|Value is in the eye of the stakeholder|
The only purpose of undertaking any business activity is to create value!
If undertaking the work destroys value the activity should not be started.
Any value proposition though is ‘in the eye of the stakeholder’ – this is rarely solely constrained by either time or cost. Effective value management requires an understanding of what is valuable to the organisation and the activity to create value should be focused on successfully delivering the anticipated value.
The chain of work starts with a project or similar activity initiated to create a new product, service or result. However, the new output by itself cannot deliver a benefit to the organisation and the project manager cannot be held responsible for the creation of value. The organisations management has to make effective use of the output to realise a benefit. It is the organisations management that manages the organisation and these people need to change the way the organisation works to realize the intended benefit. The role of the project team in value creation is to ensure their output has all of the necessary characteristics and components to allow the organisation to easily adopt the ‘new output’ into it’s overall way of working (eg, effective training materials).
The outcome from making effective use of the output is expected to create a benefit – however to realise a benefit, the outcome needs to support a strategic objective of the organisation. If the outcome is in conflict with the organisations strategy, value can still be destroyed. Strategic alignment is not an afterthought! The processes to initiate the project should have as a basic consideration its alignment with the organisations strategic objectives.
Assuming strategic alignment is achieved, the realised benefits should translate into real value. The challenge is often quantifying value – the concept of ‘value drivers’ helps. Value drivers allow the benefit to be quantified either financially or by other less tangible means.
In the current economic climate, organisations are finding operating capital in short supply. Therefore a new process to accelerate the billing cycle can be measured at several levels:
The above example may also trigger additional value by allowing the capital to be redeployed into another profit generating activity, improving customer relationships, etc.
Once the whole organisation is aware of the value proposition, decisions to de-scope the initial work to meet time constraints and/or cost constraints can be made sensibly.
The challenge is identifying and communicating the value drivers to all levels of management involved in the activity so that valuable decisions are made in preference to knee jerk gut reactions focused on short term, easy to measure metrics.
Value is created by meeting the strategic needs of the organisation’s stakeholders - this requires careful analysis and understanding of who they are and what are their real requirements; ie, effective stakeholder management.