PPM Intelligence

The What, Why, How & What-if of Value Management

Essentials overview by Roger Davies, Managing Director Impact Dynamics

[ribbon-light]What is Value Management?[/ribbon-light]Value Management is about delivering more for less. It addresses the fundamental imperative in our current dire economic climate to grow wealth whilst consuming fewer resources and incurring less cost. Value Management is outcome focused, meaning that we are principally concerned with delivering value outcomes, benefits, to key business stakeholders, such as shareholders, customers and staff, in addition to society and the global community as a whole. We define value as the relationship between the benefits realised by a stakeholder and what it costs them. As economics is the study of how wealth is created and distributed, value is the measure of more for less.

Change programmes are the most effective vehicle we have for delivering better stakeholder outcomes and cover all types of and sizes of initiatives from continuous operational improvements to complete business transformation portfolios. So more specifically, Value Management provides a practical means to deliver much greater stakeholder value from change programmes and portfolios.

[ribbon-light]Why is Value Management Important?[/ribbon-light]Change programmes have a very poor record in delivering anything like the value that they promised and in many cases incur massive losses. This is particularly true of Information Technology (IT). Although Value Management covers much more than technology, this is important because IT typical comprises a major part of any programme.

Despite advances in IT architecture, software design processes, standards and programme management value delivery has not mirrored these improvements. We must be missing something, but what is it? Our experience and research over 30 years across both private and public sectors indicates that failure to deliver intended value is due to a fundamental causal disconnect between programmes and the stakeholder benefits which the programmes are intended to deliver.

Consequently, Value Management places great emphasis on working with the true causal relationships driving today’s dynamic business environment. To make this shift we need to change the way we perceive and respond to problems and opportunities. Essentially, this means we must see beyond surface events to the underlying patterns of cause and effect. We also need to support this thinking with tools that deal with relational complexity.

[ribbon-light]How does it help to deliver greater value from change programmes?[/ribbon-light]

Value Management targets investment where most value can be created, delivers that value quickly and aligns investment optimally by ensuring that all people engaged in the business and those effecting change through programmes are pulling in the same direction. This is achieved through six key steps incorporated within the Value Management framework, IMPACT:

[ribbon-light]Intention:[/ribbon-light]We define the business vision and specific stakeholder benefits, together with high level programme deliverables, with clear, unambiguous ownership and accountability for both deliverables and benefits.

[ribbon-light]Model:[/ribbon-light]We model key cause and effect relationships in the business using some of the most advanced simulation tools available and home in on the most critical performance drivers, the leverage points, against which to target the investment.

[ribbon-light]Programme:[/ribbon-light]The performance drivers and consequential benefits are linked dynamically to the deliverables and specific programme phases which output one or more whole or partial deliverables.

[ribbon-light]Alignment:[/ribbon-light]The programme is optimised to target, time and align the deliverables with the business in order to maximise value most quickly for least cost and risk. This produces an Implementation Strategy, which is a programme plan or portfolio aligned with the business vision.

[ribbon-light]Certainty:[/ribbon-light]We determine the bounds within which we can be as certain as practically possible that the programme will deliver intended value by subjecting it to extremes using sensitivity, risk and scenario analyses, along with exhaustive user reviews. The resulting output is an approved Baseline Business Case.

[ribbon-light]Track:[/ribbon-light] In addition to cost, time and quality of deliverables, we track changes in performance drivers, together with consequential benefits, during and post implementation to ensure that intended programme value is realised. This is called Value Realisation and is one of the most neglected yet critical aspects of programme management.

[ribbon-light]How quickly can results be expected and what will it cost?[/ribbon-light]A surprisingly short time and low cost. The key to success is ‘measure twice cut once’. This means that rather than go for a sexy, all or nothing big bang implementation, with hefty front end costs, high risks and late benefits, we implement time and effort boxed proof of concept pilots. These have three major advantages:

First, they can deliver significant, sustainable value very quickly and cost effectively. Secondly, they reduce risk by proving key elements early, using models in which we can afford to make mistakes. Thirdly, they inject certainty into the specification for subsequent industry strength solutions.

For example, many companies use Business Intelligence (BI) to manage the shear weight of data in their businesses. These systems are very large, complex and immensely expensive, taking many months to implement. They are not tolerant to change if, as is normal, the market shifts or the business is reorganised and new requirements are needed.

Conversely, dynamics models used for proof of concept pilots can be built in days, sometimes hours and even in real-time during Value Breakthrough workshops, and their insights enable the release of real value almost immediately.

In Value Management we combine the analytical power of BI with the predictive capability of dynamics modelling to provide complementary ‘rear view mirror’ and ‘front windscreen’ views of the business. We call this Dynamic Performance Management.

[ribbon-light]Where can I learn more?[/ribbon-light]Our book, Value Management: Translating Aspirations into Performance published by Gower was launched in October 2011 and provides a manual for what we have outlined in this article.

Learn more about the power and application of Value Management by visiting www.impactdynamics.co.uk

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