Value management for business analysis and requirements fulfillment

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Managing Partner, Valense Ltd.
Adjunct Professor, University of Technology, Sydney

Abstract

Today's organizational context is rapidly becoming more complex and turbulent, and good business analysis (BA) is becoming increasingly critical to success. Whereas conventional business analysis focuses on the gathering and analysis of hard data. Value management (VM) was developed as a means to innovate using both hard and soft data. It is ideally suited to support the organization's need to become more responsive to both stakeholders needs and a continually changing business environment.

Value management is meant to create synergy between business analysis and project management that will help optimize and deliver strategies. Many well-known project management books, like the Gower Handbook of Project Management (Turner, 2008) and The Wiley Guide to Project, Program, and Portfolio Management (Pinto, 2007) recommend value management as one of the methodologies by which projects and programs can define, manage, and deliver benefits to organizations.

This paper introduces value management as a business analysis method and a major source of competitive advantage. As portfolio, program, and project management (PPPM) and project management offices (PMOs) increasingly become an organizational capabilities, managers need to understand how value methodologies can help BA achieve strategic goals and objectives in an environment that requires constant innovation and change. This paper outlines the evolution of value management from value engineering (VE) into a business analysis approach that can easily be combined with portfolio, program, and project management to elicit, prioritize, and deliver multiple stakeholders’ expected requirements. It also emphasizes VM's strong, creative approach and sensible resource management.

Introduction

Business Analysis

Business analysis is broadly defined as: “the practice of enabling change in an organizational context, by defining needs and recommending solutions that deliver value to stakeholders.” (IIBA, 2014b). A more specific definition of the term is: “the set of tasks and techniques used to work as a liaison among stakeholders to understand the structure, policies, and operations of an organization, and recommend solutions that enable the organization to achieve its goals.” (IIBA, 2014a), but business analysis has always focused on the support of data generated by more and more sophisticated software to deliver “value.”

The International Institute of Business Analysis (IIBA) publication A Guide to the Business Analysis Body of Knowledge® (2009) defines six knowledge areas for BA:

  1. Business Analysis Planning and Monitoring;
  2. Elicitation;
  3. Requirements Management and Communication;
  4. Enterprise Analysis;
  5. Requirements Analysis;
  6. Solution Assessment and Validation.

Whereas elicitation and requirements management and communication are softer areas, the practice of BA relies heavily on a core of hard data analysis competencies: enterprise analysis, requirements analysis, and solution assessment and validation.

The Project Management Institute's (PMI's) PMI's Professional in Business Analysis Examination Content Outline (2013) also emphasizes a heavy reliance on IT tools and control methods for the practice of BA. Since the Examination Content Outline is based on a role delineation study (RDS) that surveys practicing professionals, it is deemed to represent actual practice. The focus is on analysis (35%) and planning (22%), and the needs assessment is based on the business problem or opportunity defined though opportunity analysis techniques.

We could summarize the role of the BA through the words of the British Computer Society (BCS). They claim that: “the responsibility for advising organizations on effective courses of action lies with BAs, and their work precedes that of the project manager.” (Cadle, Paul, & Turner, 2010, p. 1). This early engagement requires the BA to make sure the business change is aligned with the mission and strategy. The authors also acknowledge that BAs are not involved in defining the strategy but in developing the tactical support for strategy implementation, and requirements elicitation for scope definition is an important part of that process.

Requirements Fulfillment

Wikipedia defines requirements management (RM) as, “the process of documenting, analyzing, tracing, prioritizing and agreeing on requirements and then controlling change and communicating to relevant stakeholders” (2014). Requirements management traditionally relies on the description of the technical features of a product and its acceptance by the customer. This approach implies that changes are seen as negative and that the goal is to deliver the product as required when defined. As our world is changing, requirements should be expected to change throughout the life cycle of a program or even a project, and it is not so much delivery to specifications that ensures success, as delivery as required when provided. This is what I have called requirements fulfillment.

