Agile QuickTip: Boosting Product and Team Success with Value-Based Planning

Boosting Product and Team Success with Value-Based Planning

It’s no secret that some of the greatest product features and innovations come directly from its customers and users.  Product teams solicit feedback and ideas from users in order to understand user priorities and needs.  With reviews and suggestions in hand, Product Managers and Product Owners identify highest priority opportunities and then work with their teams to envision how to best address these and attempt to estimate projected costs in order to determine the feasibility of tackling these opportunities.

This approach is known as cost-based planning.  We design a solution, evaluate its cost and then determine whether it’s worth pursuing. This type of product planning and prioritization was popularized in traditional product development that relied heavily on upfront plan driven strategies – we need to know exactly what customers wanted so we can design and plan to meet these needs.  Essentially we are trying to answer the question: “What does the customer need so we can effectively budget and plan to deliver on these needs”

An alternative approach is to ask: “How much is this problem/opportunity worth?” or “How much are we willing to spend to address this opportunity?” and then work with teams to determine whether there is a viable solution that fits within that budget.  This approach is value-based planning. There are a number of advantages to this approach, not the least of which is making it much easier for organizations to prioritize their product development investments far more effectively.  Imagine you were planning to remodel your kitchen.  Making a list of features you desire in your new kitchen is likely not the most effective way to plan your remodel.  A better place to begin is to determine – “how much am I willing to spend on my kitchen?” and then evaluate alternative options for that budget.  Starting with the investment amount allows us to design solutions that fit that budget. 

Value-based planning allows us to engage customers in a different way.  Instead of simply asking customers for a list of product features they want, we can ask them how much they would be willing to spend on these.  Ask your stakeholders to weigh in on what solving a problem or enabling an opportunity is worth.  This helps product managers better understand the value of any given opportunity. For example, by asking the customer to estimate how much the solution would be worth to them in dollars, you can understand both the value to the customer, and whether you can deliver this feature within a budget that would justify its implementation. 

With value-based planning we can better align product investments with real-world budgets and allow organizations to better collaborate with customers to prioritize their product roadmap.

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