A Value Realization Framework Can Drive a Successful Business Transformation

By Andy McCarthy

A value realization framework keeps teams focused on delivering value through every phase of the transformation.

Organizations make significant investments in business transformation strategies, including consulting services, to attain specific results. If not managed and measured properly, programs will get off track, jeopardizing the investment and delivery of the value for which the program was initially undertaken. As a result, roughly 70 percent of transformations fail, leaving the value of the transformation unrealized and potentially putting the organization at risk. There is a tool, value realization framework, that can be employed by leadership to manage and drive better outcomes, sustainably.

What is a Value Realization Framework?

Having a framework in which to realize the value of your investment is critical to a successful transformation. Such a framework is specifically designed to deliver business value realization throughout a major transformation initiative. It allows for flexibility in utilizing multiple project or program management methodologies, making it extensible, and sustainable across styles, teams, and approaches. Most importantly, it keeps C-Suite leaders apprised of and teams focused on delivering value through every phase of the transformation.

Why is a business value realization strategy important?

Funded Program Value

All business transformation initiatives start with a great idea, which is then translated into a business case. The business case provides justification for undertaking the initiative and a rationale for the preferred solution, including the dedication of teams and budget to execute. Funding is granted based on a commitment to time-paced delivery of specific benefits – those benefits comprise the Funded Program Value (FPV).

When a program is funded, the individual or body (e.g., a board of directors) that approved the funding, has a specific value or benefits in mind. That value and those benefits are the FPV. While there is often other value being driven, the funded program value is what absolutely needs to be achieved for the effort to be a success. 

However, the business case alone often lacks sufficient definition to support the stewardship of value creation within the program. As large programs progress through execution, it is easy for the Funded Program Value to become cloudy or lost as leadership focuses on day-to-day workstream/project and program issues.

Four Steps to Drive Value Through a Value Realization Strategy

With funding secured, there are four steps to a value realization framework:

  1. Define Funded Program Value (FPV).
  2. Identify collection of program(s)/project(s) needed to deliver the FPV.
  3. Determine key dependencies and create the program critical path.
  4. Create operating mechanisms, monitor and control.
1. Define Funded Program Value (FPV). Commonly, when a program is in trouble it is due to lack of clarity of the FPV.
  • Basis for evaluating program health – answers the question: What is the needed value out of this transformation? 
  • Gives awareness of potential multiple FPVs that need to be delivered; a look beyond just traditional financial returns to more holistic areas of value that the program can deliver
  • Allows for conversation around program issues as they relate to the business benefits/need
2. Identify collection of program(s) / project(s) needed to deliver the FPV. All related initiatives should be evaluated for inclusion in the newly identified program.
  • Identifies missing efforts needed in the ‘program’ to ensure benefits are meet
  • Initiatives that don’t lead to FPV are managed separately to maintain focus on critical activities. Non-aligned initiatives often add unneeded complexity and risk to the delivery of the funded benefits
  • Those non-aligned initiatives may be candidates to delay or cancel, freeing resources FPV producing initiatives
    need to deliver on benefits
3. Determine key dependencies and create the program critical path. This differs from a project critical path in that it is drawn through the key dependencies that achieve the FPV.
  • Allows measurement of the true program duration and its overall health
  • Allows us to answer the questions: Will we deliver on promised benefits? How do we know we are on track? Where should leadership put its attention?
  • Highlights current activities that may not deliver benefits; identifies areas for scope reduction
  • Identifies critical activities to be monitored / managed by the program
  • Creates the foundation for operating mechanisms which enable management of the program as a single entity versus a collection of projects or workstream
  • Focuses the program attention on key drivers responsible for successful value realization
4. Create Operating Mechanisms to monitor and control program critical paths.
  • All mechanisms should focus on delivering the FPV and controlling the program critical paths. Non-FPV impacting activities within a program should be managed at the individual project level.
  • Answer the question: “Is the program using the right tools and process and are they properly ‘right-sized’ to manage the delivery of Funded Program Value
  • Evaluate the program and project management disciplines used to manage the transformation effort
  • Focus on the key Funded Program Value producing dependencies
  • Evaluate the health, identify areas for improvement, and understand where intervention is needed

How are value realization efforts measured?

Value realization efforts are measured by the extent to which they have resulted in value creation. This can be accomplished  through financial measures such as return on investment (ROI), or non-financial measures such as customer satisfaction and employee engagement.

For example, if a company conducts a value realization effort to improve its e-commerce site, it may measure its success by how many more people buy from the website than previously. If, on the other hand, the company wants to increase customer loyalty, it could look at how many customers are purchasing from the website more frequently than before.

In general, organizations should use a combination of both types of metrics since they do not always correlate. For example, an organization may be able to cut costs by offering discounts, but this may result in lower satisfaction scores if people believe they are being overcharged for a product or service.

Conclusion

Transformation programs can be managed in a way where leaders and the team are looking at the value these activities are laddering up to. They need a framework that defines value more holistically, uses cross-project mechanisms focused on understanding critical dependencies and proactively prioritizes activities based on that value. As a result, key value-producing dependencies are identified so executive leadership can focus their attention on them. This thoughtful, planful approach to business value realization can ensure organization objectives are being achieved, and assure the delivery of a successful business transformation.

If you want to realize the value of your transformation efforts, contact Lexico.