How to Establish Customer Value Definition—Before Funding Occurs

    An executive for a Fortune 100 company recently asked me a question that seemed fairly simple: "How do I prove customer value?” The executive recounted how they make decisions to fund things that they are told customers will value, but they don’t really know what value customers actually receive. Simply put, decisions are being made based on claims around customer value definition, without there being any way to ensure those claims can be, and are, validated.

    In this post, I’ll outline how to do customer value definition up front, before funding takes place, and show how to tie metrics and features together in order to prove value is being received. My goal with this article is to inspire others to incorporate this idea into their frameworks and to build on this, so together we can create something that is simple to use and extremely powerful for leaders.

    How Business Apps and Websites Provide Value

    Before we can determine how to approach customer value definition, we first need to consider what it is that customers will actually value. Toward that end, I talked to quite a few people and asked them how they derive value from what I’ll call “business apps.” These are the applications enterprise DevOps teams create for their customers. These are the apps we as consumers would use for insurance, banking, travel, mobile phones, and retail. I also asked about programs people used for work. (In these conversations, I did not cover apps for entertainment, such as gaming or streaming.)

    The first thing I determined is that the value people look for in consumer-facing business applications and websites is generally very different than the value found in enterprise software employees need to do their jobs. This article will focus on apps used by customers rather than enterprise software.

    The takeaways from these conversations with business app customers were interesting, and very clear. With great consistency, people told me the faster they could get in and out of apps, the happier they were. Fundamentally, what they valued most was the speed and convenience with which they could use these apps to do necessary tasks—and the less frequently they need to use the apps, the better. For example, in discussing the use of a health insurance app, one person stated “I am happiest if I never have to access the app.”

    So, what do you fund when your customers find the most value in how little they have to use what you are creating? What it came down to was “save me time.” No one wants to waste time these days. Further, the younger the respondent, the more they expected their apps to know not just what they wanted to do but how—all in the name of expediency. Customers just assume your apps are secure, bug free, and user friendly and they will abandon the app if they struggle with fundamental usage.

    That sentiment was true regardless of the type of business app I asked about. One person told me about a retail app they used. After they had placed an order, they realized one of the items was not the model they wanted. Once they realized the mistake, they were able to easily fix the order, without having to call customer service or cancel the entire thing and start over. They mentioned that they expect all retail apps to be this easy to use and will shop more at stores whose apps meet or exceed these expectations.

    Proving Value

    If you read my blog post on how to take a hypothesis-driven approach, you already know that key business outcomes are only achieved if customers find value in what we do. Another part of the process needs to be defining the telemetry and the metrics you will use to prove value—and to do so up front, before anything is approved or ready for development.

    And this is where I found a gap: None of the current models helped me understand how to prove value up front. I looked at a range of approaches, including Scaled Agile Framework (SAFe), Scrum@Scale, Lean Startup, Design Thinking, Jobs to be Done, and a number of other planning methods. I was finding some parts, but not everything that’s needed to close the loop.

    Effectively, all the models just say that the work to be done should be something customers would find value in. However, these frameworks offer nothing in terms of how to determine whether the enhancements actually created value.

    This led me to develop a chart that can be used to prove that the changes you are making will provide value to customers. Note, however, you won’t replace your current planning with the chart below, but use it to supplement what you do today.

    How to Establish Customer Value Definition—Before Funding Occurs - Image 1Figure 1: Proving Value Chart

    I’ll admit that it looks very simplistic. It may seem like it should be more complex, but read the explanations in the following sections to understand the power it has. This chart helps the person creating the strategic ask to identify how they will prove value, so that the appropriate telemetry can be built in and metrics can be planned—and all this can be done prior to the funding of the initiative. The key is that all four elements described below need to be aligned and defined at the same time, if we are going to be able to deliver maximum value from what we create.

    Following is some definition of the elements that get entered into each column:

    Customer Value

    Based on the conversations I had with users, I will define customer value as “save time.” The value you define can be more of an emotional description, yet it has to be one that is measurable. Ensuring that the value is something that can be measured through telemetry helps you to eliminate those nebulous value statements, such as “improve customer experience” and “delight our customers.”

    Enhancement

    The enhancement is the feature or change you plan to make to try to create the defined value. For example, I might move vital information to the front page of my app to see if that allows my customers to save time. Note that the items in this column are usually guesses, so make them as small as possible. This is key to ensuring you can get that specific feature or capability into your customers’ hands quickly.

    Ultimately, you want to be able to see which enhancements are valuable and which are not. Throwing five changes into an individual release makes it very hard for you to tell which of those enhancements your customers like, and which makes the experience worse. Both of these aspects are critically important. I have had friends tell me they stopped using a credit card, simply because changes to the mobile app degraded their experience. The negative changes drove them to try a new card, and, because they preferred the new card issuer’s app, that is the card they opted to shop with.

    Metrics to Prove Outcome

    Metrics to prove outcome is where you define what the stakeholders for the product (leaders and finance teams, this is you) can use to validate if the enhancements are creating value. This column should define whether you want the metric to increase or decrease. Those funding or approving the enhancements should think about the items in this column and make sure that if they view the metrics listed month over month, that they can tell whether value is being created.

    Telemetry to Prove Outcome

    The items in this column are key to creating the metrics you want to use to prove the outcome is being met and therefore your customers are getting value from the changes you are making. These items must be incorporated into user stories or you can’t accept the feature as done. Do not let people push out this work. These elements are just as important as the features themselves.

    Following is an example of what a completed chart might look like:

    How to Establish Customer Value Definition—Before Funding Occurs - Image 2

    Figure 2: Sample Chart

    As a leader, I can see that if, on a month-over-month basis, number of clicks per visit is declining, people are spending less time on certain pages, visits per month have dropped, and app rating has maintained or increased, my customers are getting value from the changes.

    You might also want to monitor social media interactions and Net Promoter Scores to augment your ability to track customer happiness. None of these metrics by themselves tell you if your customers are happy but together, you can start to see trends in terms of what your customers find to be of value.

    The Power of Simplicity

    This chart is simplistic, but it is the only way I could find to tie all these elements together: anticipated customer value, the telemetry that needs to be embedded in the app to gather data, and the metrics leaders should consistently review to ensure value is being created. No current framework includes this combination—but they all should.

    To those authoring frameworks: Feel free to use this in your work. I’d just ask that you please reference this blog and credit Broadcom when you do.