Value Proposition Management Delivering on Ideas John G. Mathers 2011

Value Proposition ManagementDelivering on Ideas

John G. Mathers 2011

Awareness

Early Adapters

Small

Low

Low

Business life cycle

Value Proposition Management

Startup Growth Maturity Decline

Focus

Audience

Market

Sales

Competition

Market Share

Mainstream

Growing

High

Moderate

Retention

Late Adopters

Large

Flattening

High

Transition

Laggards

Contracting

Moderate

Moderate

Idea

Actions by life cycle stage

Startup Growth Maturity Decline• Business / product

Intention (value)

• Market/business feasibility

• Detailed (bankable/ viable) business plan

• Project oversight (advisory/business)

• Initial funding

• Growth Strategy

• Capital

• Organization

• Marketing

• Investment options (private/public)

• Performance management

• Process / structure optimization

• Operating efficiency

• Strategy / management re-creation

• Transition options

• Transition strategy

• Business Model

• Cost management


Manage by life cycle stage

Startup Growth Maturity DeclineAre we clear:

• What is the value?

• How to communicate the value?

• Who to talk to about the value?

Stick with plan:

• What is our growth strategy?

• How do we fund our growth?

• What structure do we need and when?

• How to keep focus on our market(s)?

Optimize:

• Performance planning and management

• Process / structure Improvement

• Operating efficiency

• Strategy / management re-creation

Reward Results:

• Transition options

• Transition strategy

• Re-aligned business Model

• Incentives and performance management

• Cost management


Key Practices throughout life cycle stages

Startup Growth Maturity Decline

Linked TeamsManagement hierarchy operates as a system of Linked Teams

Performance PlansEvery team has plan coordinating every individual’s performance throughout org

Work ReviewsSystematic and frequent focus on evaluating and controlling each other’s output

Rational Decision MakingTeams use group intelligence as organizational resources.Breakthrough Systems

Individual manage their own behavior with reliable feedback systems with immediate and accurate reporting

Strategic CommitmentManagement oversight, practices and re-creation


4. Measuring

3. AligningValue/$

Payback


Key practices

2. Coring

1. Owning

Idea

Stakeholder Acceptance

5. Reviewing Project Performance

7. Learning

Develop

Imp

lem

en

t6. Re-Creating/Re-Aligning


So .. what’s up with major projects today?

• Help me understand:– We do projects every day; they define the value of

growing businesses!– We devote hundreds of billions of dollars to them!– There are thousands of classes on how to run projects,

tens of thousands of books and articles, hundreds of associations devoted solely to project management!

… and yet >70% of projects still fail!!!!• What’s wrong? Are project

– Too complicated? Too complex and sophisticated?– Too demanding? Requiring too broad a range of

skills?– Too dependent on people? Too reliant on the quality of

management and team members?Value Proposition Management

What do the studies show?

• 30% of major projects are never completed and 50% do not deliver as promised*

• Only 50% of corporations use metrics in projects, despite size, cost or timing**– >95% consider “done/not done” a metric

Sources: * Study of 2000 US-based companies by Hackett Group, Atlanta, 2003 ** Study of 6000 companies worldwide by Rubin Systems, Pound Ridge NY, 1999

Not completed as planned

50%

Completed as planned

20%Never

completed30%


What do the studies show? (continued)

• US companies currently spend $250 billion yearly on IT development projects alone (~ 175,000)– Of all companies studied only 12% of projects were on-time and

on-budget– 31% had cost overruns (average 189%)– 34% had time overruns (average 222%)– 26% realized only portion of planned functionality (average 61%)

• Corporate professionals assessment of successful projects (in order of importance):1. User Involvement (19%)2. Exec Mgmt Support (16%)3. Clear Requirements (15%)4. Proper Planning (11%)5. Realistic Expectations (10%)

Source: Standish Group 1995, updated 1998 and 2000 (study of 362 companies and 3,682 projects

6. Smaller Project Milestones (9%)7. Competent Staff (8%)8. Ownership (6%)9. Clear Vision & Objectives (3%)10. Hard-Working, Focused Staff (3%)