Most requirements management efforts are focused on establishing requirements, and, while that is essential for success, ultimate fulfillment of objectives is only ensured with a continual, iterative, and progressively elaborated definition of requirements. PMI's Pulse of the Profession® study found that: “Poor requirements management is a major cause of project failure,” and that “53 percent [of surveyed organizations] fail to use a formal process to validate requirements in an unbiased way.” (PMI, 2014). Whereas requirements management is dependent on the development of a baseline, requirements fulfillment is an agile process, constantly monitoring the evolving needs of a number of stakeholders. It requires an active stakeholder involvement and a sound decision management process. Requirements fulfillment focuses on the result rather than on the process; it involves constant readjustment of objectives to fulfill the need at delivery and necessitates a different approach than simple requirements management.

Value Management

One of the key elements missing from current BA and RM is the creative aspect required to compete in today's continually changing environment since they both build on the analysis of existing data and typically rely on a set baseline to deliver results (see Exhibit 1). Value management is a proven innovation methodology that has helped organizations create and realize value and stay competitive for over 60 years. When applied properly, it is expansive and continually challenges existing boundaries.

VM was initially developed at GE in the late ‘40s as value analysis (VA) and later, value engineering (VE). This was a product improvement methodology known today as hard value management. Although the term value management was first used in the 1970s, it was only in the late 1990s that value management emerged as a discipline distinct from VA/VE, drawing on management techniques and fully integrating it in the project life cycle as a “collaborative group-learning approach” (Barton, 2000). This approach was labeled soft value management and focuses on achieving stakeholders’ needs and expectations with the least possible resources. More recently, it has been used as a strategic business analysis and decision management methodology aimed at improving competitiveness (Thiry, 2014).

Value management is one of the most effective processes to consolidate multiple stakeholders’ needs and expectations into a clear and agreed scope and prioritize requirements on an ongoing basis. It is also an efficient group decision-making and problem-solving methodology that helps clarify a strategy, define the means to achieve it, and manage change along the way. The application of VM as a business analysis method can be a major source of competitive advantage for portfolio, program, and project management.

This paper discusses the application of VM as a cross-functional group process that uses the concept of functions and creative thinking principles to deliver business benefits consistently in a continually changing world. It will be particularly helpful to managers who need to prioritize multiple stakeholder requirements in order to deliver business benefits that are in line with the organization's strategy, while making sure that these strategies are achievable. It is tailored for business analysts, PMO, portfolio, program, or value managers who are interested in helping to deliver business value and want to achieve both significant benefits and improved stakeholder relationship management.

A Comparison Between Value Management and Business Analysis

Exhibit 1: A Comparison Between Value Management and Business Analysis

The Context of Value in Today's Organization

What constitutes value for today's organizations and why it is not achieved consistently?

Strategy execution is the area with which traditional organizations experience the most difficulty because the final outcome can be unpredictable. The current business environment is characterized by both high uncertainty and high ambiguity, or as Siggelkow and Rivkin (2005) have labeled it, combined turbulence and complexity. Strategy developers often spend time and effort collecting hard, evidence-based data; this is not best practice when turbulence and complexity are high and firms need to act quickly on scant and unreliable information. Adding more information often increases confusion for an already complex issue and, by the time enough data has been gathered to make a decision, it has usually become irrelevant.

Business analysis has offered a viable alternative for the quick analysis of large amounts of varied data, but its reliance of software is also its Achilles’ heel. Data analysis and metadata analysis rely on a statistical approach and a rational mindset. This works well for complicated solutions where there are a lot of components that assemble in known ways; it does not work in complex situations where relationships and interdependencies change continually. Business analysis, as developed in recent years, is an ideal method to manage complicated solutions in a known environment. In order to manage complex, continually emergent situations, it needs to be supported with other, softer methods.

In the last few years, BA has evolved to incorporate some soft methods like workshops, hothousing, storyboards, use cases, relationship and association identification, as well as culture ad change concepts (Cadle, Pul, & Turner, 2010). On the other hand, these methods are still few as compared to more rational methods, and their use is marginal in practice. Practitioners still rely heavily on rational analysis and modeling methods.

