The Value Bucket Model (VBM) finds its origin in the same train of thought as WSJF and RICE. It divides value with effort and ranks according to the highest outcome. The goal is to objectively value your initiatives.
It is set up to be more flexible than WSJF, more suitable to the context of where it’s used. You will probably end up with multiple models. We believe that you should set formal value definitions for each of your departments or value groups using the broad scope of value types. These will become the foundation of your specific VBMs.
The formula is simple and flexible at the same time. You can make it as simple or complex as you want or need it to be. A bucket is a type of value, hence Value Bucket and it has a normalisation and a weight. To be able to calculate and compare actual value (real-life objectively measurable), we give value a norm on a representative scale. Sum all buckets norm multiplied by its weight to get the value.
“Hey! Can you create the VBM to represent WSJF?”
Yes, you can, but why limit yourself? And your own value definition will be easier to determine since they match your departments thinking.
Normalising value can be done using the Fibonacci scale or a simple 1-5. With Taskstreamer this can be made real easy, by letting your Product Managers, Product Owners or whichever role does this, fill in the actual value and team effort to keep their focus on value. Our software figures out what the norm value is and how resources can be optimally deployed based on value, effort and dependencies and creates a Continues Roadmap.
Such a roadmap is not something a Product or Project manager should try to make fit manually in a Gantt chart. That makes him focus on resources (Capacity Tetris) and not value. A roadmap should be a view on data representing value, effort and dependencies that is continuously adapted when changes are made. More on Continues Roadmaps later.
To determine the priority, the value is divided by Effort. Our definition of effort is the number of iterations (in Scrum you would know these as Sprints) all teams would need to finish the work (or the percentage of a team needed). This has the benefit of having a time factor where a relative job size does not.
Asking for estimates in number of hours or days needed is asking for unnecessary complexity. We should have learned by now these estimates are not something we can actually plan on. But ask a team if they how many Sprints an initiative will take and are able to give a more realistic indication.
If your team does not use Scrum thinking in such iterations is probably not something you are custom to do. This can help your team to better scope and oversee their work. If an initiative takes more than 5 iterations (an iterations usually takes 2 to 4 weeks), you should try and split it. It will help your team process the work better.
To get started with VBM you can start of with a simple formula, setting the weights to 1 and normalise on a 1-5 scale. The VBM is intended to be evaluated from time to time and you will make it increasingly more refined based on your experience and needs.
Let’s assume you define Value with Revenue, Cost reduction and Compliance. Your main focus is on Revenue and Compliance, weighing them with a factor of 2 compared to Cost reduction.
Revenue and Cost reduction are financial metrics and are not that hard to set a norm for:
|Actual value||Norm 1-5 scale||Norm Fibonacci scale|
An actual value that lies in between to scale values can be addressed in two ways: simply use the closest norm value or calculate the line between the 1 and 5 norms. An actual value of $6,000,000 in the first way would become a 3. Calculating the line results in 3.76.
Using the closest norm method limits scoring higher actual values to 5. So $20,000,000 would be a 5 while in the line calculation it would be 56.36, actually showing the real higher value it holds. It is more complex to do, but does represent reality better. Value bucket software will do these calculations for you.
It is important that the ones working with the value model can think in actual values because this is closest to reality and is something people can relate to.
Compliance can be a bit more tricky to make objective. You should start out with a 1-5 scale and later on will think of what makes Compliance a factor of value? It has a time factor. The closer you get to the moment a new law becomes active where you need to do work for, the more valuable that work becomes, so you could set the norm table as:
|Actual value||Norm 1-5 scale||Norm Fibonacci scale|
|52 weeks to go||1||1|
|40 weeks to go||2||2|
|27 weeks to go||3||3|
|15 weeks to go||4||5|
|2 weeks to go||5||8|
You could also see Compliance as the number of issues you find during an audit for example. Use the KPI that fits best for you, is something you can measure and is feasible.
The VBM for E-commerce could look something like this:
This way you can set a specific VBM for every department you have, prioritize the work accordingly and align with your strategic goals. You are free to decide to use one value type or even ten. As long as it fits your purpose.
This means different departments can use different VBMs, but they use the same rules: an objective measure to determine value and the same denominator effort to calculate priority.