Realizing Enterprise Value: Delivering Projects in a Value Focused Environment

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Realizing Enterprise Value Delivering Projects
in a Value FocusedEnvironment

• DND/PMI-OVOC Symposium
• 29 30 November 2005
• Loreen Reid

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Agenda

• Challenges Facing Projects Today
• Why Manage Value?
• What is Enterprise Value Management?
• Integrating EVM into EISS
• The Pay-off

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Challenges Facing Projects Today.

• Too many top priorities!
• Multiple business goals - all being top priority
• No clear strategic criteria for selection
  projects are sold internally on a subjective
  basis
• Organisations try to do it all with limited
  resources
• Inability or reluctance to kill existing
  projects
• Project Failures
• Did not deliver expected benefits, over budget,
  delivered late, business needs not met
• Resources spread thinly - the never ending
  project
• Project value and success determined by time,
  budget and scope measures
• Over-emphasis on Financial Return on Investment

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Executive Managements Predicament

• How do we pick the winners?
• How do we align our projects to business
  priorities and objectives?
• How do we identify which projects have the
  greatest potential value?
• How do we ensure/know that we are getting value?
• How do we manage our projects so that they
  deliver the expected value?

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What is Value?

• The importance or worth of something for someone
  (Cambridge Dictionary)
• From a project perspective, value is the
  benefit(s) desired/expected by the organisation
• An outcome that an organisation considers to be
  attractive
• It can be assessed - through either quantitative
  or qualitative means
• The reason why an organisation decides to make an
  investment or undertake an initiative

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Why Do We Need to Manage Value?

• Benefits do not just happen when you implement an
  project
• Benefits are not inside the product box
• Benefits are rarely achieved according to
  original business case
• Benefits are rarely captured after implementation
• Accountabilities lie with the person who spends
  the money, not who gets the results
• Difficult to compare projects in terms of
  business value

Realizing benefits is a business processa
continuous process that can and must be managed!
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Why is EVM Capturing So Much Interest and
Attention?

• Promise of intelligent investments and resource
  allocation
• Understanding not just what is being spent, but
  why!
• A need to align spending with the priority goals
  of the business
• Intelligent spending results in significantly
  greater enterprise value

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What is Enterprise Value Management?
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Enterprise Value Management is..

• the art of understanding what benefits a
  particular project will deliver and the act of
  ensuring those benefits are realized

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EVM is not
Enterprise Value Management

• Earned Value Management

• Enterprise Value Management defines value as the
  business outcomes that are sought
• Earned Value Management defines value as the
  contracted amount or budget, and schedule for the
  project
• the two can and do work together

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Enterprise Value Management

• A set of processes, techniques and tools which
  maximize business value by
• Clear and complete understanding definition of
  potential investments and their drivers
• Objective relative evaluation selection of the
  highest potential value investments along three
  dimensions
• alignment with strategic goals
• value or measurable contribution to business
  outcomes
• acceptable level of risk
• Proactive management of execution to deliver
  results

Increasingly managers are looking for practical
advice about the sometimes difficult choices
they have to make to fulfill their strategic
goals
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A Shift in Thought Process.

• Competition for IT and Business resources
• Business Cases not clearly comparable
• Alignment to Business and IT strategy unclear
• Financial worth open to interpretation
• Sponsored by those who do the work

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The EVM Building Blocks
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Enterprise Value Management

• Project Portfolio Management
• Portfolio Management
• Strategic Governance
• Benefits Realization
• Structure for Value Integrated Project Design

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Results Chain ?
Results Focused Integrated Projects
Complete and Comparable Business Cases
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Value Case

• An operational tool to
• Initially collect all necessary information to
  pick the winners,
• Obtain authority to proceed and manage the
  realization of value.
• Same level of focus and rigor on Business
  Results/Benefits (Outcomes) as on Costs (Inputs).
• Value contribution represented by three measures
• Corporate Worth - contribution
• Strategic Alignment - fit with business goals
• Risk - chance of not realizing benefits

An Operational Tool ...Pick the
winners ...Manage the realization of value
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Project Portfolio Selection Monitoring
Summarise Integrated Projects on a Value/Risk plot
Give priority to high value/low risk projects
Select amongst priority projects based on
resource availability (, people, time)
Strategic Alignment Enterprise Value
Stop
Delivery Benefits Risk
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Different but Consistent Views of the Project
Results Chain
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The Need for Strategic Governance
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Integrating EVM into DISB / EISS
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(No Transcript)
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Aligning Project EVM Processes
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Aligning DISB and Client Value
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The Pay-Off
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EVM Contribution to DISB/EISS

• Quick definition of focused, value-driven and
  actionable business transformation strategies
• Identification of structured and comprehensive
  candidate client projects for integration
• Selection from a portfolio of high-value
  projects for integration
• A dynamic sense and respond" governance process
  to manage the realization of business value

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The EISS Pay-off..

• Selected client projects that
• Are aligned with business priorities
• Deliver clear and measurable outcomes
• Have high likelihood of delivering benefits
• Increase the business value of EISS

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Recognition within the GoC

• Modern Comptrollership
• Increased focus on sound management of resources
  and effective decision making
• Enhanced Management Framework for IT Projects
• Projects are aligned with, and support, the
  business directions and priorities
• Clear accountability
• Project managers are developed in, and work
  within, a corporate discipline
• Project management decisions are based on risk
  management
• Results Based Management Accountability Framework
  (RMAF)
• For Grants Contributions but concepts are being
  applied to project

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Additional Reading

• The Information Paradox Realizing the Business
  Benefits of Information Technology
• John Thorp Fujitsu Consulting Centre for
  Strategic Leadership
• ISBN 0-07-560103-6 (Canada)
• ISBN 0-07-134265-6 (USA)
• Portfolio Management for New Products
• Robert G. Cooper
• ISBN  0738205141
• Best Practices in IT Portfolio Management
• Mark Jeffrey and Ingmar Leliveld
• MITSloan Management Review, Spring 2004 Vol. 45
  No. 3
• IT Portfolio Management Challenges and Best
  Practices
• Mark Jeffrey and Ingmar Leliveld
• Kellogg School of Management and Diamond Cluster
  International
• Kellogg School of Management Research, Spring
  2003 Vol. 45 No. 3

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For More Information

• For further Information on the DISB Project,
  please contact
• Brian Carter, DISB A/Project Director
• Carter.B2_at_forces.gc.ca Tel [phone]
• JP Lamberti, DISB Project Manager
• Lamberti.JP_at_forces.gc.ca Tel [phone]

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Questions?