Cost Plan

Cost Actual

Time Plan

Time Actual

Project Plan vs ActualOnly 12% of projects are on-time and on-budget31% have cost overruns 34% have time overruns 26% realize only a portion of planned functionality (avg 61%)


Identified areas of failure

• The reasons given for failure include– Ownership: too often senior management has not considered

the project in light of realistic expectations for results and clearly committed – through budget – to the effort

– Stakeholders: often internal and external stakeholders/ influencers are not clearly identified and included until they are impacted by ongoing project activity

– Alignment: too often alignment is attempted as new stakeholders are identified rather than through a focused and directed effort at the start and regularly during the effort

– Changes: often market and internal surprises demand immediate and reactive changes in deliverables/timeframes

– Management: too often performance problems at the bottom of the organization tend to be escalated late as emergencies rather than arise as part of regular, normal reporting

Sources: General compilation of comments from Standish and Hackett studies


Another way of looking at what’s wrong?

• Projects – like many business activities – are too often addressed as routine activities rather than a demanding management of VALUE PROPOSITION through the life of the effort

Delay ToleranceLo Hi

Routine Projects

Pred

icta

bilit

y

Hi

Trouble-shooting

Negotiable


What is Value Proposition Management?

• The Value Proposition is a clear, concise, factual statement of quantifiable results from products or services – the more specific the value proposition, the easier the measurement … and achievement

• Value Proposition Management (VPM) is regular, ongoing oversight of pre-identified Stakeholders’ values/ benefits as new products or services are identified, developed and delivered

• VPM provides management with appropriate positive or negative feedback on the impact of changes during the development/ implementation cycle, with quantitative and qualitative reporting to support decision making

• VPM supports and enhances project management tools and senior level control through the life of the effort


4. Measuring

3. AligningValue/$

Payback


Key practices

2. Coring

1. Owning

Idea

Stakeholder Acceptance

5. Reviewing Project Performance

7. Learning

Develop

Imp

lem

en

t6. Re-Creating/Re-Aligning


1. Owning

• Feasibility review & value proposition:– Value criteria– Benefit assessment (initial

deliverables)– Stakeholder benefit– Initial schedule– Initial costing– Initial risk Review– Initial benchmarks – Initial dependencies

• Management review• Initial list of stakeholders

Feasibility

Initial value proposition

Buy-in (senior-, group- and project-level mgmt)

Initial budget

Stakeholders list (first cut)

Key Actions Key Results


2. Coring

• Core project team:– Recruitment / selection– Initial work plan

• High-level requirements

• Payback assessment– Revenues or cost savings – Breakeven vs current state

Project staffing

Project work plan

Requirements (first cut)

Payback assessment (first cut)



3. Aligning

• Contact stakeholders & interested parties

• Detailed value proposition• Detailed requirements• Detailed work plan• Detailed budget• Project alignment:

– Value proposition– Requirements– Work plan– Budget & human resources– Project management

structure & reporting

Identified stakeholders & interested parties

Completed value proposition, requirements, work plan, and budget

Agreed-upon overall project and reporting structure



4. Measuring

• Establish metrics:– Time

– Cost

– Resources

– Scope

– Quality

– Action items

• Detailed reporting process / templates and process– Graphic representation– Hierarchy of meetings– Timing

Regular reporting and decision-making process Sub- & project-level Group Senior management Stakeholders

Hierarchy meeting regular agenda: Deliverables realized Cost review Critical issues / decisions Payback assessment



5. Reviewing (short-cycle)

• Tools selection and acquisition:– Project management– Budget– Reporting

• Regular project-level meetings:– Performance to plan

(graphic schedule & cost)– Project and individual

exception issues– Action required

• Regular communication across & up organization:– Exception graphical report

with issues/actions highlighted

– Specialized reporting

Control of performance issues

Regular communication to all interested parties

Special management reporting: Change control Risk assessment Payback assessment



6. Re-creating

• Regular review and re-alignment (all interested parties):– Key issues/impacts– Decision-making– Revision of plans

