source

+ Importance of Value Source

x Impact of Value Source
Value Score1 + VS2 + … + VSN =
+ Importance of Value Source
x Impact of Value Source

Overall Balance Value Score

= Balanced Business Value Score

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Value scores help support decisions. This blueprint looks
specifically at four use cases for value scores.
A value score is an input to the following activities:

1 Prioritize Your Product Backlog 2 Prioritize Your Project Backlog

Estimate the relative value of different product backlog Estimate the relative value of proposed new applications or
items (i.e. epics, features, etc.) to ensure the highest value major changes or enhancements to existing applications to
items are completed first. ensure the right projects are selected and completed first.

This blueprint can be used as an input into Info-

This blueprint can be used as an input into Info-
Tech’s
Tech’s Build a Better Backlog.
Optimize Project Intake, Approval, and Prioritization
.

3 Rationalize Your Applications 4 Categorize Application Tiers

Gauge the relative value from the current use of your Gauge the relative value of your existing applications to
applications to support strategic decision making such as distinguish your most to least important systems and build
retirement, consolidation, and further investments. tailored support structures that limit the downtime of key
value sources.

This blueprint can be used as an input into Info- This blueprint can be used as an input into Info-
Tech’s Tech’s Streamline Application Maintenance.
Visualize Your Application Portfolio Strategy With a
Business Value-Driven Roadmap
.

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The priorities, metrics, and a common understanding of value
in your VMF carry over to many other Info-Tech blueprints

Transition to Product Build a Product Road Modernize Your SDLC

Delivery map

Build a Strong Found Implement Agile Pra

ation for Quality ctices That Work

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Use Info-Tech’s Value Calculator

The Value Calculator facilitates the activities INFO-TECH DELIVERABLE

surrounding defining and measuring the
business value of your products and
services.

Use this tool to: Value Calculator

PURPOSE:
• Weigh the importance of each Value Use this Business Value Calculator Tool to determine the relative value of your products and services by producing an overall balanced value score.
This tool can be to compare the value of a variety of "Items," including applications, products, services, projects, or product backlog items (epics,

Driver based on established features etc.). These scores are then used for prioritization or rationalization purposes.

INSTRUCTIONS:

organizational priorities. This tool is designed to be used in coordination with Info-Tech's Value Measurement Framework (VMF), which produces an Overall Balanced Value
Score for an Item (product or service) by factoring the Value Fulfillment (Metric or Gauge) of a Value Source by the weight of its corresponding
Value Driver (weighed organizational priorities) and adding the culmultive scores for each Value Source of an Item. For more infromation, please

• Create a repository for Value Sources

review Info-Tech's Build a Value Measurement Framework Blueprint.

Step 1 - Define and weigh your Value Drivers, using the fields in the" Value Driver" tab.

to provide consistency throughout each Step 2 - For your first Item, determine it's various Value Sources. First, assign to a Value Driver in the "Value Driver" tab, and then enter in the
appropriate fields in the "Item {#}" tab.
Step 3 - Assign a metric and Value Fulfillment for each Value Source in the individual "Item {#}" tab.
measurement. Step 4 - Collect your Overall Balanced Value Score for your Items in the individual "Item {#}" tab.
Step 5 - Repeat for all Items. * To generate more Item tabs, copy the "Add Item Tab (do not edit)" tab, and rename the new tab.

• Produce an Overall Balanced Value

Score for a specific item.

Populate the Value Calculator as you complete

the activities and steps on the following slides.

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Limitations of the Value Measurement Framework

All models are wrong, but some are useful.

– George E.P. Box, 1979
Value is tricky: Value can be intangible, ambiguous, and cause all sorts of confusion, with the multiple, and often
conflicting, priorities any organization is sure to have. You won’t likely come to a unified understanding of value or an
agreement on whether one thing is more valuable than something else. However, this doesn’t mean you shouldn’t try. The
VMF provides a means to organize various priorities in a meaningful way and to assess the relative value of a product or
service to guide managers and decision makers on the right track and keep alignment with the rest of the organization.

Relative value vs. ROI: This assessment produces a score to determine the value of a product or service relative to other
products or services. Its primary function is to prioritize similar items (projects, epics, requirements, etc.) as opposed to
producing a monetary value that can directly justify cost and make the case for a positive ROI.

Apply caution with metrics: We live in a metric-crazed era, where everything is believed to be measurable. While there is
little debate over recent advances in data, analytics, and our ability to trace business activity, some goals are still quite
intangible, and managers stumble trying to link these goals to a quantifiable data source.

In applying the VMF Info-Tech urges you to remember that metrics are not a magical solution. They should be treated as a
tool in your toolbox and are sometimes no more than a rough gauge of performance. Carefully assign metrics to your
products and services and do not disregard the informed subjective perspective when SMART metrics are unavailable.

One of the deadly diseases of management is

running a company on visible figures alone.
– William Edwards Deming, 1982
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Info-Tech’s Build a Value Measurement Framework glossary
of terms
This blueprint discusses value in a variety of ways. Use our glossary of terms to understand
our specific focus.

Value A method of measuring relative value for a product or service, or the various
Measurement components within a product or service, through the use of metrics and weighted
Framework (VMF) organizational priorities.

Value Driver A board organizational goal that acts as a category for many value sources.
Value Source A specific business goal or outcome that business and product or service
capabilities are designed to fulfill.

Value Fulfillment The degree to which a product or service impacts a business outcome, ideally
linked to a metric.

Value Score A measurement of the value fulfillment factored by the weight of the corresponding
value driver.

Overall Balanced The combined value scores of all value sources linked to a product or service.
Value Score

Relative Value A comparison of value between two similar items (i.e. applications to applications,
projects to projects, feature to feature).

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Use these icons to help direct you as you navigate this
research
Use these icons to help guide you through each step of the blueprint and direct you to content related to
the recommended activities.

This icon denotes a slide where a supporting Info-Tech tool or template will help you perform
the activity or step associated with the slide. Refer to the supporting tool or template to get
the best results and proceed to the next step of the project.

This icon denotes a slide with an associated activity. The activity can be performed either as
part of your project or with the support of Info-Tech team members, who will come onsite to
facilitate a workshop for your organization.

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Info-Tech offers various levels of support to best suit your
needs

Guided
DIY Toolkit Implementation Workshop Consulting

“Our team has already “Our team knows that “We need to hit the “Our team does not
made this critical we need to fix a ground running and have the time or the
project a priority, and process, but we need get this project kicked knowledge to take this
we have the time and assistance to off immediately. Our project on. We need
capability, but some determine where to team has the ability to assistance through the
guidance along the focus. Some check-ins take this over once we entirety of this project.”
way would be helpful.” along the way would get a framework and
help keep us on track.” strategy in place.”

Diagnostics and consistent frameworks used throughout all four options

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Build a Value Measurement Framework – project overview

1. Define Your Value Drivers 2. Measure Value

1.1 Identify your business value • Identify your product or service SMEs.
authorities. • List your products or services items and
2.1 Define your value drivers. components.
2.2 Weigh your value drivers. • Identify your value sources.
• Align to a value driver.
• Assign metrics and gauge value
fulfillment.
Best-Practice Toolkit

Identify the stakeholders who should Identify the stakeholders who are the
be the authority on business value. subject matter experts for your
Identify, define, and weigh the value products or services.
drivers that will be used in your VMF Measure the value of your products
and all proceeding value and services with value sources,
measurements. fulfillment, and drivers.
Guided
Implementations

Outcome: Outcome:
• Value drivers and weights • An initial list of reusable value sources
and metrics
• Value scores for your products or
services

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