Flashback: This Week in the Past on Tyner Blain [Feb 9]

reflection

A look back at the best from this week in the past.

Using ROI For Requirements is a Risky Business

dice

We must allow for risk when calculating ROI

We’ve talked repeatedly about using ROI to drive prioritization of requirements based upon value. ROI can be used as the basis for prioritization for all decision making.

If we fail to take risk into account, our calculations will certainly be wrong, and we may make a poor decision. When we talk about accounting for risk in this context, we mean that we are accounting for the unlikely, undesired, or unintentional outcomes. We use the term expected value to refer to the risk adjusted approximation of the outcome. In financial circles, this is also called discounting.

The most common mistake people make when calculating ROI is failing to take into account the expected value of the return or the expected value of the cost of a project.

Foundation Series: Intro to Utility Curves

classroom

Utility is an abstract concept usually relegated to economics. What is it? How does it work?

Prioritization With ROI and Utility

cards

Prioritization with ROI is generally thought of as a quantitative analysis. For hard and soft ROI, that is true. But benefits can not always be quantified. Economists get around this with the notion of utility. You have to make a prediction of the utility of the requirement or feature. How do you do that?

Five Return on Investment Calculation Tips

boomerang

Return on investment calculation is critical to using ROI for prioritizing requirements. We’ve discussed how to forecast return on investment by estimating costs and predicting benefits. Here are five tips to help you when calculating return on investment.

Leave a Reply

Your email address will not be published. Required fields are marked *