Sunday, June 30, 2019

What is "Value"

In the book, The Professional Product Owner (which by the way I recommend each Product Owner and Scrum Master to read) the authors Don McGreal and Ralph Jocham, under the heading "Value Defined" (pg56) discriminate "Value" into three different categories:

Types of Value

The italic quotes in this section are verbatim quotes, and I will comment on them below:

Personal Value = Personal happiness

 As people, anything we consider to be of value ultimately comes down to one elusive element: Happiness. Is money valuable? Only if it makes you happy. More time with your family? Only if it makes you happy ... Time, money, good job, these are only circumstantial evidence of value. We assume having more of them will make us happy.

Business Value = Money

 As companies, anything they consider to be of value ultimately comes down to one elusive element: money. Are happy customers valuable? Only if they pay for your product. Is a good culture valuable? Only if it reduces the cost of attracting and retaining employees. Happy customers, good culture, steamlined processes; these are only circumstantial evidence of value. We assume having more of them will make (and save) us more money.

Nonprofit Value = Improving Society

 An obvious exception is nonprofit organizations (...) where value is about improving society. For nonprofits, money is circumstantial. In fact, revenue while not positively impacting society would be considered negative value.

A myopic definition of Value

The short form would be: "People see value in happiness, businesses in money and nonprofits in improving society."
Personally, I disagree. All three of these statements are myopic. And here are my cases for ponderance:

Basic human needs

Why do people see a doctor? Is it to get well, or is it to be happy?
While there are indeed certain pills that "make people happy", most people would agree that health is a value in and of itself, regardless of whether it's connected to happiness.

The entire Maslow "Hierarchy of Needs" doesn't even contain the term "happiness", and there's a reason. When people's basic needs, such as food, shelter and safety are unmet, happiness is irrelevant. Likewise, it's entirely possible to have psychological needs met without seeing fulfilment - which meets the need, but doesn't result in happiness.

Therefore, people are looking for other things than happiness as well.

Emotional Compass

And finally, to put the nail into the coffin on the happiness argument:
Happiness is but one of many human emotions. When we study the Plutchik Wheel, we discover that there are eight base emotions, with different nuances on each, accompanied by different attitudes, and they can even combine to form yet other emotions. The mix of all of these is what makes us human, a biased pursuit to ultimately have only happiness makes us shallow.

And without going further into details, both Christian and Buddhist teachings contradict the idea that the pursuit of happiness leads to a fulfilled life.

Therefore, happiness is one, but definitely not the only, thing people strive for.

Online Games

Why are "free games" such powerful cash cows? Is it because everyone eventually pays? No!
One of the core tenets of Free-to-Play Games is that you need a massive player base in order to attract some so-called "Whales", that is, people with a high willingness to spend a high amount of money on games. Some games go as far as calculating that they need about ten free players to attract and retain just one paying customer, and maybe one in a hundred of those paying customers is a whale - so basically, your entire business model is built on the idea that 99% of your player base play at or below cost in order to rake in the cash from a few hundred!

Therefore, attracting and maintaining unpaying customers may be crucial to your business model!

Cross Service Subsidization

About a decade ago, Deutsche Bank chose to make their unprofitable private customer banking segment so unattractive that millions of customers simply left.
Too late did they realize that many individuals (myself included) are entrepreneurs who also have a company. And when your bank basically gives you, as a private person, the extended middle finger, you'll consider twice where you, as a businessperson, take your transactions.

The money of this segment wasn't what made this customer group valuable - their entire value was in enabling other business segments!

Therefore, eliminating unprofitable customer segments may be economic suicide!

Interests aren't Improvments

It's not necessary for a Non-Profit Organization to actually want to "improve society". Although a large number of NPO's are formed around a societal goal which they themselves consider an improvement based on their perspective, this isn't the only reason to have an NPO. Indeed, an NPO only means "Not for Profit", which only excludes profit as a motive. And this should also hint that there are indeed other motives which an organization could hold.
Also, according to Wikipedia's definition of an NPO, it's entirely possible for an NPO to further exclusively the self-interests of the organization.

Therefore, "improving society" is neither excluded from being valuable for a for-profit organization, nor is it necessarily valuable for a non-profit organization!

Other types of Value

Is money, or bottom line, the best measure for company value? I consider this view myopic.

"We're in business to earn money, and we build products to earn money, hence the best product is the one that earns most money." That's common thinking, but it's not that easy and probably the reason why so many companies get in trouble on a strategic level.

Personal Values

People value a whole range of things, and happiness is just one of them. There are a wide range of things people can value that neither directly nor indirectly translate to happiness. Instead, the validity of these values depends on a person's core belief system, which is not the same for every person.

Here are just a small number of things which people might value that have at best extremely fuzzy links to happiness:
  • Health
  • Life
  • Compassion
  • Kindness
  • Integrity
  • Respect
  • Religion
  • Patriotism
  • Environmentalism
I would like to argue, based on the standpoint of the authors, which shows the absurdity of the concept of taking individual happiness as ultimate measure: 
  • Is another person's life valuable, even if it doesn't make you happy?
  • Is respect towards other people valuable, even when they don't make you happy?
  • Should we do something about climate change, even if it means that you may have to stop doing something that currently makes you happy?
With the argument that "only what makes you happy has value", we create a corrupt, unsustainable society!
Although each person has their own set of core beliefs, I think I made the point that adopting the core belief of "do whatever makes you happy and ignore everything that doesn't" could lead to an entirely broken moral compass.

Strategic Values

When I was an inexperienced agile coach, I used to abide in the narrow definition of value that everything can ultimately be translated into fiscal value. I was quickly taught something else. Managers in organizations see a huge variety of "strategic values" that are extremely difficult to express in terms of money, just to list a few of them:
  • Brand
    • Reach
    • Dominance
    • Exclusivity
  • Publicity
    • Influence
    • Reputation
    • Visibility
  • Networks
    • Recommendations
    • Partnerships
    • Alliances
  • Capability
    • Scalability
    • Descalability
    • Flexibility
While some of those things could indeed translate to money in the long term, it's about impossible to relate a single backlog item's contribution to any of the above to a meaningful fiscal quantity.


Ultimately, if we stick to an overly narrow, dogmatic definition of "Value", we lose opportunities and might be acting against the best interests of ourselves, our organization, our society and eventually of humanity.

Instead, we might want to reflect on this one simple point and explore: "What do we consider valuable - and why?"
The answer will be different for different people, different teams and different organizations, and change over time.

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