• Special situation review and re-alignment (only as demanded by project-level impacts):– Key issues/impacts– Decision-making– Revision of plans

Revised project plan impacting (as agreed by management) schedule or budget Risk assessment Payback assessment

Revised metrics for reporting purposes



7. Learning

• Review of project performance (what worked, what did not work, & suggestions)

• Payback Review (final assessment of value proposition realized)

Project learnings (shared across all interested parties)

Payback review (shared with stakeholders only)



Seven practices in three areas

A. Careful preparation1. Owning – Establish ownership at the senior-, group-, &

project- levels2. Coring – Core project team recruitment, selection & work

plan 3. Aligning – Alignment of stakeholders / interested parties

B. Focus on managing action and change4. Measuring – Selection / representation of key project

performance metrics 5. Reviewing – Regular exception reporting designed and

implemented at project-, middle- and senior-levels

C. Considered review of results6. Re-creating – Regular re-alignment and exception change

management to adjust to shifting strategic and market realities 7. Learning – Review learnings from project successes and

failuresValue Proposition Management

Success is at the intersection

Ongoing, balanced management of all key elements is the leverage point for delivering project benefits

ValueProposition

ValueProposition

Planning

Payback

Alig

nm

ent G

overnance


Success is at the intersection

Project success is based on simultaneous attention to:• Planning – ongoing alignment on vision, resources,

deliverables, project plans, roles, and project management responsibilities

• Alignment – identification, needs assessment, and motivation of all internal and external stakeholders

• Governance – ongoing project management, including project monitoring, resourcing, reporting, decision-making, and individual feedback systems

• Payback – constant oversight of performance in direct relationship to expected, measurable results


VPM tools

• Benefit identification• Planned cost and timing• Planned dependencies and

organizational support• Measurement benchmarks• Project structure & controlsReports:• Stakeholder Analysis

Where Did We Start? Where Are We Now?• Deliverables and benefits

realized• Cost to date and resource

utilization

Reports:• Current Risk Assessment• Payback Assessment

What Do We Do?• Project issues indicators• Current challenges and

opportunities

Reports:• Recommendations for ongoing

project support

Value Proposition Management Assessment

Customer

ExpectationsSatisfied

Preparation Action Results• Clear Stakeholder Benefits• Value Criteria• Organization & Culture• Costing & Resources• Alignment & Dependencies• Benchmarks

• Structure & Hierarchy• Controls & Reporting• Performance Management• Issues Resolution• Decision Making

• Deliverables Realized• Benefits Realized• Cost to Date• Resource Utilization• Project Risk Assessment• Payback Assessment


VPM tools

• Stakeholder Analysis– A concise summary of all stakeholders, their perceived and real value to

the project, and the strategies around commitment• Team Assessment

– Internal identification of project issues using indicators developed through work with hundreds of IT projects across multiple industries (focus on IT-intensive projects)

• Payback Assessment– Initial market value (revenues/cost savings to breakeven) versus current

state or return on investment, depending on data• Project Risk Assessment

– Initial value proposition (strategy, functionality, market expectations, cost, time, resources) versus current deliverables

• Recommendations for ongoing project support– Structure, planning, alignment, reporting, decision-making, and

performance management– Potential action plans

VPM Payback Scoring

Inital Current

VPM Stakeholders Analysis

Risk


Tools: stakeholder analysis

Stakeholder(in the Outcome)

Commitment(RE SK SU AD)

Tactical Plan(To Move Commit)

Required(for Desired Outcome)

Needs(Beyond This Project)

Key?

