Value Increment (VI) and Innovation Increment (II)

A cornerstone of agile is incremental releases. This involves building a small, releasable piece, learning from the release, making adjustments as needed, and repeating the process. This approach requires a clear understanding of the desired outcome and a consistent way to communicate that across the entire value stream. To achieve this alignment and clarity among all contributing teams, two concepts are used: the "Value Increment" (VI) and the "Innovation Increment" (II).

A Value Increment (VI) is a deliverable unit of work that provides measurable value to an internal or external customer or stakeholder. It represents any increment of usable value, regardless of its size or the context in which it is delivered, ensuring that each piece of work contributes to the overall satisfaction and utility of the product, service, or process

Key Characteristics of a Value Increment:

• Delivery Focus: VIs are designed to deliver value, contributing to customer/stakeholder satisfaction and the utility of the product or service.
• Versatility: VIs can be applied across various contexts, including product development, service delivery, and process improvement.
• Incremental Delivery: VIs are part of an incremental delivery approach, where usable value is delivered in manageable pieces for quick feedback and adaptation.
• Strategic Alignment: VIs can be high-level strategic increments, low-level transactional increments, or anything in between, providing a clear line of sight from strategic goals to the delivered value.
• Decomposition: The process of breaking down work into VIs, then into features, and finally into user stories, provides a structured approach to value delivery.

Application of Value Increments:

• Product Development: VIs are essential for rapid iteration and feedback, enabling teams to test assumptions and adjust product direction.
• Service Delivery: In service-oriented environments, VIs ensure that each enhancement or new offering delivers immediate customer/stakeholder value.
• Process Improvement: VIs can be used to incrementally improve processes, ensuring that each change adds value to the organization or its customers/stakeholders.
• Strategic Initiatives: Linking VIs to strategic initiatives ensures alignment with organizational objectives, providing a clear path from strategy to execution.

Note: A Value Increment was previously called a Minimum Business Increment (MBI).

Innovation Increment (II)

An Innovation Increment (II) is a deliverable unit of work focused on discovering new ways to serve customers or stakeholders, often through experimentation and exploration of new markets or technologies. It represents a shift from incremental improvements to transformative changes that can lead to new products, services, or business models.

Key Characteristics of an Innovation Increment:

• Exploratory: IIs are designed to explore new possibilities, often through hypothesis-driven experimentation.
• Risk-Taking: IIs involve higher risk as they seek to break new ground rather than incrementally improve existing offerings.
• Discovery: IIs aim to understand unmet customer/stakeholder needs and desires.
• Strategic Alignment: IIs are often derived from strategic initiatives aimed at innovation, providing a clear path from strategy to innovation.

Application of Innovation Increments:

• New Product Development: IIs are crucial for developing entirely new products or services, often using Lean Startup methodologies.
• Market Expansion: IIs can be used to explore new markets or customer segments, testing assumptions about potential demand.
• Technology Exploration: IIs may involve exploring of new technologies or platforms to deliver value in novel ways.
• Business Model Innovation: IIs can lead to the creation of new business models or revenue streams, often through disruptive innovation.

Note: An Innovation Increment was previously called a Minimum Viable Product (MVP).

The concepts of Value Increment (VI) and Innovation Increment (II) provide a comprehensive framework for delivering value. VIs focus on incremental improvements to existing products, services, or processes, enhancing customer/stakeholder satisfaction. In contrast, IIs aim to discover new ways to serve customers/stakeholders through experimentation and risk-taking. By distinguishing between these two types of increments, organizations can align their work with strategic goals, foster customer satisfaction, drive continuous improvement, and pursue innovation to remain competitive.

VIs are not just for the external customer

While Value Increments (VIs) are inherently customer-centric, their focus on "business value" extends beyond direct benefits to external end-users. VIs can, and often should, target improvements that benefit the organization internally. These internal improvements ultimately contribute to better value delivery for external customers in the long run, but the immediate beneficiary is the business itself.

