The vast majority of organizations fail to realize the potential benefits of their projects/business initiatives. The projects take too long, have budget overruns, and don’t deliver the promised value.
There are many potential reasons for this, including:
- No standard approach to building a business case
- Unclear linkage between business strategy and the project
- Lack of sponsorship and collaboration during business case development
- No effective and compelling benchmarks
- Limited benefit quantification and clear investment success criteria
- Inability to detail the hard dollar benefits, which makes it hard to justify the costs
As a result, many organizations simply underperform and fail to attain the business benefits promised by their initial projections. One survey by ASUG (America’s SAP User Group) found that:
- 73 percent of companies don’t quantitatively measure value post implementation
- 50 percent achieve value later than planned
- 83 percent miss their benefit objectives
How can we overcome this shortcoming? One remedy is to do a better job at value management.
Simply put, value management is a methodology that links project management to metrics. It encompasses several important sub-disciplines, including benchmarking, building business cases, and executing better. It requires organizations to establish best practices for deriving more value from projects and replicating them throughout the organization.
An important component within the methodology is the mapping of business cases to strategic objectives. This allows your organization to be smarter about evaluating proposed initiatives, picking which ones to pursue, executing them effectively for maximum business impact, and managing portfolios of initiatives. In short, it helps close the gap between strategy and execution.
Value management isn’t easy. If it was, more companies would be doing it. Value management requires a systemic approach and organizational focus.
The first step is to define what value means to your organization. Value isn’t necessarily financial. For some, it means maximizing profitability; for others, it may be a matter of risk management or innovative research and development ideas. Four common value categories are:
- Measurable benefit: most common definition of value; includes all the classic elements, such as reducing costs and increasing revenue
- Strategy enablement: ability to integrate new business units—especially for companies undergoing inorganic growth (i.e., through acquisitions or mergers)
- Risk and compliance: projects need to happen; in this case ROI may be less important than preventing an accounting scandal
- Innovation: most subjective category; a focus on freeing a subset of investments to pursue game-changing innovation
Value management is a journey, not a destination. The journey doesn’t end when you arrive at a certain result. Rather, it’s an ongoing process of constantly striving for better results, achieving them, and setting new goals based on changing business circumstances and current priorities.
The best way to begin this journey is to start with a limited scope project in one particular area of your organization. These small scale projects allow the organization to grow comfortable with the procedures before expanding value management to the entire organization.