Success is reaching your goal:
Benefit realisation
Measuring benefit realisation
Time and cost both are inputs to the project process.
Benefits and business value are the outputs.
However, most organisations tend to only focus on the inputs as generally only time and cost are tracked.
Benefits and business value are subject to a more "soft" evaluation based on whether the decision makers, e.g. the steering committee, believe that a project is still moving in the right direction towards the delivery of the projected outcome.
But in order to know if we are successfully delivering the projected outcomes, both inputs and outputs need to be tracked as we otherwise will not know what we are trying to achieve and may gradually get the wrong focus, loose the overview and thereby loose control.
Missing a consistent focus on business value in projects will destroy the business value meaning, that if you execute projects to realize a great business initiative or idea and only focus on the project inputs, you will gradually miss out on the delivery of the benefits and the business value. In this way you start out with a great idea, put it into the normal processes where time and cost are in focus thereby missing og even destroying a part of the potential business value, and then you end up with less than you could have achieved.
Global studies made initially by Boston Consulting Group and subsequently by Totally Optimized Projects in the 90's and 00's give a quite clear picture of this problem.
Regardless that time has passed and billions have been spent on improving project governance and project management capabilities, adoption of new methodologies and implementation of new frameworks during the past 20 years, the problem is still as big today as it was then and no significant improvement has been achieved.
Source: Drivers and Destroyers of Project Value - studies at BCG and TOP
In short what the graphic says is, that if you start out executing a business initiative using the orthodox mindset, then you will spend 160% on the cost/time side to get 40% business value. This is of course on average...
When focussing on the delivery of the agreed business outcomes, benefit realisation and the business value, a lot of things on projects will become more easy and transparent.
The benefits of adopting a business value focused approach where clear outcomes are defined and value is quantified and tracked like cost and time include:
- The mission and end goals becomes clearer to all stakeholders and participants.
It is no longer about simply delivering a product in itself, e.g. the software component, the agile transformation or the reorganisation. It is now about delivering the desired business outcome, the new business-as-usual state where things as a whole work in new and better ways and the business benefits and business value are realised. - Project execution and delivery gets more certain and predictable as project planning and organisation is focused on delivering the desired business outcomes - meaning that all that needs to be done on a project has to directly support the delivery of these desired business outcomes.
If a task does not clearly support the delivery of an outcome then it shouldn't be done.
So - this approach helps to put focus on what needs to be delivered and eliminates extra work - thereby simplifying planning at the same time as reducing risk and cost. - As business value is quantified it becomes easier to identify when the project starts delivering actual value. Planning can then focus on delivering business value as early in the project as possible, thereby reducing overall risk and optimizing value delivery and benefit realisation.
As the project moves ahead it is transparent to all stakeholders what the cost has been so far, how much time and effort has been spent, and whether the projected value is being delivered according to plan.
This information gives the steering committee and the project manager valuable insight as to whether changes are needed to the way the project is planned and executed. - When approaching a business initiative with a business value delivery focus, the aim becomes to identify and deliver all the benefits and all the value of the initiative.
As the benefits and value are the key focus more benefits and more value is identified than if using a product-cost-time focussed approach.
It is suddenly not a question of luck whether more benefits and increased value is delivered, but it becomes a normal way of operating and part of a controlled process.
