Most valuable players
BY PETER FRETTY
Just having a value-based project with impressive ROI throughout isn't enough. Value creation concerns managing and ultimately surpassing stakeholder expectations based on business objectives. These activities often are incorporated into the portfolio management process of project selection and delivery prioritization, and managing the resulting change, but also can happen at the project level itself.
For example, when it came time to relaunch its Global Business Services (GBS) division last year, IT giant HP did so by taking its value creation process up a notch. The program set out with the objective of identifying multimillion-dollar opportunities through a unified process-improvement methodology and GBS's evolution toward a center of processes expertise for the entire organization.
That is just one organization's response to the pressure to bring about benefits in its project portfolio. With value creation, organizations can hone in on the work that contributes to waste minimization and the maximization of ROI, explains Anca Slusanschi, PMP, program manager at HP in Wellington, New Zealand. “I am unaware of a better recipe for sustainable business success,” she says.
On the flip side, organizations focused solely on generating financial returns without delivering value often end up losing business and alienating customers.
“Value creation establishes a working environment of continuous process improvement where cost, cycle time and technical capability are optimized, enabling a competitive position in the marketplace,” says Donald White, founder and program manager at Defense Systems Leaders, a project management consultancy for the defense industry in Washington, D.C., USA.
Stage 1: Understand Requirements and Risks
Project managers must find the sources of value creation within the system, Ms. Slusanschi explains. “That often means striving to find the products, services and features that customers are likely to value most,” she says. “Employees can then take pride in creating desirable products, and investors benefit from the success of the organization.”
Start with stakeholders. “Actively seek out folks who will be affected by the project if they are not involved already,” Ms. Slusanschi says. “Then develop relationships with them and understand their needs—what do they value and why? Work with them to define win-win agreements that fit within the constraints of the project. The better you understand your stakeholders, the better the tradeoffs you can make.”
This process of reviewing and tailoring the organizational processes to ensure the team meets customer expectations is the most crucial stage of value creation, Mr. White says.
“Even understanding the requirements will not guarantee that the organization will meet customer expectations,” he adds.
That's where risk management comes in. “Identify performance risks and define risk-handling strategies throughout the project,” Mr. White says.
External stakeholders should be involved in the risk-management process as well to gain an appreciation of potential problems and how they'd be handled: the probability of a risk, its impact and the steps being taken to reduce the probability and impact.
“This process can help adjust the customer's original expectations,” Mr. White says.
VALUE CREATION ESTABLISHES A WORKING ENVIRONMENT OF CONTINUOUS PROCESS IMPROVEMENT.
—Donald White, Defense Systems Leaders, Washington, D.C., USA.
Stage 2: Explore Areas for Improvement
Value creation doesn't work unless the team can discover the project's strengths, weaknesses, opportunities and threats (known as a SWOT analysis), explains Sonia Usih, PMP, owner of Usih's Project Management Consulting Firm Inc. in Ajax, Ontario, Canada.
Successful value creation hinges on strategic data collection, Mr. White says, including subject-matter experts, stakeholder input and project team research.
Analyze existing project plans, and map out their development life cycle, framework and/or infrastructure—including enterprise architecture, service architecture, policies, standards, methods and tools—and change management procedures for the implementation, Ms. Usih suggests.
Project managers should use the information they've gathered to:
1. Baseline the workflow as a foundation for value creation. “Base this upon the previous implementation of a similar project,” she says.
2. Continue to develop a value stream map of the end-to-end workflow. “This is to identify redundant and non-value-adding steps to help determine what the team can eliminate, change or improve,” Mr. White says. “The resulting policies, processes and procedures now are the new baseline for the project.”
At this stage, the project team should consider the following aspects, he says:
- process improvements
- new but mature technologies capable of reducing cost, shortening the schedule and providing additional capabilities or features
- supplier adjustments, renegotiations or replacements to improve product performance and cost
When exploring improvement areas, everyone involved must keep an eye on the relative contribution of each potential improvement to the overall value, Ms. Slusanschi explains. “By taking into account the contribution to value, assessment and prioritization are greatly improved,” she says. “Ideally, a measurement system should be built in, so that future assessments can take advantage of actual measurements.”
