By: Michel Thiry
Making sense of value: What is value?
© Michel Thiry 2017 (with permission)
Value has become a key element of sustained competitive advantage, but not just the more traditional sense of financial or shareholder value anymore. Today’s business context requires transient strategies and successful change initiatives as an essential element of value realization. Change initiatives can include programs, projects, innovation and continuous improvement. But how can we make sense of their value for the stakeholders and measure their successful realization beyond simple financial value?
The concepts underlying value management were established by Lawrence (Larry) Miles when he developed Value Analysis and Value Engineering for General Electric in the late 1940s and early 1950s. Since then, many disciplines have stemmed from those initial concepts; for example: TQM (Total Quality Management), Lean Management, Value Management and others.
Initially, value analysis was used to reduce purchasing costs of products by finding cheaper alternatives that would perform the same functions as the original, more expensive product. In the 1960s and 70s, Value Engineers defined value as a ratio between quality and cost, and later value managers defined it as the ratio between the satisfaction of the needs of the customer and the resources used to satisfy them.
This value ratio is the basis for many business measures like the ROI (Return vs Investment); SWOT (Strengths and Weaknesses vs Opportunities and Threats); the project management’s Scope and Quality vs Time and Cost; or the program management’s Alignment vs Achievability. To make sense of value, we must examine how value can be defined and mastered in every situation.
Making sense of value
In today’s VUCA (Volatile, Uncertain, Complex and Ambiguous) context, realized organizational value can be described as the balance between the alignment of an initiative with strategic objectives, or expected benefits, and the achievability of the agreed solutions. Alignment with strategic objectives has been linked to benefits realization management and achievability can be linked to the overall risk.
To realize value for the organization, when managing a change initiative:
The value index: How to measure value?
© Michel Thiry 2017 (with permission)
What is the value index?
Strategy developers, portfolio managers and program managers typically assess the alignment of options with the strategic objectives and compare them on that basis. A high-level risk analysis is performed to assess uncertainty and value is usually reduced to return on investment (ROI).
A true value index enables a comparison of strategic initiatives and portfolio or program components based on tangible and measurable factors. Decision-makers can compare options or rank potential initiatives on their broader value contribution by combining a measure of alignment with strategy, with a measure of achievability in a value score.
Alignment is a measure of how well an initiative, be it a strategic initiative, a program, or a project, contributes to achieving a strategy, or adds value to the organization or its clients. A measure of the alignment requires a clear statement of the agreed initiatives’ objectives.
Typically, key stakeholders are consulted and asked to state their expectations for the initiative, which are mapped and prioritized from strategic objectives to benefits, outcomes, outputs and capabilities. This creates a benefits map or Benefits Breakdown Structure (BBS). Value Management (VM) offers creative team methods to elicit expected benefits from stakeholders and functional analysis can be used to methodically develop the BBS.
Critical Success Factors (CSFs) are then identified and weighted; they are the benefits that matter. Weighted CSFs provide the alignment target score. Each initiative is then assessed against their contribution to these weighted CSFs to provide an alignment score. The conformity to those targets will also offer an alignment monitoring measure throughout the program or project.
Achievability is assessed against four main factors: financial, boundaries, resourcing and complexity. Each of these groups can be divided into individual measures. For example, what is the proportion of the initiative’s expected cost against the total available budget? What is the availability of the resources required to undertake this initiative? Is the expertise required to carry out that initiative sufficient? How familiar is the work that needs to be undertaken?
For all these questions, levels are set, and measures are agreed upon, like in risk analysis. Once the measures are agreed upon, each initiative’s achievability is assessed against an ideal score. The measure of achievability is a measure of the overall risk of that initiative against a series of known factors. And, the measures of achievability are also the measure of success of that initiative. It can also be used to set risk thresholds for portfolios or programs.
Calculating the value index
The value index is the combined score of alignment and achievability, where alignment is favored over achievability as it is of higher importance to value realization. The calculation of the value index offers an opportunity to negotiate the balance between available capabilities and expected benefits with the sponsors and key stakeholders.
