What is The Lean Value Tree

This is the first of the number of posts that aim to share learnings around the use of the Lean Value Tree to prioritise work at scale. The context is a company that builds software for both sides of a marketplace and operates across multiple international borders at some scale and the challenge is ensuring focus on the customer problem as the engine of growth and then driving company wide alignment around this.

Intro: Everyone wants to know how stuff gets prioritised and why their stuff is not getting done

It would be great if the answer could be something simple like a formula involving effort, impact, value created and risk. But even if such a formula did exist and was accurate — How often have you seen a £m business case that never delivered £m of upside and how many times has an estimate come back and turned out to be wrong? And that is before we even get to the law of unintended consequences! Even if you could take the edge of these known issues you would still have too many things to do and you’d then need to go through every idea and add additional weightings: Does it align to the strategy, does it address a core customer need, does it serve one market or just one customer?

So quite quickly even the theoretically simple gets quite complex. But while it’s never simple you can start to solve this by having a clear framework for making decisions that is transparent and ensure all work is clearly aligned to the company’s mission — whatever that may be.

An Overview of How The Lean Value Tree Works

It seems there is not much online about this framework apart from these slides, but myself and some of the team were fortunate to have worked at a company where this had been applied and so seen a detailed explanation first hand and had a chance to operate it.

Here is a summary

At the top of the tree there is the concept of the mission and a finite number of strategic goals and bets that are needed to deliver the mission.

How the top of the tree works

• The mission is an ambitious destination that it will probably take years to reach. Think Uber and their mission to replace public transport or Deliveroo’s mission to replace the kitchen, etc.
• The strategic goals are clear statements that explain what we will do to achieve the mission, each goal is accompanied by a number of clear business measures that indicate progress towards the mission. Agreeing these and their measures is really important as the goals will define the business and what it does and does not do. And there really should not be too many of these.
• The Bets are where it gets interesting. These are the assumptions that we believe will deliver the strategic goals: Secondary ERB will let us add inventory, A single website will make us more efficient and scalable, etc. Language is important here, because these are bets based on assumptions. The Goal is to have the bet form a clear brief and to build a team to work to this brief and test the assumptions behind it.

Explaining the tactical layer

The tactical layer is the best bit — it is where people see what we are going to do. But — critically — because of the work done above we know that what we are doing is advancing the mission. In the tactical layer we have the following items

• Promises of value represent the definition of the problem and the value it will bring (more detail below)
• Promises of delivery the things we will do/build to deliver the value

The idea here is that we take the bets and allocate them to teams or collections of teams or even cross functional groups and ask them to understand how to deliver the bet. At this point it’s common to call out all the stuff we want to deliver as business for ourselves and our customers and assign it to a bet. But if you study the framework there is an essential check here. Before anything gets passed to a team to build it is essential to establish the value it will generate for the customer (in our two-sided market place we have B2C customers, B2B customers and internal teams)

Definition of value: Products or services that solve a problem for a customer or end-user, for which they are willing to exchange some other value, like money (or time, information, energy etc.)

Only once the value has been established do we then look at how to deliver this. This sounds obvious but having done this before I have seen how the value bit gets skipped. There are multiple reasons why the analysis of the value gets skipped

1. It is hard, often requiring people to stick together multiple data sources and model these over time and these skills might not be in the team
2. It needs research to make sure we really understand the customer problem and this take time to do and organise (but it does not need to be: This earlier post)
3. People have favourite projects. This seems dysfunctional but many things seem so obvious to people that just need to get done, but even these need 1 & 2. Assumptions need to be tested, esp when time and money is in short supply
4. Some work is in flight so people just want to finish it, probably fair enough. Unless there are still 6 months to go and it turns out not to solve any problem anywhere

Warning!

If you shortcut the definition of value these problems will come around:

1. There is no way to check if a situation for the customer has been improved
2. The wrong thing gets done because the value for the customer was actually zero
3. The right thing gets done but done but it takes ages because it was over-complicated for the size of the problem
4. All of the above: The work took ages, there was no way to measure the value to the customer and it turns out the bet was based on an assumption that was probably wrong.

The ideal outcome is a well understood problem with a range of solutions validated with customers through prototyping and research. The expectation is that many of these validation efforts will fail, but this is good as the next step is to build the smallest piece of working software to start to validate the bet at scale — no tears!

What next?

See follow up posts for Solving Customer Problems First With The Lean Value Tree for How to sell the in the framework and build consensus around the priorities that come from this. And how you make the framework part of everyday working.

Other People’s Links

Super succinct summary: https://openpracticelibrary.com/practice/lean-value-tree/

The only slides I can find on this topic: https://www.slideshare.net/steve236/lean-value-tree-overview-82783795

Possibly the original deck from a ThoughtWorks presentation: https://www.slideshare.net/OllieStevensonGoldsm/strategy-in-a-lean-enterprise