“The Growth Strategy Challenge”
A major challenge to any growth strategy is the ability - or rather the inability - to implement projects that enable or deliver growth.
Small, incremental growth projects can be implemented, but deliver small returns.
When it comes to larger, transformational, high-value growth initiatives, firms struggle to implement them effectively, if at all.
Research has repeatedly confirmed that around 40% of projects fail to deliver any net improvement. Some fail altogether, but many just deliver ‘something’ at a cost that exceeds the value of the benefits.
Of the remaining 60% of projects, 55% fail to deliver the available business value in full – often missing this target by more than 50%.
All pretty distressing figures. The standard response, by both the project industry and business management, is to seek out ‘better project managers’ to manage these challenging growth projects and programs. But herein lies the fundamental problem.Business managers expect ‘value delivery’ but project managers focus on ‘project delivery’.
There is a major difference between- ‘project delivery’ – the ability to deliver the project and implement the solution (which most firms focus on today), and
- ‘value delivery’ – the ability to fully deliver the new, improved business end states, benefits and associated value.
- identify the benefits and value
- target them
- protect them
- deliver them, and
- sustain them.
1 Identifying the benefits and value
When with The Boston Consulting Group I conducted research into the drivers and destroyers of value on projects.
Suprisingly we found that the greatest single destroyer of value was the business case — the way firms approach and manage business cases actually encourages value loss.
To illustrate, in most business cases benefits are treated as an offset to the costs. So, once you have ‘enough’ benefits to cover your investment costs, you stop looking for any more benefits.
On a recent project we recomputed the business case but this time without the constraint of only trying to justify the project costs. The benefits’ value went from $35 million to over $100 million (we stopped counting when we passed $100 million). This example demonstrates the potential size of this ‘lack of benefits identification’ problem.2 Targeting the benefits and value
The orthodox mental model is that there are projects and there are benefits and somehow they are two separate streams of activities. Methodologies advocate the establishment of ‘benefits delivery streams’ to plan and manage the delivery of the expected benefits. The project is somehow viewed as separate from this benefits/value delivery activity.
This is ‘project delivery’ thinking triumphing over ‘value delivery’ thinking.
Delivering the project is a major value delivery process – not a separate process.
The project should be measured on the benefits and value it directly enables and delivers during its existence.
Many a project manager rejects the notion that they have any accountability for benefit realization – this is project delivery thinking. If you want to realize the available business value you need to ensure from day-1 everyone is thinking, planning and aligning what they are doing to the realization of the improvement benefits and value.
In a utility implementing a major ERP system, well over 20% of the identified benefits had been realized before the system was implemented as a result of a value delivery mindset and approach.
3 Protecting the benefits and value
With the obsession on delivering a project ‘on time and budget’ the project’s scope has become a variable that is adjusted to meet the time/cost constraints.
However, you don’t commission projects to spend money or control costs but to implement improvements and realize the benefits and value. This cost-based obsession is project delivery thinking again.
The scope controls the value. Changes in scope can impact the potential value to be realized. Protecting the scope and thereby the value is one of the Sponsor and Steering Committee’s key roles – one that most governance teams are blissfully unaware of today.
The governance team should be championing the ‘value delivery’ mindset and approach to ensure the business realizes the maximum available benefits from each and every project. Instead, too many governance teams are caught up in the project delivery mindset and see their project as ‘successful’ if it comes in "on time and on budget" regardless of the improvement value actually realized.
We recently witnessed a steering committee adjust the scope to avoid a cost overrun and in doing so eliminated the top two benefits of the project. This is not an isolated occurrence.
4 Delivering the benefits and value
Benefits and value can and should be realized during the project, on its delivery and after. The notion that “all benefits come after the end of the project” is nonsense and an exercise in abdicating accountability for benefits to “them” – whoever they are.
This benefits delivery step has been confused by a perception that ‘benefits’ are financials and, therefore, realization of the benefits equals the realization of the financials. However, ‘benefits’ should be seen as three separate components
- the new business end states, the improved outcomes and processes to be achieved within business-as-usual (this is your first measure of benefit realization)
- the associated benefits realized or enabled as a result of the delivery of these new end states
- the financial value of these benefits as ‘banked’.
Chasing just the financials is fraught with problems and is unnecessarily difficult. The key is to firstly to focus on delivering the agreed business outcomes, then their associated benefits and then the available value in full. This is an easy, sequential benefits and value delivery and measurement approach.
Realization of all three benefits/value components should be the primary target and measure of success of both the project and governance teams. Achievement of all three of these valuable results is why each project is commissioned in the first place.
5 Sustaining the benefits and value
It is easy for some benefits to be lost after implementation as practices slide back to the old ways of doing things or are changed without any awareness of the business value impacts.
In a bank, a new superannuation department was formed and defined all of its operating processes in detail. Two years later when the operating processes were mapped as they were occuring then, they were unrecognisable by the original process designer – they had mutated so much in just two years.
‘Process management’ is still an embryonic concept as it cuts across organizational structures and power bases but it is necessary if the end-to-end value and growth opportunities of the organization's core processes are to be protected into the future.
Professor John Kotter has argued that it takes seven years for a change to become part of the DNA of an organization – so actively sustaining benefits and value once delivered is key in achieving and sustaining growth.
Summary
Currently each of the five key value realization steps is poorly done.
These steps are currently not the core focus of the orthodox ‘project delivery’ approaches – hence the loss of 50% or more of the available value from most projects.
To support and enable growth, these five steps require a ‘value delivery’ approach – an approach designed to ensure both the business growth opportunities are fully identified and implemented, and the maximum available value is realized from the results.
It is time - and necessary - to shift from the common, orthodox ‘project delivery’ approach to the more effective ‘value delivery’ approach to projects – an approach that consistently delivers the competitive growth benefits and value desired
The starting point or a value delivery approach is The TOP Value Equation™.
