Business value is a new indicator for project success. Huh? You may be wondering what ever happened to the good ole scope, schedule, and budget. They are still there and measured, but what the 2012 trends have been pointing to is that a project completed within scope, schedule, and budget and not be successful. The opposite is also true. A project that is late, over budget, and does not meet the initial scope can also be successful if it brings value to the organization. It is more important that the final implementation brought value to the business then that it mets the arbitrary budget and deadlines early in initiation. Here is a sampling of what the industry experts are saying.
"Despite increasing functional competencies within the BA community, 2012 will mark a year where business analysts will have to add to their competency tool kit their ability to demonstrate business leadership by articulating business value and impact to the organization as a whole." 10 Key Business Analysis Trends for 2012, Glenn R. Brûlé, CBAP, CSM, Executive Director of Global Client Solutions, ESI International
"The new definition of project success is that a project can exceed its time and cost estimates so long as the client determines that it is successful by whatever criteria they use." Top 10 Project Management Trends for 2012 J. LeRoy Ward, PMP, PgMP Executive Vice President, Product Strategy & Management, ESI International
"Stakeholders of all kinds are gaining a sharper understanding of how technology decisions will impact the business, and are raising the bar in terms of expectations for success." What's In Store for IT in 2012? Daryl Plummer Managing Vice President, Fellow, Gartner
What is business value?
There is a short answer and a long answer for defining what business value is. The short answer is “whatever the customer says it is.” A more appropriate definition is measured results that indicate an improvement to the business’ bottom line. The state of Washington requires a Cost Benefit and Feasibility Analysis prior to funding any major project based on cost and risk. According to Connie Michener of the Office of the Chief Information Officer, the state is looking to expand the requirement of this tool to include additional projects. This study requires agencies to analyze and document the overall cost benefit of a project over a 10-year period including implementation and operation costs with a variety of options. Determining a reasonable financial benefit over a 10-year period is not an easy task, but is an essential step to truly understanding the potential value to the organization. The benefit can be in terms of reducing staff to support the product, better quality that justifies a high price, to simply selling more for a greater benefit. As an organization gets more disciplined in conducting this analysis it will increase their data, capacity, and knowledge to get more proficient and accurate benefit analysis for determining highest value projects in the future.
Another benefit may be the avoidance of risk. The cost of risk can be calculated as the likelihood of a risk event happening multiplied by the cost of event occurring. Again, analysis will determine the cost of risk. Cost should include actual dollars to recovery, labor cost to recovery, and lost revenue. Think about the most business dependent system in your organization. How much will it cost if this system goes offline for a day? A week? A month? Permanently? The likelihood of this happening will vary depending on system age, technology, maintenance status, and sustainability.
Estimated value (or cost benefit) is part of the value analysis. However, the final answer is "client (sponsor) determines that it is successful by whatever criteria they use" as indicated in the LeRoy Ward quote above. There will be cases where the sponsor or organization’s decision is contrary to the analysis and that is okay. Document the value expected on the solution or approach chosen.
How do you know a project has delivered value?
Think of the last project implemented more than 6-months ago that you were involved in. Has this been project been reviewed to compare the actual results to the objectives identified in the business case or project charter? If it has, you are one of the lucky few who have satisfaction in knowing you not only saw a project to completion, but that the project met the organizational objectives. Would you rather be the project manager that brought a project in on time, on budget, and within scope but did not meet objectives, or the project manager that brought value to the organization? The problem is that we do not often have a view into our past projects to know the answer. This will need to change in the new world of determining project success by the value it brings the business.
I foresee a new role that monitors complete projects over time to track organizational success in delivering value through projects. Tracked data will help to make better project decisions into the future. For example, strong change management processes will continue to be supported if projects that have good change management processes that allow for value added changes in a controlled fashion tend to bring more value to the organization. This role may fall to the Project Management, Portfolio Management, or Business Analysis functions within the organization. The benefit of this information would be unstoppable if this information is coupled with formal review of prior lessons learned (another article).
Who is responsible for ensuring the project brings the organization value?
I first became interested in this topic after attending a local PMI meeting where a panel had presented their thoughts on the future of project management. The general view was that the project management was moving towards organizational value being of greater importance in project success then cost, schedule, and scope alone. I completely agree in the change of definition of project success, but have a hard time understanding how a project manager can be wholly responsible for delivering that value. I think it looks more like the following model.
Thank you to Todd Williams of eCameron,Inc. for input to this model
Project Sponsor
The project sponsor is the person who authorizes the project, secures project funding, and champions the project. They are the first line in ensuring that selected projects will bring value to the business. They also have the authority to monitor the project and approve change requests. Changes requests are encouraged to remove scope of little value or add scope where it enhances business value. The project sponsors base decisions on information from the project manager, business analyst, and business subject matter expert.
Project Manager
The project manager is the keeper of the plan and processes to execute and monitor the project. This includes communicating what value means in terms of projects and including proper checkpoints in the project plans and schedules. These plans and schedules should incorporate the business analysis plan from the business analyst. This does not say that the project manager will plan or conduct the business analysis activities any more than they would plan or develop the system code or product testing. The project manager needs to have a high-level understanding of best practices to support the project, but not prescribe the process.
Business Analyst
It requires a significant amount of analysis to determine which projects bring value to the organization and what requirements, features, and solutions add to the value. Their work is crucial to all in order to which options will improve the cost benefit of the project. A skilled business analyst will plan a business analysis plan and approach to meet the needs of the projects. The business analysis has the specific experience and education to elicit the project needs, document the true project needs, and analyze the options to ensure value based decisions. While the project manager leads all project activities, the business analyst leads finding and documenting the value and benefit available.
Customer (Subject Matter Expert [SME])
Project sponsors, project managers, and business analysts are all dependent on the subject matter experts (SME) for the business the solution is to address. Without active SME participation, we will not have the information needed to understand what value is to that business or manage risks, issues, and communications for the project across the stakeholder spectrum. The business will not realize the greatest business value from the projects if they adopt a “come back and show me when it’s done attitude.” The business needs to plan capacity to participate in the project to ensure the result brings value.
Closing
Results of a recently conducted poll largely agreed with the premise of the model. More people felt that the project sponsor was responsible to ensure that projects brought value to the organization. Many people commented that it was not the role of one person, but rather the team. One concerning result in the survey was a lack of vote for the business analyst.
The bottom line is that it takes a collaborative effort from all to realize true business value. The more we work to understand and support the roles of each other in our projects, the easier it will be achieve business value. Business analysts will need to work to show the value their skills bring to projects before others see them as an equal in the project governance. This includes individual business analysts on specific projects and the business analysis community as a whole through media such as ModernAnalyst.com.
Author: Vicki M. James, PMP, CBAP has been involved in project development since 1999, serving as both business analyst and project manager. She is a skilled trainer, presenter, and facilitator with a passion to share best practices through her company Professional Project Services. She is also a co-author on Strategies for Project Sponsorship alongside Peter Taylor and Ron Rosenhead - in development.
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