For example, when creating features for systems used by customer service centers, determine which are used most. Those features are the best candidates for improvement and acceleration. Any increase in speed can then be shown as cost savings.
Stage 3: Define Possible Solutions
Allow team members to take ownership of their portion of the project.
But make sure they keep in mind the organization's objectives when suggesting ways to increase value.
“This will help empower the team to develop tactics to implement the strategy and achieve the goal,” Mr. White says. “Let the team develop detailed schedules, modify processes and own their piece of the project. Then hold team members accountable for cost, schedule and technical performance.”
Investigate each area of improvement and quantify its benefit as well as the cost to implement it, he adds.
Project professionals should employ “set-based thinking,” which encourages the simultaneous development of multiple alternative solutions, Ms. Slusanschi explains. That way, “the trade-offs and implications of solution choices can be made visible to all stakeholders.”
WITH VALUE CREATION, ORGANIZATIONS CAN HONE IN ON THE WORK THAT CONTRIBUTES TO WASTE MINIMIZATION AND THE MAXIMIZATION OF ROI.
—Anca Slusanschi, PMP, HP, Wellington, New Zealand
Stage 4: Prioritize Opportunities
Once the list of opportunities to create more value has been made, project professionals, working with stakeholders, must then prioritize and rank the options. The goal is to maximize value for all stakeholders.
The shorter the time between creating a feature and its availability to end-users, the higher the chance it will be found valuable and create a positive ROI, Ms. Slusanschi says. Conversely, “the longer the cycle time, the higher the risk of waste.”
Value can't be created independent of use. “On an IT project, for example, a feature that no one uses is wasteful,” she says. “It adds no value, despite what its creators may have hoped for it or how much effort has been expended to create it.”
Pay close attention to the customer's perspective throughout the prioritization process, Mr. White recommends. Value creation modifications with high benefits yet low implementation costs should be done first.
“Improvements should always create value in the customer's eye,” he says.
For instance, if the customer is focused on product reliability, prioritize improvements to exceed the customer's reliability expectations, such as building additional layers of redundancy into an IT application. If the customer doesn't care if you deliver early, though, don't select an improvement that shortens the schedule.
“Exceeding customer expectations will motivate the customer to come back to you for additional contracts,” Mr. White says. “When the customer comes back for additional work, the organization gains value.”
RESISTANCE TO CHANGE
As with any new approach, adopting a value creation methodology often requires a major shift in the way business currently is done. The change can send a shock wave through the organization, leaving many team members either afraid or cynical about its worth.
Below are a few key situations that can lead to sabotage, says Donald White, Defense Systems Leaders, Washington, D.C., USA:
- Overachieving: Trying to do too many things at the same time hampers value creation by forcing teams to switch frequently between tasks. This introduces waste and significantly slows down progress.
- Short-term profits: When organizations neglect long-term sustainability, they are trading future health for immediate payoff, Mr. White says. But by actively seeking to create value (rather than cutting costs by any means possible), an organization can retain and grow its market share. Customers tend to seek out and use the more valuable products rather than the cheapest ones.
- Lack of respect: “Respect is a vital prerequisite for continuous improvement,” Mr. White says. “Without it, people will not become passionate seekers of better ways of working. Disrespect people, and they will retaliate with apathy, boredom, absenteeism, make-work [performing tasks of little importance to keep busy], outright sabotage and other maladies. Disrespect customers, and they'll find someone who will treat them better.”
- Buy-in blues: Early buy-in with top-down support is crucial. Allowing negativity to fester can derail and minimize the likelihood of success. “Any individual who will not accept the change and support the value creation initiative needs to be removed from the project and reassigned to another project to reduce probability of sabotage,” Mr. White suggests.
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