Value to whom?
Contents |
Abstract
The purpose of a project is to create value balancing risks and rewards [1] , but value for whom? It is necessary to understand which are the main stakeholders by underlining the importance of customers and of those who are defined end users, presenting also the strategies of communication that should be maintained with all these actors. The project benefits management plan, which is an additional document to the project charter and the project management plan, describes how to bring benefits and how to monitor them subsequently. A benefit delivers value, which can be tangible or intangible, to the organization and to people impacted by the project. Each organization, thanks to Program Management aims to increase its ability to transfer its benefits to society, consumers and users. Benefits are presented differently depending on whether a non-commercial organization (social value) or a commercial organization (business value) is considered. In the case of Portfolio Management there is a section completely dedicated to value management, to the descriptions of its components and the tasks which should be performed by the portfolio manager: from the negotiation of the expected value to final report value.[2] Finally in the article, the Agile approach will be considered and how this allows users to help increasing the value for themselves and for the company. In this way the needs and desires of the consumer are met in the best possible way; in fact consumers are one of the four fundamental pillars of the Agile manifesto. The big difference between predictive projects and agile projects is that, in the latter case, the value is delivered to consumers throughout the implementation of the agile project, not only at the end as can happen for example applying the Kanban approach (part of Lean Thinking) that focuses solely on the final value brought to the consumer. The value then flows very quickly and optimized to the end user who is the main reason why the project team and the leaders act in one way rather than another.
Introduction
Organizations which use correctly Project, Program, Portfolio management try to achieve a lot of objectives, but the most important one remains providing business value to their customers. (1) But how business value can be defined? The Project Management Istitute tried to summarize it in only one sentence considering a lot of other definitions together:
´´business value is the net benefit that will be realized by the customer of a project, and can be measured in either monetary or non-monetary terms ” [3]
In the graph in figure 1 we can see which are the steps that a project manager has to follow in order to understand if what he is actually doing has and creates business value.
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Company´s strategy, project management and value
The main goal of a company is to create a competitive advantage. This advantage arises from the additional value that a company is able to create for its customers with respect to the cost it incurs. In this way, customers will prefer the product of the company to that of competitors. According to Michael Porter, US economist and professor at Harvard Business School, a competitive advantage can be of two types: cost leadership (same product / service, but at lower cost) or differentiation (alternative and / or innovative product). Thanks to the use of the value chain, a model theorized by himself in 1985, it is possible to select and understand the most important business processes and therefore those that contribute to have value for the end customer. [4]Every project or program should be an expression of the organization's strategy. Due to the fact that the strategy often is confused with the objectives pursued, or simply it is identified with the company mission, there is the need to underline that a strategy is not what an organization wants to achieve, but what it decides to do in order to achieve it, starting from precise choices on which are the main company´s needs to who it wants to address, and what is its value proposition.
A perfect harmony is needed between the strategies followed by the business units and the company's projects. In fact, a project must be an integral part of all the activities that constitute the strategy by which the company aims to achieve its competitive advantage. Communication between the executives and the PMO is fundamental and this is also the only way to ensure perfect consistency, and, thus,to enable the company to achieve high successes. Otherwise, the lack of alignment between strategy and project management is one of the most common causes of failure of companies and, for this reason, one of the greatest challenges.
Success of a project
In order to evaluate the success of a project, indicators such as being on time, respecting the budget and satisfying the scope were used in the past few years, but this idea is changing continuously; in fact, projects that do not respect these characteristics could still bring value to the company. [5]
“The new definition of project success is that a project can exceed its time and cost estimates as long as the client determines that it is successful by whatever criteria they use.” [6]
The new trend is to focus on different factors that put the end user in a central conception. In this sense we consider:
- The level of satisfaction of the stakeholders and of the final customer. Customer satisfaction has become one of the main objectives for companies; in fact, more often, they ask themselves if the client appreciates the work done and the skills demonstrated, if the project creates the conditions for further future collaborations. Some stakeholders may maintain doubts about the quality of the work done. It is good to intercept these doubts during the project and to understand their motivations before it is too late. For this reason it is advisable to carry out an analysis of the stakeholders and take the consequent actions.
-The users’ adoption. It happens that the outcome realized by a project is not used after its delivery. There can be a lot of motivations depending, for example, on misunderstandings of customers´ requirements or on not high involvement of users in the project.
