How do we measure the value properly?

In the framework of evidence-based management, the value that customers experience today is called current value (CV), while the value that customers want but have not yet experienced is called unrealised value (UV). 

But how can teams measure these? 

There are metrics such as Net Promoter Score (NPS) that are not measured very often. (Most professional portals recommend measuring this every six months or every year.)

Interviews and satisfaction surveys are another measurement tool, but these require a lot of resources to conduct and are relatively expensive, take a long time to run and, depending on how much time has passed between the service being used and the interview, the respondent's memory may be distorted. And surveys can only measure a few things before the resource invested in the survey loses interest. Moreover, although surveys and NPSs capture emotions, they may not reflect what people actually do.

A simple and immediate way to gather feedback is to build it into the product itself and measure what customers are actually doing. As many products include software that is connected to the internet in some way, this can be a real opportunity for many teams.

How to measure value properly - in the case of a Scrum team

Scrum teams that regularly deliver to customers in each sprint can incorporate measurement into their sprints by defining sprint goals for the customer outcomes they deliver, and then incorporating the measurement into their product, which provides them with feedback on how well they have achieved the sprint goal. Scrum teams that deliver less frequently to customers can still measure the achievement of the sprint goal, although their feedback on success will be delayed. Measurement can be as simple as "did someone use the new capability we delivered" or as deeper analysis looking at, for example, "did the customer achieve their goals in using the new capability". 

The frequency with which Scrum teams measure value has an impact on the usefulness of the measurements: teams that can deliver and measure new value at relatively short intervals (a few weeks) gain relatively timely insights into customer value, while teams that can deliver and measure value only a few times a year (or less frequently) are working with relatively old information and should consider improving their delivery rate before spending much time improving customer value, because information about customers is likely to become outdated before the team can respond to it effectively.

Some organisations focus on measuring activity (What did the team do? Did they perform as planned?) or they focus on output (Did they produce what we asked of them? Did they achieve the desired speed?).  

Neither of these types of measurements tell the organisation or the team anything about the value of what the team is doing. Lean flow metrics have the same problem: they tell you how well the team is doing, but not whether the work they are doing is valuable. 

Over time, a well-performing Scrum team should see an improvement in the aforementioned actual value (CV) and a corresponding decrease in unrealised value (UV).

Measuring the value delivery performance of the Scrum team 

Some organisations focus on measuring activity (What did the team do? Did they perform as planned?) or output (Did they produce what we asked them to? Did they achieve the desired speed?).  

None of these types of measurements tell either the organisation or the team anything about the value of what the team is doing. Lean flow metrics have the same problem: they tell you how well the team is doing, but not whether the work they are doing is valuable. 

Over time, a well-performing Scrum team should see an improvement in the aforementioned actual value (CV) and a corresponding decrease in unrealised value (UV).

A Scrum team can examine its own performance through changes to its CV:

• If CV is generally trending upwards, the team's performance is improving; the steeper the overall trend line, the faster the improvement.
• If the value fluctuates slightly, but does not generally change, the team is neither improving nor deteriorating. In this case, the team should ask itself whether it is really performing at its best or whether it should set more ambitious targets.
• If the line shows a downward trend, the team should ask why customers who were previously more satisfied with the product are less satisfied. Have their needs changed? Has something happened to the quality of the product that has made them less satisfied? Is the latest version of the product not stable enough or has it not changed according to customer needs?

Teams can also look at UV trends to get a complete picture:

• If the overall trend is downward, the team's performance is improving; the steeper the overall trend line, the faster the improvement.
• If the value fluctuates slightly, but generally does not change, the team is neither improving nor deteriorating.
• If the line is trending up, the team needs to ask itself how it can gain better insight into customer needs, which may be changing faster than they can respond. Perhaps there are new competitors offering products that better meet customer needs? Or maybe something has happened that has changed customer expectations.

Examining either the CV or the UV, or ideally both, is essential for teams to understand whether they are doing useful work or simply wasting time. Once they better understand whether they are providing valuable incremental value, they can look at other factors to decide where they need to improve.