The Power of the TOP Value Equation™

The Power of the TOP Value Equation™

What if there was ‘one Tool to rule them all’? One tool that could transform strategy execution and project delivery by translating strategic intent into business results? And, in the process, reduce waste, increase control and increase the value delivered. Utopia? No. We call it the TOP Value Equation.

Proven over the past 20 years to dramatically change projects and their results, the Value Equation provides you with a simple tool to direct, control and measure the results of your project investments.

Have you every wondered what it would be like to be able to start every project confident that you’ll receive what you really want? Not only would this take the hassle out of projects but it would also give you a competitive edge as organizations that are highly capable in project and value delivery out perform their peers by over 40% over time.1 That’s a sizable advantage.

The principal solution – the TOP Value Equation – simultaneously

1. Increases your control of your projects

2. Reduces or eliminates waste on projects, and

3. Increases the business value identified so that it can be delivered.

4. Ensures clarity, specificity and measurability

5. Ensures everyone is ‘on the same page’ — and much more.

Increased control, increased results and reduced waste—what’s not to like here?

The Value Equation On the surface, the TOP Value Equation is quite simple.

1. Project/change activities (A) cumulatively deliver the desired business outcomes (O).

1 “How to put your money where your strategy is” Hall, Lovallo, Musters, McKinsey Quarterly March

2012

The Power of the TOP Value Equation™

2. The business outcomes enable the delivery of their associated benefits (B) and value (V).

3. The value realized is determined by how well the outcomes and benefits are delivered and by the value of the financial benefit quantification value drivers (D) at the time of realization.

This may all seem self-evident but…most projects fail to adequately define the most vital part of the Value Equation—the desired business outcomes.

The Power of Desired Business Outcomes The desired business outcomes are clear, specific statements that describe the targeted end state to be achieved in the business after the end of the project when everything is working just right. Importantly, these outcomes are defined in measurable terms—measurable with a true/false question—Do we or don’t we? Have we or haven’t we? Can we or can’t we? Clear, specific and measurable in black or white terms. These outcomes are what you’re trying to achieve. They are your primary measure of success.

Yet, most projects only define:

• Objectives in non-measurable terms

• What they are going to do (action/project plans)

• The financial benefit targets

• Or any combination of these.

Because these all make sense and would be adequate in an operational environment (where the operational processes’ desired outcomes are already known) they are accepted and the project proceeds with no clear, specific, measurable outcomes as its goal.

Why does this matter? For several reasons including

Lack of clarity and specificity of the end states allows everyone associated with the project to define their own variation of the goals and to work to slightly (and sometimes radically) different agendas.

With no clear, specific outcome statements, technicians, for example, have no visibility of the overall business outcomes sought.

When the project rushes off to ‘do’ and forgets to define the ‘why’, the outcomes, vast amounts of activity can be burned up unnecessarily pursuing false options and in rework. The costs go up and the value goes down.

The lack of a business value focus means the current overwhelming focus on costs is not counterbalanced. So, the project’s primary measure of success is redefined from a business’ outcomes to a project’s cost. However, you don’t commission projects to see if you can bring something in ‘on budget’; therefore this cost focus is misplaced and the business value is, as a result, compromised.

If you don’t set up your financial benefits’ calculations for easy ongoing tracking and measurement they can legitimately change (up or down) without you knowing. This can result in an increase in the benefits’ value being missed (it is not known to exist)

The Power of the TOP Value Equation™

or a decrease in the benefits’ value can be missed which, in a worse case scenario, can make the project unviable.

On a major program that was entering its fifth year (!) we developed its Value Equation—the first time its desired business outcomes, benefits and value had been clearly defined. The project and governance teams were so delighted that they circulated the list of desired outcome statements to all staff with a note saying, “This is what we’re delivering!” It was the first time in five years they had been able to explain in simple, clear and specific language exactly what they were trying to achieve.

The Power of the Value Equation Desired business outcomes are the core of the Value Equation. And the power of the Value Equation is in its use.

As all of the Equation’s dimensions are linked to the business outcomes these become the focal point for all project activities and decisions. This simplifies benefits management, for example, as it makes the invisible, visible, and eliminates poor decision-making. To illustrate:

The full delivery of the business outcomes enable the full delivery of the benefits—so, to manage the benefits you initially only need to focus on managing the delivery of the outcomes. (This eliminates the need to have a massive parallel benefits management process – the project is the benefits realization process!)

Where the business outcomes are not fully delivered the impacts of the shortfalls can be assessed in terms of the benefits and value lost. (As the business measures of success are usually missing, any real gap between what is needed and what is delivered is invisible. You are reduced to ‘measuring’ gaps between expectations and reality.)

