Working a strategy around value into the
conversations with your client.
Understanding where your client is coming from and what they are looking for out of a Garage engagement is a vital first step, but it’s just the start of the conversation around value. When it comes to defining the value of your Garage and the specific opportunities it’s pursuing, its important to get more concrete about what valuable outcomes are and how you hope to measure them.
The process of arriving at a strategic plan feels similarly straightforward: define the objective (vision, aspiration, problem), assess the current state, find the gaps, and decide how to get from where you are to where you want to go.
Even though it may sound simple, we know from experience that formulating and executing a strategy is rarely easy.
One of the things that makes strategy and measurement so difficult is knowing where to start in assessing the current state. There are so many factors you could take into account it’s sometimes difficult to see the forest through the trees. Value trees are an important tool for overcoming this challenge. Building them with your client is a quick way to align around what outcomes are most important for your project and how to measure them.
“
(Value Trees) allowed us to be more specific with the data we needed from our client to establish the baselines to start comparing our new feature sets. We could go speak to smaller teams on the ground to gather data and then once we created our model, we could share back with the higher level stakeholders in the organization.
Matt Gierhart
User Centered Design Lead,
Frito-Lay Garage
Value Trees on a
Garage Level
A value tree is a flow diagram which plots all the things that lead to business value creation and how they relate to each other. It is a chain of consequences. This leads to that, which leads to something else, which leads to business performance and value.
A value driver is something that the business can control that has a material effect on the performance of the business. Each link in the chain on a value tree is a value driver. A value driver is…performance of the business, it can either increase or decrease business value.
The example above, from the Woodside Garage in Australia, is a good example of how to visualize and track the potential impact of an IBM Garage. The Value Tree starts on the left, generally with a high-level objective such as increasing revenue or decreasing costs.
Value Trees should be Mutually Exclusive and Comprehensively Exhaustive, or MECE. What this essentially means is every branch level of the tree needs to ensure no overlap between buckets and with each item having a place in one bucket only (ME), and with the buckets including all possible items relevant to the context (CE). This is key to avoid double counting value in different branches and making sure that we capture the full business value of a certain product or Garage business opportunity.
This Garage is focused on the transformation of refinery operations for Woodside Energy, a petroleum exploration and production company. You can see the primary drivers for refineries are production margin (basically revenue of a refinery minus the cost of running it) and invested capital costs associated with other aspects of the business.
The exercise is to use those strategic drivers to identify potential opportunities, refine them so they are comparable in terms of potential value to the business, and pull them into a backlog. In the case of Woodside, building this visualization with their client allows the Garage to understand and track the opportunities they plan to pursue and measure their impact against the critical performance drivers for the business, namely production margin and cost of invested capitol.
Objectives should be SMART - remember that acronym - Specific, Measurable, Achievable, Relevant and Timebound.
Value Trees at an
Opportunity Level
Value Trees aren’t just useful for setting overall Garage strategy; they’re also vital for defining what type of value a Garage can return from each opportunity it pursues.
At an opportunity level, value trees still start on the left, generally with a high-level objective such as increasing revenue or decreasing costs. Once the top-level goals have been identified, the next step is to define the value drivers that drive performance and determine how to best measure them. In the example above, the value drivers for the onboarding tool being built by the Woodside Garage are “returned hours to the business,” “better performance of employees,” and “higher employee retention rate.”
The rest of the value tree shows the specific formulas and calculations that will allow the Garage to measure their impact on the high-level value drivers. Getting an accurate measurement will likely require access to back-end data from the client. Building trust as a strategic partner is vital to being able to access this data and make accurate measurements. This is where having value conversations with your client early is such an important step; if you can gain trust early on, then accessing business data later will be easier.
The importance of
Value Trees
The thought process behind building a value tree is vital to making sure you’re working on an opportunity that is important to the business, and to determining how best to measure the impact you’re making as you deliver successive iterations of your solution.
There’s more information on defining and measuring KPIs for value drivers in Section 3: Measuring Value.