Measuring the value that an agile team creates is one of the biggest challenges that teams who are new to agile often face. And while many agile methodologies put an emphasis on focusing on those activities that are most likely to yield value for your organization, how to actually measure that value often remains a question.

For many agile teams, especially those using the Scrum framework, velocity is often the first place we look. But is velocity really the best measure of the value that a team creates?

What’s Wrong With Velocity?

Velocity is often described as a measure of the amount of work a team delivers in a given sprint, but this description isn’t entirely correct. Rather than a measure of the amount of work a team delivers, velocity is actually the sum of the estimates of each story that the team delivered during that sprint.

Let’s look at an example. Imagine during the last sprint your team delivered the following 5 stories.

The total of the estimates of all of those stories was 21 points, which means that your team’s velocity for the last sprint was also 21 points. But does that mean that your team delivered 21 points worth of value? Not necessarily. The points that we’ve just described are estimates of a story’s complexity, which doesn’t always correlate to a story’s business value. For example, the previous sprint’s most complex story, which was the story to update the admin portion of the app to support color blindness mode, was estimated at 8 points. However, just because this was the most complex story undertaken in the sprint doesn’t necessarily mean that it was the story which produced the most business value.

By comparison, the story to add American Express as a supported credit card was estimated as the least complex story in the sprint at only 2 points. However, due to the potential for additional revenue this story may have been one of the most valuable stories delivered in the entire sprint, despite its relative simplicity.

What does it mean that our most complex story was one of our our least valuable while our least complex story was one of our most valuable? It tells us that velocity isn’t necessarily correlated to the value produced. In fact, this example tells us that it may not even be a reliable proxy.

Changing the Conversation

To measure the value that an agile team produces you must shift the conversation away from your team’s productivity and towards the value that your team actually creates. But to do this, you must have at least an initial understanding of how that value is created.

Sometimes this can be easy, as in the case of a story that may result in increased usage of your product or even in direct revenue. But other times, it may not be as easy. Sometimes the ultimate goal of a story is not to increase revenue, but instead is something more tangential. For example, some stories are written with the goal of streamlining an existing workflow inside of a product, improving the perception and awareness of a company’s brand, or simply making an existing process inside of an organization more operationally efficient.

Measuring the impact of these kinds of stories can be difficult and that difficulty only increases if the impact must be measured soon after a story is delivered. So, how do you measure the impact of these types of stories?

Understanding The Value Your Stories Will Create

The most important point to remember is that if you don’t have at least an idea of how to measure the impact of these stories then immediately stop where you are. Everything an agile team does should be in support of maximizing the value that they produce for their organization. This means that if you don’t have at least an idea of how to measure the value of what your team will be creating then you don’t understand your end goal well enough to continue to invest in it.

If this is the case, then take a step back and consider what the value is that you’d like each story to produce. Once you have an understanding of what that value is then you can begin to brainstorm possible ways to actually measure that value after delivery.

It’s important to realize that your first idea of how to measure the value produced in these cases doesn’t have to be correct. In fact, measuring these types of stories can be so difficult that you’re unlikely to get it right the first time. But to learn from that experience you need to consider why your first attempt was wrong and what you could do differently to measure that value more effectively. Like most things in an agile, learning to measure the value produced by stories that don’t directly produce value themselves is often an iterative process. However, this iterative process not only results in the right answer, but also teaches you more about the value your stories are creating along the way.

Making the Most of Measuring

A high-performing agile team will almost certainly produce value for your organization, but understanding how much value they create isn’t always straightforward. Worse, it can often be easy to conflate metrics such as velocity, which are intended solely for the team's own use for forecasting and planning, with the amount of value that the team is producing.

But by using the opportunity to measure the value that your team is producing as a chance to uncover what that value truly is, you can be sure that your team will always be producing value for your organization.

Want to learn more about getting the most out of agile with your team? Check out my course, Agile in the Real World, for tips and techniques for making agile work in your organization.

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