A recent example is the advertisement for webinars by the IIBA, which announces its next five webinars. Of those, three are distinctly technology and tools-oriented: 1) A Standard Model for Eliciting, Analyzing and Communicating Requirements; 2) Using Data Analytics to Understand the Mobile Shopper and; 3) Cloud Computing – Models, Progress and Context for BAs. The other two, although their titles seem softer are also very technical: 4) Key Considerations for a BA While Addressing Requirements for a Mobile Solution (which describes how technical requirements of mobile differ from standard IT requirements); and 5) How to Mitigate Resistance to Change (which introduces tools and tactics for assessing if the change will be successful and what is needed to address requirements-related gaps). (IIBA, 2014).

Technical considerations and technology are important to ensure successful change, but, as outlined in the PMI's Managing Change in Organizations: A Practice Guide (2013a) and other change-related publications, the “practice of enabling change in an organizational context” also requires a lot of soft skills and techniques.

Today, as shown in Exhibit 2, what constitutes value for organizations is not so much the capability to execute a given strategy but its capability to realign quickly to keep up with a volatile environment and to continually test new ideas to succeed in their chosen market. This is what Rita Gunther McGrath has labeled “transient competitive advantage.”

A Transient Competitive Advantage

Exhibit 2: A Transient Competitive Advantage

Exhibit 2 shows how, in today's complex and turbulent context, strategy developers need to adapt continually in order to prevent a comfortable competitive advantage from turning into a competitive deficit. Organizations that are not prepared to look for those elusive and temporary competitive advantages continually will soon face a crisis and become irrelevant. The central principle of today's business context is that success is only temporary and that, as soon as you have achieved competitive advantage, you should start looking for the next fleeting advantage.

The continual evolution of IBM, from business machines to desktop, and then to laptop manufacturer, and finally to consultancy firm; the expansion of Google from search engine to robotics and car manufacturer; the development of Apple from a hardware company to a music provider; and the transformation of New York City from crime capital to the US city with the lowest murder rate since 1963 are all examples of transient competitive advantage successes. On the other hand examples of Nokia's failure to move quickly into the smartphone business, the American motor industry's failure to see the Japanese auto industry threat fast enough, and the city of Detroit's decline and bankruptcy filing are examples of failures to understand the need to change and innovate.

Consistently Delivering Value in a Continually Changing Environment

We need to examine how the iterative and dynamic nature of value management helps deliver consistent results in a transient business context.

As programs and projects are developing into more and more complex ventures because of the number of stakeholders involved and the number of interdependencies between components, there is a need to constantly review and realign strategies, this without even considering the need to always stay innovative. As portfolios and PMOs have to deal with more and more turbulence in the organizational context where decisions have to be reviewed regularly in light of newly available data, BAs need to become more and more responsive and involve stakeholders with decision power on an ongoing basis. In fact BAs need to become more agile!

For the last 10 years, a small group of practitioners around the world have used value management to help formulate strategies and master their execution. As VM is more and more associated with governance and decision management, it is evolving from a finite methodology to an agile process in which both decision-makers and those who will execute the decisions actively participate. In this context, the participants in the VM process have authority over the resources required to implement the decision. Whereas traditional value analysis and value engineering are typically comprised of one or a few interventions to resolve a problem or define a project, value management is designed to be an iterative and dynamic decision management process.

Business analysis is, like project management, a strategy execution support method. Business analysts make recommendations to decision-makers whereas VM, when practiced well, is a continuous process that involves decision-makers directly. VM, through its collaborative approach directly involving decision-makers, enables the strategy team to be actively involved in every decision concerning a project or program. This is an imperative area of development for BA. At the portfolio level, VM is used to elicit multiple, often diverse, stakeholders’ needs and expectations based on both hard and soft expected benefits, not solely based on performance requirements. On the other hand, VM's focus on stakeholders’ needs and expectations can sometimes be detrimental to a sound analysis and consideration of hard performance data, which BA provides.