How to balance benefits delivery with risk optimization to realize value?
© Michel Thiry 2017 (with permission)
Value realization is only possible if benefits are achieved; therefore, the continuous monitoring of both alignment with strategic objectives and achievability of the initiative are essential to realizing value. Value management is based on the balance of alignment and achievability and offers a robust method to combine benefits realization with risk management to ensure that initiatives undertaken will not only fulfill stakeholder’s expectations but also be realistic regarding available capabilities.
The change recipients, sponsors, program and project managers collaborate to set objectives that are agreed and achievable and align with the organization’s strategies. Typically, through creative thinking-based workshops, a value management (VM) facilitator will help elicit stakeholders’ expectations and creatively identify potential alternatives to achieve them.
During the performance cycle of decision management, value management will consist of monitoring benefits realization, continual risk assessment and sustaining value targets.
Sensemaking is aimed at identifying, mapping and prioritizing benefits. The output will be the benefits map and key performance indicators to measure their achievement.
In today’s VUCA context, organizations must be creative to maintain or gain a competitive edge. Ideation is a creative group process aimed at finding innovative alternatives to achieve the agreed benefits. This process enables a clear mapping of benefits to outputs.
The benefits realization management plan will combine the above elements with transition and integration support activities, their milestones and their ongoing monitoring.
Benefits realization is subjected to high ambiguity and is a creative team process.
Value management must include an assessment of the probability of achieving the benefits and overall value objectives. Risk thresholds define the achievability of a change initiative; once achievability factors are defined, they are used to assess the achievability of the initiative.
When the initiative has been approved for execution, the team will perform a risk analysis that will lead to the definition of contingency reserves and risk responses. Management reserves are based on the level of achievability, or overall risk.
During execution, risk responses will be implemented, reserves managed, and achievability issues monitored. If achievability, based on the factors used to approve the initiative, is questioned, the initiative’s owner or board could challenge it.
Risk management is subjected to uncertainty and requires an analytic process.
As organizations operate in increasingly complex and volatile contexts, the concept of value continues to evolve. The organizations that can strike the right balance between benefits realization and risk optimization, while fostering adaptability and responsiveness, will deliver value to their stakeholders. Selecting the most innovative business initiatives, based on their alignment to the strategy and achievability, is a difficult task which the application of a value index can support.
Interested in learning more and furthering the dialogue?
By: Jamie Champagne, PMI-PBA, PMP
You’ve gone virtual! No more stakeholders in the same room – so how do you not only get things done but get all your virtual attendees to work together WITH each other?
Come join me as we think about how to facilitate collaboration and turn our attendees into participants and really engage in our dynamic environments. Innovation is not creating new digital technology, but simply looking at the work you’re doing and how you’re doing it from a new perspective. And that’s exactly what we want to do! You want to take those tools in your toolbox that you already use and try them in new ways. You want to experiment with different techniques that you’re really comfortable with by incorporating technology and how our stakeholders are working in today’s information age. It can be as simple as using some of the online apps so that you show content in a different format. Or you can start to explore ways to have attendees participate in meetings. No more meeting minutes but produce your requirements DURING your sessions! I’d rather get the feedback in front of the entire group so that it is verified and validated all at the same time. Think about your online meeting tools – do you have people chat, whiteboard and annotate during your session? Even using these simple features is a great step to engaging! You want to think about what people can DO during your work. The more they take on and do themselves, the more it feels like their own ideas and they will own the idea to drive it to fruition. As analysts and project managers, you often are the facilitator with no ownership or decision-making authority but have all the responsibility to deliver. With a few changes in how we have participants actually participate during a meeting, you get that ownership with their actions!
Our challenges are different than they were before and so our approaches need to be different. In an age of digital transformations, artificial intelligence and business data analytics, think about how you incorporate those same topics in HOW you work and really engage your stakeholders. Do you work WITH them? Do you have THEM define the product, own it and drive the success? We’re often facilitators – the key here is to facilitate, make things easy for others! So, let’s get a little creative and think about how our stakeholders are (or are not) comfortable communicating today and build that into your work that gets people collaborating and creating those innovative ideas of tomorrow!
