Pulling the 'levers of value' to deliver genuine business benefit in financial services programs



The financial services sector runs many programs to:

  • deliver business change to become ever more customer focused;
  • create improved financial products, many web-based;
  • reduce operating and transaction costs.

One of the key issues that these programs have to deal with is how to ensure that real business benefit is delivered to the organisation. Effective program and project processes are important, but alone will not guarantee that benefit is delivered. It is fundamentally important that the right programs and projects are run; delivering the wrong program perfectly is simply wasteful of resource and destroys value.

This paper sets out a methodology to help financial services companies to deliver increased value to their clients and shareholders from their portfolio of programs and projects. Value management has a relatively long history in technically orientated industries, helping to increase the ‘bang for the buck’ across aerospace, defence, process engineering, building, and construction. We have developed this well-established process for systematic use in the financial services sector to increase genuine business benefit delivered.

The context of the financial service sector for value management

Projectisation of the financial business sector has generally been slower than other more technically orientated industries. This may be because the sector has traditionally enjoyed far higher profit margins from its operations than more heavily project-based industries. Its income streams have historically not been derived primarily from new products as other sectors have. (For instance Cooper, et al (2001) report that ‘an estimated 50% of a firm's sales today come from new products introduced to the market within the previous five years'.) However, the market for financial services has become far more open in the last ten years or so as deregulation and disintermediation have changed the competitive environment.

Changes in the way strategic change is achieved

Exhibit 1. Changes in the way strategic change is achieved

Traditional financial services products such as the management of investments, sales of long term financial products, and even straightforward retail banking products can now no longer be relied on to provide low cost, high margin income, at an acceptable risk. A steady stream of new products and operations-centred cost reduction programs are becoming increasingly the norm. The way that company strategy is enacted is changing, Exhibit 1. The portfolio of programs is becoming increasingly important in strategy delivery, as business-as-usual becomes a less effective means of doing this.

Project management in the financial services sector is often driven by the Information Technology and Communications (ITC) departments. This has come about as ITC infrastructure was built over the last 25 years to capitalise on the cost reduction opportunities available from using the technology. It is possible to surmise that resistance, or at least the perception of resistance, to projectisation in the sector has been due, to some extent, to generally poor performance of ITC projects. There is now an increasing acceptance that non-technical sectors of the financial service businesses need essentially to address business challenges, not technical challenges. The emphasis is on running business projects, not ITC projects.

The challenges to overcome to extract greater value from the portfolio

Mintzberg (1995) postulated some time ago that realized strategy (that which actually happens) is a combination of:

‘...deliberate strategies, where intentions that existed previously were realised, [and] emergent strategies, where patterns developed in the absence of intentions, or despite them...’

A company's portfolio of programs is often a classic example of this happening in real life. It is frequently the case that the portfolio is made up of programs deliberately set up by senior management to deliver specific strategic goals, and other programs that have been sanctioned, as and when they were proposed, ‘from the ranks’. In addition to what may have become an inappropriate mix of programs, the delivery of business strategy through the P3 processes (Portfolio: Program: Project) is also ineffective for some firms. The major challenges we have found are described in the following section.

Business strategy

Business strategy development is mostly the job of senior management – in most cases to maximize shareholder value. As in all sectors of business some companies have been better at this than others.

P3 and the challenges for maximising business benefit

Exhibit 2 P3 and the challenges for maximising business benefit

Portfolio management

Managing the portfolio effectively means defining the suite of programs needed in order to ensure delivery of the part of the strategy that is to be delivered by programs and projects.

Portfolio management, as a technique, is well understood by firms operating in the financial services industry, since:

  1. They have been successfully managing portfolios of investment vehicles for decades;
  2. Moreover, these portfolios have often been multi-national in nature.

However, the management of portfolios of programs and projects is sometimes not as well managed as the investment portfolios. Perhaps this is due to the way that strategic change has traditionally been implemented through business-as-usual (see Exhibit 1). The need to effectively manage portfolios of business change programs is relatively new for many companies in this sector. The linkages between strategic goals, the portfolio, programs, and projects are often not as clearly articulated as it could be.

