What is Business Value?

Attempting to define business value as a software architect and technology leader has been a challenge. A software engineer’s default tendency is to want to sink their teeth into something new. “Fresh meat”, as it has been called, writing cool new code is always more fun than maintaining that “legacy” code of the past. I’ve learned that the term “legacy code” really means “code someone else wrote that I don’t like”. Of course, as Uncle Bob (Robert Martin) would say, the code we are writing today is tomorrow’s legacy code, but that’s a challenging lesson to try to teach to an engineer.

One of the skills that I think differentiates a software developer from an architect is being able to negotiate a technical decision path that achieves the company’s goals and delivers maximum business value. Business value is a complex topic, but in some respects I think that agile coach David Hussman describes it best in his “Dude’s Law”. He asserts that V = W / H, where V is value, W is why (intent) and H is how (mechanics). Go read his post (or better yet, have David come coach your team) for more details because he can describe it better than I. However, I think his simple formula has some profound implications for business.

I’m reading Josh Kaufman’s book, The Personal MBA. In his chapter, “Playing with Fire”, he discusses some of the pitfalls that many modern, especially large business fall into around using statistics, financial numbers, and algorithms to attempt to predict the future. Business executives have gotten used to using complex statistical models to attempt to divine the future, and in many respects are not all that better than reading tea leaves.

He espouses that creating and delivering value is essential for business success, but that many top executives come from a finance background and spend more time looking at and trusting their numbers than thinking about creating and delivering value. This can be exacerbated when the company doesn’t have enough people on the management team who have come through the ranks from the area where the value gets created. When the statistical models get trusted and attains higher weight than building and delivering value, I think the company’s future becomes suspect. It gets worse when a statistical model is used to drive “efficiencies” which in many cases end up lessening, not building value.

I also think that many companies today are far too short-sighted in their planning, especially those that are public. Planning, is based around annual financial statements (forced in some part by the SEC). Every decision is very heavily predicated on how the financial statements will look for the year, rather than building the overall value proposition.

So, it appears to me that learning how to quantify business value and use it in decision making is a skill not only important for software architects, but business leaders as well.