Examples of internally-focused VIs include:

• Platform Enhancements: Upgrading or improving internal platforms used to build and deliver products/services. This might not be directly visible to the customer, but it could lead to faster development cycles, improved reliability, or the ability to support new features in the future.
• Process Improvements: Streamlining internal processes (e.g., development, deployment, support) to reduce waste, improve efficiency, and increase team velocity.
• Technical Debt Reduction: Addressing accumulated technical debt to improve system maintainability, reduce bugs, and make future development easier. This is a proactive investment in long-term value.
• Tooling Upgrades: Implementing new tools or upgrading existing ones (e.g., for testing, monitoring, collaboration) to enhance team productivity and product quality.
• Agile Transformation Initiatives: Implementing steps in an organization's agile transformation. These improvements increase the ability of an organization to deliver customer facing value.
• Compliance and Security: Implementing changes to meet new regulatory requirements or enhance system security. These protect the business and, indirectly, the customer.

The key principle is that a VI must represent realizable business value. That value can be found in many areas, not just in features directly experienced by external customers. The business stakeholders define what constitutes value.

Advantages of a VI

The Value Increment (VI) approach offers several key advantages for organizations seeking to deliver value efficiently and effectively:

• Faster Value Realization: VIs prioritize delivering increments of business value that are as small as is practical. While smaller increments often lead to quicker development, deployment, and realization of benefits, the emphasis is on identifying the most efficient and effective size for each increment, balancing speed with delivering meaningful value. This provides a faster return on investment and facilitates rapid feedback.
• Reduced Risk: By breaking down work into smaller increments, the risk associated with large, complex projects is significantly reduced. Each VI can be validated independently, minimizing the potential for large-scale failures.
• Improved Adaptability: The incremental nature of VIs allows for greater flexibility and adaptability to changing market conditions or customer feedback. If priorities shift, the organization can easily adjust the sequencing of VIs or pivot to a different approach.
• Enhanced Collaboration and Alignment: The VI definition process requires collaboration between business stakeholders and the teams involved in delivery. This fosters a shared understanding of goals and priorities, leading to improved alignment across the organization.
• Better Work in Progress (WIP) Management: VIs provide a clear, manageable unit of work, helping teams focus on finishing one increment before starting another. This reduces context switching, improves efficiency, and promotes a more predictable flow of value.
• Comprehensive Value Delivery: VIs encompass all aspects of value realization, including not just development work, but also documentation, marketing, operations, and support. This ensures that the delivered value is complete and usable.

VIs as a bridge between contributing teams

VIs serve as a crucial communication and alignment tool, acting as a bridge between various teams contributing to the value stream. This goes beyond just "business" and "development"; it includes all teams involved in the process.

• Shared Understanding: The VI document itself provides a clear, concise, and consistent description of the desired outcome, the target audience, the benefit hypothesis, and the requirements. This shared artifact eliminates ambiguity and ensures everyone is working towards the same goal.
• Cross-Functional Collaboration: The process of creating a VI necessitates collaboration between business stakeholders, product owners, architects, developers, testers, operations, marketing, and other relevant teams. This collaborative process fosters communication and breaks down silos.
• Dependency Management: VIs explicitly address dependencies between teams. Where appropriate, Vis identify required support from shared services, operations, marketing and other groups. This proactively addresses potential roadblocks and ensures coordinated effort.
• Sequencing and Prioritization: VIs can be sequenced based on business priority, allowing different teams to align their work accordingly.
• Visible Progress and Feedback: As VIs are completed, progress is made visible to all stakeholders. This transparency allows for early feedback and course correction if needed, ensuring that all teams remain aligned throughout the development lifecycle.

Comparing VIs and IIs

Value Increments (VIs) and Innovation Increments (IIs) are both valuable tools, but they serve distinct purposes and are applicable in different contexts. Here's a comparison:

In essence, VIs are about execution and realization of defined value, while IIs are about exploration and discovery of potential value. Organizations often use IIs to test new ideas, and then, once an idea has been validated, transition to VIs to deliver the fully realized product/service. They are complementary tools in a comprehensive product development strategy.