Program management

Program management means:

  • for a new product, shaping the development process (and projects within this);
  • for all programs ensuring benefits are measured and delivered (harvested);
  • managing change for effective product and business performance;
  • optimising use of resources between programs and projects across the portfolio.

There is (and has been for some time) an increasing emphasis on sophisticated business programs involving multiple projects (which often have phased delivery schedules), as business change becomes ever more important to the survival and prosperity of companies in this sector.

Methodologies are, in general, not so well developed for program management as for project management. This undoubtedly contributes to poor definition of programs. Managing the realisation of benefits is a particular area of concern.

Project management

Project management has a well-defined framework, with considerable agreement across industries and nations of what effective project management means, and how it should be carried out.


In the context of the financial services industry projects are where the work is actually carried out to deliver the program and portfolio objectives. Crucially, delivering maximum value from these projects means that greater attention must be paid to front-end definition and alignment with the program strategy. Applying good project practices to non-technical projects is fundamental, although not always understood to be so.

INDECO has developed and implemented a value improvement methodology that addresses these major challenges.

A value improvement methodology for the financial services industry

We have taken the lessons we have learnt from deploying typical engineering orientated value management processes and built them into our value improvement methodology for the financial services sector. Value management may be considered to have two main groups of activities:

  1. Value analysis (and usually value planning as well);
  2. Value engineering.

The use of value management in the financial services sector meant, for us, a fundamental re-evaluation of the technique in the context of the sector. Value analysis and planning for companies in this sector means:

  1. Identifying the levers of value;
  2. Deciding how best to pull them.

Our work with international financial services companies underpins our value improvement methodology for ensuring that:

  • programs, and their constituent projects, are correctly aligned to the goal set out by the corporate strategy;
  • programs are set up properly to achieve the change needed;
  • the context of the change within organization, indeed place, the and the market understood by the organization.
Financial services value improvement methodology

Exhibit 3 Financial services value improvement methodology

Value engineering translates in our methodology to the detailed implementation of the programs and projects, and will be far more dependent on the type of project being run. For instance a program with a significant ITC component will benefit from standard value engineering techniques being carried out on the ITC projects. Other projects (for instance are about changing peoples behaviour) may benefit from bringing in external experts and the early participation of suppliers – typical value engineering activities reframed to suit ‘softer’ non-technical work.

The overall methodology is set out in Exhibit 3. The part of the methodology of most interest in this paper is the development of the value improvement plan. This is not to understate the importance of the implementation phase – it is clearly of huge importance. It is absolutely imperative that the implementation work is run as a change program. To that end it requires skilful and dedicated resources, making maximum use of all the best practices that world-class change management programs require. That, though, is a different concept to the one we wish to outline in this paper.

The central (and value adding!) steps in this value process are:

  1. Analyse business linkages
  2. Benchmark performance measures
  3. Gap analysis
  4. Analyse third party spending
  5. Stakeholder analysis

By necessity the five stages are described sequentially. However, as Exhibit 3 demonstrates, the processes are carried out in parallel, dependent mainly on the availability of internal and external resources. The integration of the information the core processes create is done when producing the situation analysis report. The steps in the methodology are described in more detail as follows (preceded by the initial process step shown in the exhibit):

Decide the scope and organisational envelope of the value improvement program

This should be a prior activity before starting out on the identification of the levers of value. It is fundamental in more than the obvious way – of setting up the program properly according to the known rules of effective program and project management. Defining the organisational envelope means that the strategic concerns that are to be addressed are clearly delineated from those that are not. It also helps to place the value improvement program in the context of the overall business. In practical terms this means that time, energy, and effort is not wasted trying to identify value levers that cannot actually be ‘pulled’ because the remit of the program does not extend that far. Another advantage of carrying out this work diligently is that in order to do it effectively senior managers and executives need to be consulted. This consultation process in its own right is valuable when the time comes to getting organisational buy-in to the development plan – how to pull the levers.