The project outcomes, the primary measures of project success, can be defined as a clear, specific, measurable subset of the business outcomes—so, you know exactly the size of the gap between the business and project outcomes, and can manage this gap to ensure the business is not left with too much to do to realize the benefits. (On most projects this gap is invisible.)

Delivery of the project outcomes will enable the delivery of the immediately available benefits. So the project team in conjunction with the business can be charged with the responsibility for realizing these benefits. (This ensures the project team is business benefits-focused—which unfortunately is rare.)

Generation of an Outcomes Dependency Roadmap enables all decisions made on the project to be assessed in terms of their potential impact on all up and downstream outcomes, their workload and benefits. This equips the project governance team to avoid making short-term project-focused decisions that destroy long-term business value. (The downstream impacts of project governance decisions are usually invisible but are very long lasting and expensive.)

The linking to each outcome and its benefits to the change activities (with their workload and costs of delivery), plus the Outcomes Dependency Roadmap, enables project optimization—enabling the identification of opportunities to eliminate high

The Power of the TOP Value Equation™

cost outcomes that have both little-to-no associated value and no downstream impacts. (This value/cost optimization option has previously been impossible.)

And we could continue.

In a utility that had finally ‘rammed in’ (their words) its new system we identified (post implementation) the desired business outcomes, benefits and value the project could and intended to deliver. We then adjusted the desired business outcomes to what had actually been delivered (the compromised outcomes) and quantified that around 80% of the potential value had been lost through how the project had been defined, designed, developed and delivered. Most of this 80% was unrecoverable. Had they identified their outcomes, benefits and value at the outset, most of this value would have been delivered.

The Value of the Value Equation The Value Equation changes how you approach and think about project investments. How you define and measure ‘success’. And how you organize your project and non-project activities so as to achieve your desired business outcomes and their benefits.

It enables simple control of benefits realization as:

Each change activity produces a measurable output.

This output can then be measured as 100% complete (or not).

These 100% complete outputs cumulatively deliver the agreed project outcomes and their immediately available benefits.

The realization of each project outcome is measurable with a true/false question.

These project outcomes in turn enable the delivery of the business outcomes.

And then the remaining benefits are delivered through the post project Benefits Delivery Plans.

Through this simple cumulative process the Value Equation embeds benefits realization into projects.

The Value Equation increases the value realized as it is specifically designed to maximize the identified value. It both raises the project investment’s perspective to the business level where the benefits will be realized and then uses the Benefits Funnel™ and ‘Double-Pass’ processes to maximize the number and value of the benefits. Once the benefits are known they can be targeted for realization, whereas unknown benefits can be inadvertently designed out of existence or just not realized as no one knows they are available.

The Value Equation eliminates waste caused by uncertainty, ambiguity and lack of controls. The clarity, specificity and measurability provided by the Value Equation eliminates many drivers of waste. The Value Equation eliminates the sources of waste rather than allowing effort to be wasted dealing the symptoms.

And it is also simple to understand, adopt and use.

The Value Equation has a broad range of uses.

The Power of the TOP Value Equation™

For example, a group of accountants from around the globe met to discuss the new financial strategy. Vastly different levels of understanding existed and overall there was confusion as to what was to be achieved or done. By using the Value Equation the accountants themselves translated the financial strategy into a series of desired business outcome statements—each of which was clear, specific and measurable and left no room for ambiguity. Two-days later they dispersed with a common understanding of what they were to achieve and, through the outcomes dependency roadmap, how they were going to get there from here.

The problems you are having with compromised projects, poor project results and projects taking too much time and money are to a large extent caused by not having a clear, complete and effective definition of the business value to be delivered—a Value Equation.

What a Value Equation delivers is

• Specificity—no ambiguity. Any compromises are clear and their impacts can be assessed.

• Measurability—no vagueness. Outcomes are either delivered or not; no disputes.

• True outcomes—not wants. Enables management to be taken through a process to discover and define what they really want.

• Business perspective—not project perspective. Outcomes, benefits and value are realized in the business, not on the project. To maximize the value targeted you need to take a business perspective.

• Business measures of success—not on time and budget. The reason you invest in projects is to realize the desired business outcomes, benefits and value. The Value Equation equips you to define these and then align every project activity to their delivery.

It really is that simple.

Here we have only touched on the tip of the iceberg of what the Value Equation can do.

In the following papers we’ll focus on the three critical areas where the Value Equation directly improves project results, increases control and eliminates waste. That’s the power of the Value Equation™.