The value obtained by the project must be defined before the start of it. Several criteria can be set and therefore the metrics to be used for its evaluation are different. The value of a project can in fact refer to the financial value, the value for the customer, the value for the stakeholders, the value for the shareholders, the employment value, the infrastructure value, the expected contribution to the company business, the environmental value, health, safety.
But, who is the main responsible for this value?
There are a lot of different ideas about the answer to this question. With the paper presented at PMI® Global Congress in 2012 James, V. M. has declared that not only the project manager is responsible for reaching an high business value, but also other actors such as the Project Sponsor who makes the decisions and is the main value promoter, the business analyst who will analyze data and quantitatively will try to understand which projects bring value to the organization and which not, and finally, but not for this reason less important, subject matter experts (SMEs) who must be involved throughout the project and not just at the end. [7]
Portfolio Value Management
The main idea of Value Management is the maximization of value that is generated by the realization of project and program´s benefits. Value is an indicator of the effect an entity or offering can deliver. Higher is the value higher is the impact it has on the company’s environment. It can be expressed in different ways depending on the types of goals an organization tries to pursue. For example, a public organization will receive value in reducing the costs and increasing people satisfaction while in case of private organizations the most relevant value is increasing profits.
Metrics can be used in order to evaluate tangible value (Skills uplift,Resource capacity, Market share, Client satisfaction or economic value), but for intangible value (Brand awareness, organization’s reputation Risk exposure, Compliance, and Societal value) the evaluation is more difficult. [8]
In figure 2 can be seen which are the main activities of Portfolio Value Management. The Portfolio Manager must excel in negotiating the expected value, maximizing returns, realizing and reporting value. As regarding negotiation different tools can be used as the Value management framework which allows the definition of a target value for each portfolio´s component.
A key role in this sense is played by the external environment and organizational purposes and strategy which can affect the generation and the kind of value. It must be noted the presence of two feedback loops, the first one which links together the Portfolio expected value obtained after the expected value negotiation and the Portfolio required value given by the strategy’s development, while instead, the latter, which has an higher impact, integrates measurements of performance, achieved value and environmental factors.
Agile approach
Before starting a project it is important to involve consumers in order to understand what are their requests and expectations and how these can be transformed into business value by the project team. In this sense, thanks to Agile Approach, users become an integral part of the project as the unique soul of the organizational body and they are not treated only as external actors. The life of the project revolves around them. Their importance can be noticed even more in the "Agile Manifesto" which bases its philosophy on four factors:
1) Attention should be more focused on individuals and interactions than on processes and tools;
2) Working on the software is more important than complete documentation
3) Collaboration with the client is more vital than contract negotiation
4) The process should respond to change rather than being tied to a plan.
The Agile method introduces a method of Project Management that allows the realization of a project by phases, called "sprint", each of them focused on new functions. It is usually shown to customers the work which is done continuously in order to verify their satisfaction. It is therefore possible to make changes very quickly, thus avoiding the failure of a project already completed.
The adoption of the Agile method involved changes in the organizational structure of the teams, in the planning of work and in the culture of companies. Agile in fact allows to achieve reactivity, costs and fixed times, with the aim of giving value to the entire business and to the customers themselves.
Value in construction and IT projects
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Bibliography and sources description
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- ↑ ©2017 Project Management Institute, Inc. A Guide to the PROJECT MANAGEMENT BODY OF KNOWLEDGE ( PMBOK ® GUIDE ) Sixth Edition
- ↑ ©2017 Project Management Institute, Inc. The Standard for PORTFOLIO MANAGEMENT
- ↑ Phillipy, M. A. (2014). Delivering business value: The most important aspect of project management. Paper presented at PMI® Global Congress 2014—North America, Phoenix, AZ. Newtown Square, PA: Project Management Institute
- ↑ Michael E. Porter Competitive Advantage, Free Press, New York, 1985
- ↑ James, V. M. (2012). Achieve project success by delivering business value. Paper presented at PMI® Global Congress 2012—North America, Vancouver, British Columbia, Canada. Newtown Square, PA: Project Management Institute
- ↑ Top 10 Project Management Trends for 2012 J. LeRoy Ward, PMP, PgMP, Executive Vice President, Product Strategy & Management, ESI International)
- ↑ James, V. M. (2012). Achieve project success by delivering business value. Paper presented at PMI® Global Congress 2012—North America, Vancouver, British Columbia, Canada. Newtown Square, PA: Project Management Institute.
- ↑ ©2017 Project Management Institute, Inc. A Guide to the PROJECT MANAGEMENT BODY OF KNOWLEDGE ( PMBOK ® GUIDE ) Sixth Edition