Identifying the levers
Analyse business linkages

The first area that the identification of value levers works on with an organisation is the linkage between the firm's espoused strategy – what has been stated as the strategy – and the actual composition of the portfolio created to deliver that strategy (Exhibit 4). This means:

Identifying the levers of value

Exhibit 4 Identifying the levers of value

  1. Gaining a full understanding of the strategy from the company's senior management, including the way in which they reached that strategy, for example:
    • Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis;
    • Political, Economic, Sociological, and Technological (PEST) analysis;
    • the financial requirements the strategy should deliver (profit, income, shareholder value to be created, etc)
  2. Appreciating how the portfolio was developed (or usually how the previous portfolio was rearranged) to deliver the strategic goals sought:
    • what is the primary ‘shape’ of the portfolio expected to be – balanced risk, maximum value, or strategic alignment (Cooper, et al, 2001)
    • how were the programs and projects created;
    • what feasibility studies were carried out;
    • what are the predicted and likely business benefits (measured in the same way as the strategy defined the required financial requirements).
Program template for portfolio analysis

Exhibit 5 Program template for portfolio analysis

This analysis of the portfolio is significantly helped by comparing programs in the portfolio against a standard template of types of programs (Exhibit 5). Essentially the programs can be divided by type into statutory and essential (programs being run to reduce cost or ensure compliance with governmental requirements or changes in the law), and business and cost driven infrastructure programs (programs run to deliver maximum business benefit).

Assessment of the portfolio in this rigorous way leads to an understanding of the companies currently enacted strategy. Based on the information now available initial decisions on what programs in the portfolio should be killed or reorganised can be made. The final portfolio composition cannot however be established until the completion of the ‘identification of value levers’ process.

Benchmark performance measures

A crucial aspect of seeking value levers within the organisation is knowing where competitive advantage lies in the firm and the marketplace. Being able to estimate the potential value that arises from using the firm's competitive advantage means that one must have benchmarks against which to compare. These benchmarks can be gathered by:

  • Third party research – either primary research contracted specifically for the purpose, or by secondary desk research;
  • Trade Benchmarking – as above, but acknowledging that there are usually more published sources of such information (trade journals, papers from trade associations etc);
  • Internal Comparison – benchmarking between divisions of the same organisation (typically for banking, for example, between investment, retail, and wholesale divisions).

The results of the benchmarking exercise are shown as a radar diagram (Exhibit 6). The points chosen to be benchmarked must be aligned with the strategic goals of the portfolio, otherwise the information is interesting but ultimately of little direct use.

Typical radar diagram to display performance measures

Exhibit 6 Typical radar diagram to
display performance measures

Gap analysis

This gap analysis is about measuring the development gap to be closed by the business in its P3 processes (since we are trying to pull levers of value that are buried within this process), not within the business-as-usual operations of the firm. INDECO uses a standard gap analysis that has been developed from data gathered during a year long research program during which senior executives from over 170 major companies in the UK were interviewed to define what it was that was essential to effective project management. The analysis covers three key areas: Process; People; Practice.

  • Process – the P3 processes used in the organisation are mapped and critically reviewed:
    • are processes robust and stable?
    • are the linkages between them in place, used, and mapping strategy correctly down through the organisation?
    • are the processes communicated effectively throughout the organisation?
  • People – the human resources are assessed in detail to determine whether the company can successfully operationalise the P3 processes:
    • does the organisation have the human resource skills and competence to effectively implement
    • the programs and projects? o what up-skilling is required to build that competence?
  • Practice – a comparison is made of the firm's practices with international best practice in portfolio, program, and project management. INDECO has significant knowledge about all three of these areas across a number of different business sectors.
Third party spend analysis

Increasing the value attained from third party spend is almost always a significant way of directly improving a company's financial performance. This is equally true in the financial service sector as in any other. The major external program spend in the sector is usually on ITC. Recently there have been moves by some blue chip financial services companies to outsource their entire ITC infrastructure and service provision. Others, however, have recently decided against going down this route as their internal productivity compares favourably to external suppliers. The outsourcing spend analysis includes:

  • Looking beyond traditional maturity measures for effective procurement to:
    • innovation
    • flexibility
    • alignment
    • communication and teamwork
  • Identifying and assessing new roles for ITC program management:
    • increased input to portfolio analysis and build (because of the knowledge that ITC specialists bring about what is technologically feasible)
    • moving towards the management of an external service provider, rather than as the provider of that service itself – i.e. managing a contractor rather than internal resource.

Whatever the arrangement for ITC service provision, there is still one significant area of external ITC spend that can be analysed in detail – procurement of hardware and off-the-shelf software products. This typically means getting value from better acquisition management by improved:

  • Sourcing of suppliers
  • Negotiation – aggressive negotiation with a small group of potential suppliers
  • Alignment of the supply chain (for example by partnering)
  • Contract administration
Stakeholder analysis

Fundamental to seeking and being able to exploit value levers is an understanding of the stakeholder environment of the portfolio and its programs and projects.

  • Who is against, for, or neutral to the build of the portfolio, or particular programs within it?
  • Where are those people in the organisation, and what influence are they able to bring in the reshaping of the portfolio and programs to facilitate or prevent levers of value being pulled?
  • Why do the people identified in all parts of the stakeholder map (Exhibit 7) hold their views? And perhaps more importantly how can their experience and knowledge be tapped to ensure all the important value levers are identified, and then pulled most effectively for the business – how can they help to create maximum business benefit for the firm?
Typical stakeholder map

Exhibit 7 Typical stakeholder map

Situation analysis

During the work described in the previous section to identify value levers the situation report can begin to be sketched out. The focus is on value, and specifically business benefit. These benefits must be directly linked to the strategic goals of the organisation. (It is possible of course that there may have been some changes to the strategy originating from the discussions held with senior executives during the value levers identification stage.) The report must recommend how the portfolio needs to be reshaped to meet the strategic goals of the organisation.

The finalised situation analysis is presented to an appropriate group of senior stakeholders to:

  • Establish whether the analysis has meaning for the group;
  • Seek buy-in to the implementation work required (pulling the value levers);
  • Obtain endorsement to continue to the ‘develop plan’ stage (the plan for pulling the value levers).

The situation analysis is concise and focussed, with unambiguous identification of the value levers.

Development plan

This plan lays out in detail how the value levers will be pulled. It is fundamentally a change management program. Therefore it will contain the normal elements that would expect to be found in such a document. The program structure and approach to change is critical:

  • Visible senior management support is vital;
  • The composition of the program steering group is critical;
  • There must be a clear execution strategy, program schedule, budget and risk register;
  • Appropriate competence and resources are essential;
  • The management of the transition to business-as-usual is critical, and part of the benefits harvesting process that either is in place, or needs to be developed and implemented.

As this is a change program, addressing the so called ‘softer’ people issues is absolutely critical to ensuring success of the program. Change is a hugely difficult thing to undertake in any organisation. The financial services industry has a long and distinguished tradition and history. Furthermore it has an equally long history of high profitability and stability. In many ways the sector is conservative, which is a strength and a weakness. The development plan must be cognisant of these factors, and ensure that correct change management techniques and skills are employed. The key areas in tackling change are (Kotter, 1996):

  • Creating a sense of urgency and solving problems quickly;
  • Maintaining visibility of program, budget and business benefit;
  • Involving and gaining commitment from people at all levels;
  • Communicate, communicate, communicate;
  • Broadcast success.


The financial services industry has seen considerable change in the last decade. Increasing competitive pressures driven by deregulation and ever increasing access to the World Wide Web (making disintermediation a workable business model) are putting pressure on historically high margins. Managing the linkages between company strategy and P3 processes (portfolio, program, and project) can lead to significant improvement in value delivered by the portfolio. A value improvement methodology derived from the well established techniques used in technically orientated industrial sectors has been developed. This methodology is both straightforward and comprehensive in its scope.


1.  Cooper, R. G., Edgett, S. J. & Kleinschmidt, E. J. (2001) Portfolio Management for New Products (2nd Ed.). Cambridge, MA: Perseus Publishing,.

2.  Kotter, J. P. (1996) Leading Change. Boston: Harvard Business School Press.

3.  Mintzberg, H. in Mintzberg, H., Quinn, J. B., & Ghoshal, S. (1995) The Strategy Process. Financial Times UK: Prentice Hall,.



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