Are Your Projects Delivering Business Value? The Importance of the Value Equation

Are Your Projects Delivering Business Value? The Importance of the Value Equation
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Today, around the world, there are millions of projects being launched. Most of these will fail – unnecessarily – on one or more dimensions. Worse than running over time or over-budget, these projects will deliver poor financial returns, substandard operating processes, compromised products and services to customers and ultimately, reduced shareholder returns.

Research from the Standish Group, the Boston Consulting Group and others have identified that only 37% of projects are considered successful1. The success rate has not increased significantly over the past 20 years even with the investment in improved project management methodologies, software development methodologies and training in those methodologies.

Why Does Waste and Value Loss Occur?

For your company to get the business results and investment value it desires from all of your projects, you must first identify the full value for the project, specify how it can be achieved and then plan its realization.

While this may sound obvious, too few projects actually do this. Routinely most organizations, even when they have formally defined their targeted benefits in a business case, deliver less than half of the total available business benefits.

This is primarily because they don’t focus on their benefits’ identification or realization. Instead they ‘hope’ that the benefits will be delivered or enabled by the project. However, the project itself is rarely focused on enabling, supporting or delivering the business benefits—hence the ‘value gap’—the ‘gap’ between what the project delivers and what the business needs to fully realize the business value. This ‘gap’ is rarely visible, acknowledged or managed.

The lack of a formal and comprehensive ‘value equation’ for a project investment commonly results in many, if not most, of the available benefits being missed, lost or destroyed.

The TOP® Value Equation™ solves the problem of project waste—it maximizes the available value, specifies the measurable business outcomes and benefits that deliver the value and then identifies the change activities required to realize the value.

The ‘Value Equation’ Process

A full business-based ‘Value Equation’ can substantially increase the actual value realized from an investment by increasing the realization of the 60%-70% of the available value that is too often missed!

The TOP Value Equation is specifically designed to fill the value ‘gap’ by:

1. Identifying all of the available benefits (not just ‘enough benefits’ to get the project approved)

2. Defining specific measurable end states—the desired business outcomes—that need to be achieved in the business for the benefits to be delivered in full (filling the ‘gap’)

3. Maximizing and then quantifying all of the available financial benefits

4. Identifying the change activities required to deliver these outcomes, benefits and value.

This Value Equation approach gives you:

  • a clear, measurable definition of your future operational business-as-usual end states;

  • a clear roadmap for delivery, making clear the interdependencies between outcomes;

  • a basis for directing, controlling and governing the subsequent change/implementation/ program to achieve the business outcomes and their benefits (and not get ‘lost’ in the technical issues and options);

  • The detailed change activity list, which includes all of the activities for the business and the project that can then be used to develop far more robust cost estimates for the project and also be used as the basis from developing the work break down structure and schedule for the project plan.

Our experience has shown that organizations that take the time to develop a Value Equation generate, deliver and realize significantly more business value from their projects.

The Value Equation shifts the emphasis to “why are we doing this project and where is the value?” rather than simply “what is the cost?”

About the Author: Bob Phelan is the Regional Partner of Totally Optimized Projects (TOP®) and a Partner with P & Y Associates, LLC a certified TOP® Delivery Partner. He helps business leaders bridge the gap between strategy and achieving business results. He has executed strategy in several executive roles at GE that includes leading the Six Sigma implementation at a GE Capital business as well as in consulting roles. Follow him on LinkedIn: