Agile Software Development

Avoid ROI as a Basis for Prioritization

Business is all about ROI, and rightfully so, but ROI is not always a clear, concrete thing. More often—and especially before work has begun—ROI is a fuzzy, shifting thing. That makes it a difficult thing to use as a basis for feature or even project prioritization. In a post at her blog, Johanna Rothman discusses how ROI and also earned value (EV) as a basis is not right in an agile setting.

Bet on a Sure Thing

According to Rothman, these are the only circumstances where ROI or EV as a basis for prioritization makes sense:

  • You don’t need to change the requirements or the roadmap. You can set the roadmap and the requirements at the beginning and not change the work.
  • You know your set of customers, and they don’t change.
  • You don’t need to collaborate with your customers about what they receive and when.
  • You have a customer who has committed to buying this product from you. That’s not going to change.

These circumstances seldom apply to IT outfits, where anticipating product adoption in advance is not easy (hence more ROI fuzziness). Instead, Rothman prefers cost of delay (CoD), because it measures features according to what is known to be most valuable right now. CoD may not be the best option every time, but it works well enough.

Trying to use EV runs into similar problems, namely, circumstances change and value can vanish in the midst of it. A competitor’s new product can render something you are producing already obsolete, or maybe your customer set has changed in some way, ruining all previous calculations. The point here is that agile is a boat in rocky waters, and ROI and EV might be an anchor that the boat does not need.

For further thoughts, you can view the original post here:

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