On average, companies get about half the value they could out of projects, and nearly all think they could do better. Typically, companies spend about five percent of sales on strategic initiatives value-creating or special projects that focus on longer-term goals with a payoff further out than the current financial year.
If you could get an additional fifty percent ROI from “strategic projects” by adopting best practices, then it wouldn’t seem a stretch to say, you could also improve performance across all aspects of your business by five percent. To do so, you’d need to implement value realization management best practices in the areas where you want to make performance improvements. These best practices take the form of:
- Organizational changes
- Better identification of key performance indicators
- More rigorous project management practices.
What we’re talking about here is the need to design and implement a methodology for doing things better. On the one hand, it isn’t difficult. You decide what you want to improve, set a target, and work towards the goal. Given enough resources, it’s reasonable to expect to hit any target. The problem, of course, is we’re dealing with limited resources and competing demand for those resources – which in and of itself is a problem.
To an extent, we’re learning as we go. Once we have found a better way of doing something – more effectively, more efficiently, and in a way that’s repeatable – then we want to make it part of our organization’s fabric.
A Three-Step Process for Improving Operational Performance
Performance improvement is a three step process:
- First, you have to do some analysis and identify where you have a need to improve. What’s a good tool for doing this? Benchmarking. Benchmarking lets you compare your performance with a selected peer group and see where you where you need to improve.
- Next, you have to develop a strategy or plan that prescribes what needs to happen or to improve. How do we get from A to B?
- Finally, you need to make it happen. And this, of course, is the most difficult part. It’s like the diet and exercise piece of the puzzle, the thing with which most of us struggle.
Purpose built software tools help by installing some discipline into the process, as well as making it easier to determine what’s happening, allowing us to:
- Identify the root-cause of problems
- Collaborate on finding answers and making informed decisions
- Allocate resources and prioritize activities as business conditions change
- Link KPIs to initiatives and measure the impact the initiatives on the KPIs
- Define libraries of recommended best practices, KPIs, and associated business objectives
If we really are serious about driving performance improvements, then these are the capabilities applications must provide to better enable our value realization management programs.