I’m so excited to share some ways to re-think your tried and true techniques! Of course, keep using what you’re already using if it works! However, not all of today’s environments are as easy to be successful in as they were before. So, when you need a different approach, I want you to leave with the ideas on how to shape the engagement you are driving. I’ll show off some of the easy (and free!) technologies out there that you build into your work. Use the tools as the vehicle to get your outcomes. You’re still doing the work you’ve done before and need to drive successful projects. You’re simply trying to figure out if there’s a faster, more efficient and effective way to get there that actually builds fun into the work and really gets engagement and collaboration from all those crazy stakeholders you have to work with!
Interested in learning more and furthering the dialogue?
By: Benjamin Anyacho, PMP
In a world of breathtaking changes, constant and quick learning of new things, openness to new ideas, and adaptation are no longer optional, but necessary. Learn or become irrelevant! Learning agility, versatility, feedback, knowledge exchange, making meaning of our experience, and collaboration are woven into the fabric of all high performing organizations. However, the way we learn and transfer knowledge has changed forever. Any profession or organization that ignores knowledge transfer and knowledge management will slip into inconsequence and oblivion. We can’t do that! Hence, the efficacy of a knowledge transfer culture. Friends, culture eats any strategy or idea for kahuna breakfast any day.
As hyper job mobility and the aging workforce have come to stay, the test of success is succession. The capacity to recover quickly from difficulties or disruptions such as the pandemic is our toughness, our resiliency. Knowledge transfer transcends handover-notes and must be intentional. You cannot force people to share or transfer their knowledge; instead, you must create the right knowledge transfer environment. Human interaction is the most significant enabler of the transfer of all human capabilities.
So, what’s the solution? A knowledge culture is one where knowledge has been identified as a significant factor of production, enshrined in the organizational strategy, celebrated, and rewarded. Knowledge transfer is not another program to be adopted, but philosophy in culture—and a way of life. Imagine,
If these statistics don’t wake us up for strategic knowledge transfer, sleep inertia must have numbed us! There needs to be a direct link or action plan to get all these five generations, including those who think they know it all, to exchange knowledge. It may be challenging, but every one of them goes to the café—hence knowledge café, which could be face-to-face or virtual.
I will be presenting a session entitled “Knowledge Transfer: Culture for Succession and Resilience that is Pandemic-Proof” on 20 October. This fun and intriguing session unravels how to create a culture of shared knowledge for succession, have the courage for learning agility, and produce a resilient comeback!
Knowledge transfer is critical in today’s environment of multiple generations in the workplace, a move towards project-based roles, a hyper-competitive global economy, and the incredibly fast pace of technology change. So, it’s time to create the right culture and environment, activate knowledge transfer tools, incentivize knowledge workers, bring everyone that knows something to the café.
In this session, attendees will gain practical skills for creating a knowledge transfer culture, learning agility for efficiency, and resilience in the new reality.
Interested in learning more and furthering the dialogue? Join me on October 20, 11:25 am - 11:57 am at the PMI Virtual Experience Series event for this presentation and take part in the question and answers with me and the rest of the PM community.
By: Esra Tepeli, Ph.D., PMP
Risk management is a growing concern in project management. Nowadays, we understand more the importance of having a robust risk management strategy. Due to uncertainties, project managers have difficulties reaching project objectives in terms of time, resource, cost, quality and safety. The most difficult part is to identify and assess the uncertainties with their possible impacts on the project objectives. However, “risk” can have another dimension called “opportunity”. For this reason, structuring a risk management strategy that includes not only risk events, but also opportunities will be beneficial for the corporate strategy.
Developing a strong and reliable risk management strategy can be quite difficult for complex projects. Complex projects may have a long and complex life-cycle, multiple stakeholders with a complex organizational plan, and contractual complexities. For these types of projects, identifying and assessing risks is a tough task, depending on the project’s characteristics and the environmental conditions, also feedback on similar risks can be inadequate.