Initial strategic development statements and objectives are always more qualitative that quantitative. As shown in Exhibit 3, VM can help translate more abstract and woolly statements into clear, measurable solutions that are endorsed by the main decision-makers. If combined with BA, it could reinforce the overall impact of the business case by grounding it in hard data.

Comparison Between BA and VM Processes

Exhibit 3: Comparison Between BA and VM Processes

A recent study by Dann, LeMerle, and Percavel (2012) shows that major corporations have lost considerable shareholder value because of bad strategic decisions; they point out that: “[the tactical] team must assume that the strategic course set by senior management is sound,” but that “they do not have the mandate to evaluate the strategic risks rooted in the decisions made by senior management.” BA practice could use VM to ensure that performance criteria used to define the solution are truly based on key stakeholders’ needs and expectations and that both critical success factors (CSFs) and key performance indicators (KPIs) take into account a healthy range of factors (not just financial factors) and are clearly aligned with the strategy.

In PMI's Pulse of the Profession® 2013 survey, the PMI states that having “sponsors/executives who actively champion the strategic value of projects and communicate the intended benefits to stakeholders” is a key success factor (2013, p.10). For this to work, executives have to be ready to invest the necessary time and effort to support the requirements management effort and be ready to review their decisions based on tangible results; in a word, they have to become engaged.

Applications of Value Management

Another concern is how to apply value as a continual decision management process to successfully engage stakeholders and realize benefits.

The PMI's Managing Change in Organizations: A Practice Guide (2013a) defines value management as: “a structured, multidisciplinary team decision-making process.” Exhibit 4 graphically displays this process.

Value Management as a Collaborative Decision-Making Cycle

Exhibit 4: Value Management as a Collaborative Decision-Making Cycle

The VM process is divided into five main phases (Thiry, 2013):

Sensemaking

“Sensemaking consists of all the activities necessary for the stakeholders to build a collective understanding of a situation, develop a strategy for the project or program and define a shared desired outcome. The sensemaking phase comprises two subphases: definition of objectives and targets, which consists of clearly understanding the situation, and function analysis, which consists of identifying and agreeing objectives with the key stakeholders; this last process leads to scope definition and the development of a value profile for the program or project.” (p.72)

Ideation

The ideation phase is a creative process which consists of producing the greatest possible number of ideas for consideration as alternative solutions. It broadens the range of potential solutions and is essential to any innovative process.

Elaboration

This phase can be divided in two subphases: evaluation and development. The purpose of the evaluation subphase is to identify and select the best ideas for further development using targets set during sensemaking. The process must focus on the best ideas for development in order to achieve the best value. The development subphase will guide the decision or recommendation by developing the scope of the alternatives that have been identified as worth pursuing in the previous subphase to improve their alignment and achievability. The stated objective of this phase is to justify the investment to the sponsors. The elaboration is the VM equivalent of the feasibility assessment and development of the business case.

Choice

The final choice of options is made with the key stakeholders and decision-makers who actively participate in the decision to execute.

Mastering

“Mastering involves a continual process of monitoring and realignment as circumstances evolve. It is required mostly in complex and turbulent environments where agile methods are the norm and business benefits are the ultimate objective [...] when value management is truly integrated and the ultimate objective is to see value realized, mastering also involves an ongoing effort until the agreed benefits are achieved satisfactorily.” (p.125)

Exhibit 5 displays a full VM process across a program. The VM process is repeated at regular intervals during the duration of the program (or project) and moves from a strategic focus, to a tactical, and then to a technical focus, always striving to add value by identifying innovative solutions at each stage. In this example an emergent input appears in the second execution loop; this could be either a threat or an opportunity (e.g., a change in management, a new technology, a change in customer needs, or a drop in performance). When such occurrences happen VM mastering involves a sensemaking-ideation-elaboration process to manage the change that will be required. This process ensures that the program/project team will always optimize the value of its risk responses or change options.

VM as a Continual Decision Management Process

Exhibit 5: VM as a Continual Decision Management Process

This type of iterative process should be an integral part of the BA and requirements management effort in any complex project or program where expected benefits may change along the way, especially if they involve behavioral issues and change. VM offers a proven method that can easily be integrated in an ongoing BA of requirements management effort.

