PMI-ACP Tools and Techniques: Value Based Prioritization

[PMI-ACP® Exam Study Notes] Agile Value Based Prioritization is one of the ten Tools and Techniques for the PMI-ACP® exam. The “Tools and Techniques” accounts for a total of 50% of all the questions to be found on the exam paper. According to the PMI-ACP® exam content outline, Value Based Prioritization includes return on investment (ROI) / net present value (NPV) / internal rate of return (IRR), Compliance, customer-valued prioritization, minimally marketable feature (MMF) and relative prioritization / ranking.

PMI-ACP® Exam Importance: around 3-6 questions (~5% of all questions)

PMI-ACP® Tools and Techniques: Value Based Prioritization

• Prioritization is to organize things so that the most important ones are to be dealt with first
• Value-driven delivery is an overarching principle for Agile projects. Projects are carried out to realize values (e.g. economic benefits, competitive advantages, reducing risks, regulatory compliance, etc.)
• In terms of Agile project management (and the PMI-ACP® exam), prioritization is the process where customers organize / select product backlog / user stories for implementation based on the perceived values
• ROI / NPV / IRR
  • return on investment (ROI) / net present value (NPV) / internal rate of return (IRR) are tools to assist prioritization based on monetary values
  • return on investment (ROI) – the values a project realized (using present value) compared to the investment; a positive ROI means the project is profitable
  • net present value (NPV) – the net future cash flow (profit – expenditure) in terms of today’s value (adjusted for future inflation, etc.); a positive NPV means the project is profitable
  • internal rate of return (IRR) – this is somewhat like the interest rate of the investment; the higher the positive IRR, the more profitable the project

  • IRR is the discount rate “at which the project inflows (revenues) and project outflows (costs) are equal”

  • these calculations are performed during the selecting / justifying projects, the best projects are the ones with the largest ROI / highest NPV / highest IRR
• Compliance
  • conforming to a rule, such as a specification, policy, standard or law (e.g. regulatory compliance)
  • compliance usually requires documentation, which is somewhat against the principles of agile (working software over documentation)
  • a balance has to be struck (maybe with the help of Agile compliance management systems)
• Customer-valued Prioritization
  • deliver the highest value to the customers as early as possible
  • the backlog should be customer-valued prioritized while taking into accounts technical feasibilities, risks, dependencies, etc.
  • can win customer support
  • value prioritization schemes
    • simple schemes – rank from high to low (priority 1, 2, 3, …)
    • MoSCoW prioritization scheme – Must have, Should have, Could have, Would like to have, in future
    • Monopoly money – ask customers to give out (fake) money to individual business features in order to compare the relative priority
    • 100-Point method – customers are allowed to give, in total 100 points, to various features
    • Dot voting / Multi-voting – everyone is given a limited number of dots (~20% of the number of all options) to vote on the options
    • Kano analysis – plot the features on a graph with axes as Need Fulfilled / Not fulfilled vs Satisfied / Dissatisfied, each feature will then be classified as “exciters, satisfiers, dissatisfiers, indifferent”. Exciters are of highest values.
    • Requirements Prioritization model – rate each feature by benefits for having, penalty for not having, cost of producing, risks, etc. and calculate a score using a pre-defined weighted formula
    • CARVER (Criticality, Accessibility, Return, Vulnerability, Effect, and Recognizability) relative to the objective and mission of the project
      • Criticality – how important to be done upfront
      • Accessibility – can work on it immediately? or depends on other work / skills?
      • Return – ROI / NPV / IRR
      • Vulnerability – how easy to achieve the desired results?
      • Effect – what are the effects on the project (help moving towards the goal of the project)?
      • Recognizability – have the goals been clearly identified?
  • Relative Prioritization / Ranking
    • an ordered list of all user stories / features to be completed with 1 being the highest priority
    • when new features are to be added, it has to be compare, in terms of priority, to all current features
    • the schemes list above can be used to assist the relative prioritization / ranking tasks
• Minimally Marketable Features (MMF)
  • the minimal functionality set (a group of user stories or a package of features) that can deliver values (e.g. useful) to the customers / end-users
    • a distinct and deliverable feature of the system
    • provide significant values to the customer (can be sold / used immediately)
    • chosen for implementation after value based prioritization
    • can reap return on investment instantly
  • most suitable for software projects

Summary: Value Based Prioritization

This PMI-ACP® Exam Study notes touches upon one of the many tools and techniques of the PMI-ACP® exam syllabus – Agile Value Based Prioritization. Value Based Prioritization includes return on investment (ROI) / net present value (NPV) / internal rate of return (IRR), Compliance, customer-valued prioritization, minimally marketable feature (MMF) and relative prioritization / ranking.