In addition, a gap can be observed in the application of risk management methods in practice. For instance, in the field of construction projects, risk management is underestimated because project managers do not always have enough time to devote to risk management. However, the loss can be very critical for companies if a bad strategic decision has been made due to a lack of risk analysis, especially before the contracting phase.
For complex and strategic projects, it is important for the project stakeholders to identify and assess all the potential risks throughout the project life-cycle and establish an effective risk allocation framework. An objective, reliable and practical risk management process is essential for successful project implementation.
Taking into account the above facts, we have developed a formalized and systematic risk management approach in order to identify and assess project risks in a dynamic way and to take adequate action plans throughout the life-cycle of complex and strategic projects. The findings should enable the project stakeholders to establish a more efficient risk management framework in parallel with project management and to achieve project objectives.
The formalized and systematic risk management process has been developed on the careful analysis of complex projects to ensure its ability to deal with real projects in operational conditions. Besides, the views of a wide range of experts from all major players in complex and strategic projects have also been considered. The process will enable users to identify and assess project risks in a dynamic vision covering the entire project life-cycle, in parallel with project management, and to propose a response plan for risks deemed critical. The identification of risk events is based on a multidimensional and formalized project analysis, which intends to make a more objective, reliable and effective risk identification because each project is unique, has specific factors and needs to be analyzed separately in its case.
In summary, the formalized and systematic risk management process has several added values:
The method and tools were developed in close collaboration with project stakeholders, and their applicability was tested on several projects. The process has been tested by a variety of stakeholders to improve its use under different operating conditions and develop rich feedback for a variety of complex and strategic projects. In particular, the systematic approach for (Risk Identification), proposed in the model, in combination with the multidimensional project analysis received good feedback from practitioners. The ability of the prototype to approach with real context and to provide useful answers, such as a risk response plan, has been verified.
If you are interested in adopting new risk management models and tools in a dynamic and systematic approach, connect with me during my course Formalized and Systematic Risk Management Process for Complex Projects at SeminarsWorld® Virtual on 5-7 October. I look forward to discussing Risk and Opportunity Management with you!
By Vibhu Sinha, PMP
Why should we care about learning how to pitch? Can you think of a situation where you want others to look at the world from your perspective? Perhaps you want your business sponsor to provide funding for a new project; perhaps you want to embark on an acquisition as part of an inorganic growth strategy and you need to convince the Board that the acquisition is worth undertaking; perhaps you want to convince the interviewer that you’re the right candidate for the job; or on a personal note, perhaps you want to convince your children that eating popcorn is bad for their health. All of these situations require making your stakeholders (even if they’re your children) appreciate your view of the world or your vantage point. If you can envision the possibility of being in the midst of one of these or other similar situations, you will need to learn the skills of pitching.
Often people perceive that pitching is about looking sharp, memorizing facts, and making an impression on the audience by demonstrating their business or analytical acumen. It is not so. These attributes will help but they will not “move” your stakeholders. Often people also perceive that pitching is about using elegant words and flowery phrases. It is also not so. Pitching is about telling a story…a story that only
Perhaps you have been narrating stories your whole life or perhaps you’re new to it. The good news is that from the perspective of Behavioral Psychology, storytelling is less of an art and more of a science. There is a “formula” to storytelling that can be mastered and applied to pitching. And the formula is universal – applicable across industries, business sectors, geographical boundaries and cultures.
If you’re interested in learning more, join me on October 20 at 11:25 a.m. EDT (UTC-4) at the PMI Virtual Experience Series, where we explore the concepts behind storytelling in greater detail and participate in Q&A. This presentation was originally scheduled for 3-hours under the category of “hot topic”, in the format of an in-person workshop, at the PMI EMEA Conference in Prague, Czech Republic, earlier this year, but with the onset of COVID-19, we transitioned to a 25-minute session at the Virtual Experience Series. Ergo, I will make my best effort to answer as many questions as I could within the allotted time.