Large Customers

3rd PVendors

Divisions

Board

Development Team

Yes

No

Yes

Yes

Yes

ROI

ROI

Payback

Strategic positioning

Payback & quality

Competitive position

Long-term IT strategy



Integration

Worksessions, dialogue, formal authorityEngage in solution; clarify objectives

Additional information

Engage in solution; provide info & involve in decision

Legend: RE=Resistor SK=Skeptic SU=Supporter AD=Advocate

Participation

Com

mitm

ent

Hig

hLo

w

ActiveNegative

Skeptic Advocate

Resistor Supporter

Large Customers

3rd Party Vendors

Divisions

Board

DevelopmentTeams


Tools: project team assessment

• Rapid response study of internal project team members to identify indicators of performance issues in selected areas:– Networking and alignment within organization– Team and project planning– Reviewing project results/performance– Making decisions in project work review meetings– Focus and support at the team and individual

contributor level

• Report generates chart of areas of concern and points to active management solutions


Tools: output of VPM team assessment

Bureaucracy

0

LT

PP

PWRDPM

TIC

Professional

01231

Autocracy

0

51

1

1.5

2

2.5

3

3.5

4

Linked/AlignedTeams

Project Planning

ProjectWorkReviews

DecisiveProject

Meetings

Focus: Team& IndividualContributors

NeTeam

Project


Tools: payback period evaluation (PPE)

• Initial Payback Period assessment (based on Project History)

• Compared with adjusted Payback Period assessment (based on Current Situation changes in deliverables/functions)

• Develop gap between initial plan and current “actual”; determine potential impact on market expectations

• Establish Risk Assessment based on gap analysis

• Note: Where appropriate, ROI will be determined

Initial InvestmentNPV Savings/Years PPE = NPV Savings

Initial Investment ROI = X 100


Payback Period

$(3,000,000)

$(2,500,000)

$(2,000,000)

$(1,500,000)

$(1,000,000)

$(500,000)

$-

$500,000

$1,000,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49

Months

Co

ntr

ibu

tio

ns

Percent Functionality Delivered

0%

20%

40%

60%

80%

100%

120%

1 5 9 13 17 21 25 29 33 37 41 45 49

Months

Pe

rce

nt

Tools: output of VPM payback assessment

Project Costs by Month

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Months

Co

st

Revenues by Month

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Months

Re

ve

nu

es

Cost Savings by Month

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

Months

Co

st

Initial CurrentPayback will be delayed 5.6 months at an additional cost (delay costs + lost revenues) of $1.28M


Risk AssessmentAbsolute

Internal Expectation 82

Current Expectation 54

Gap Assessment - 28 -

PPRisk AssessmentComparative

Market Expectation 96



PP

Tools: project risk assessment

• Analysis identifies comparative performance gaps ("how do we compare against anticipated market expectations?") and absolute performance gaps ("how do we perform in areas that are critical to our business?")

• Risk Assessment specifically identifies performance requirements being met or unmet and the potential financial and service impacts

• Risk Assessment is reported as a relative score across specific project deliverables relative to Pace and Quality

Risk AssessmentComparative

Market Expectation 96



QQ Risk AssessmentAbsolute

Internal Expectation 82



QQ


Example: Gap Analysis

Time

Co

stF

un

ction

ality

P1

P2

P3

P4P5 P6

P1

P2

P3

P4

P5

Initial Cost PlanInitial Deliverables by PhaseCurrent Cost PlanCurrent Deliverables by Phase


Getting started (what to do first?)

The Seven Practices1. Owning2. Coring3. Aligning4. Measuring5. Reviewing6. Re-creating7. Learning

Review concepts and practices with project teams and with management, both middle- and senior-levels

Select an easily definable project as a “test case” (i.e., defined as low risk, small cost, semi-predictable, acceptable tomanagement and with an experienced project manager and team)

Review the results of the project both in terms of specifics (did it work to get the planned result?) as well as each of the seven practices

Make adjustments and implement more broadly


3020 Bridgeway, Suite 414, Sausalito CA 94965Tel: 1 (415) 381-4660 Email: [email protected] Web:

www.eVoassociates.com

3020 Bridgeway, Suite 414, Sausalito CA 94965Tel: 1 (415) 381-4660 Email: [email protected] Web:

www.eVoassociates.com

Speeding the natural evolution of your business

Value Proposition Management Delivering on Ideas John G. Mathers 2011

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