Value Management as an Organizational Capability

Now let's consider how to make value management an organizational capability in combination with portfolios, programs, and projects.

Portfolios

Value management methods can be used at the portfolio level to define the organizational portfolio's expected benefits (critical success factors); this is the sensemaking phase. These critical success factors can then be used either to define the programs and projects that will best support the organization's goals (ideation) or to assess the alignment of existing or proposed programs and projects with the overall portfolio strategy (elaboration). Organizations have limited capabilities, and one of the main objectives of VM is to optimize the balance between expected benefits and resources used to achieve them.

The next step would be to assess the achievability of those programs and projects. Achievability can be assessed on quantitative financial and resourcing factors but should also be assessed qualitatively on such factors as ease of financing, competence of resources, clarity of objectives, complexity of venture, and interdependency with other business initiatives. A number of techniques and factors to address these issues are explained in A Framework for Value Management Practice (Thiry, 2013)

The ultimate objective at the portfolio level is to obtain a value profile of the whole portfolio, which enables portfolio managers and PMO managers to obtain a clear and constantly updated picture of their portfolio as displayed in Exhibit 6. This will allow them to assess the value of new programs and projects in the bigger picture of the organization's strategy very quickly and effectively.

Strategic Value Profile (Balancing the Portfolio)

Exhibit 6: Strategic Value Profile (Balancing the Portfolio)

Programs

At the program level, the same method can be applied to identify the program's CSFs and achievability criteria (sensemaking). In a deliberate program, where projects are developed following the program definition, during the ideation phase CSFs will be used as the basis to develop potential deliverables that support the program. VM will also be used to build a benefits breakdown structure (PMI, 2013a, p.73 and Thiry, 2010, pp. 79–80, 128), which defines the scope of the program and is based on a combination of a function diagram (Thiry, 2013, pp.91–97) and a work breakdown structure (WBS). During the elaboration phase, those deliverables will be evaluated and grouped into projects.

If the program is ad hoc, that is if the projects exist before the program is defined, sensemaking will be used to define the program's CSFs based on strategic objectives and the existing projects’ grouping. Following this, each project will be evaluated to assess its fit with those objectives; next, the team will use ideation to optimize these projects and resolve any gaps or overlaps. The program will then be finalized through a development subphase.

During the course of the program, results will be regularly assessed against the program's CSFs and KPIs and short review sessions will be planned to address any discrepancy using VM techniques.

Benefits Breakdown Structure

Exhibit 7: Benefits Breakdown Structure

Projects

Projects usually require a more traditional approach to value management and, if they are integrated in a portfolio and program management framework, will only require a mastering effort. In projects, sensemaking will be used to clarify and align the project charter with the overall project strategy; ideation and elaboration can be used to clarify technical deliverables and activities.

Exhibit 8 shows an integrated organizational project management (OPM1) process supported by VM.

Integrated OPM and VM process

Exhibit 8: Integrated OPM and VM process

Conclusions

  • BA is ideally suited to provide business analysis in environments where data is available and reliable.
  • Today's context is complex and turbulent, making reliable, hard data difficult to obtain and to process.
  • VM is a proven method that uses a mix of hard and soft data to define stakeholder requirements.
  • VM is an iterative and dynamic method that allows requirements to be developed progressively.
  • VM relies on the active participation of key stakeholders in a continuous decision management process.
  • VM challenges preconceptions and promotes innovative ideas to give organizations a needed edge.
  • VM supports organizational agility which allows organizations to develop transient competitive advantages.
  • When integrated in an OPM context, BA and VM can complement each other and add value to the organization.

References

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1 “a strategy execution framework that utilizes project, program, and portfolio management as well as organizational-enabling practices to consistently and predictably deliver organizational strategy to produce better performance, better results, and a sustainable competitive advantage.” (PMI, 2013b, p. 60).

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2014, Michel Thiry
Originally published as a part of the 2014 PMI Global Congress Proceedings – Phoenix, Arizona, USA

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