Making sense of value blog series Blog titles: Making sense of value: what is value? The value index: how to measure value? How to balance benefits delivery with risk optimisation to realise value Authored by Michel Thiry Event evening write up newstory page: https://www.apm.org.uk/news/making-sense-of-value/

1. Author - Michel Thiry 1 November 19
Making sense of value: what is value?
This paper was first published as 3-part blog series on APM Benefits and Value SIG site.
The paper discusses the use of value management to develop and implement business
initiatives (programs and projects) that are well aligned with the strategy, deliver benefits
and are achievable. In the first blog I discuss the concept of value.
The concept of value
Value has become a key element of sustained competitive advantage, but not just the more
traditional sense of financial or shareholder value anymore. Today’s business context
requires transient strategies and successful change initiatives as an essential element of
value realisation. Change initiatives can include programmes, projects, innovation and
continuous improvement. But how can we make sense of their value for the stakeholders
and measure their successful realisation beyond simple financial value?
The concepts underlying value management were established by Lawrence (Larry) Miles
when he developed Value Analysis and Value Engineering for General Electric in the late
1940s and early 1950s. Since then, many disciplines have stemmed from those initial
concepts, for example: TQM (Total Quality Management); Lean Management; Value
Management and others.
Initially, value analysis was used to reduce purchasing costs of products by finding cheaper
alternatives that would perform the same functions as the original, more expensive product.
In the 1960s and 70s, Value Engineers defined value as a ratio between quality and cost, and
later value managers defined it as the ratio between the satisfaction of the needs of the
customer and the resources used to satisfy them.
This value ratio is the basis for many business measures like the ROI (Return vs Investment);
SWOT (Strengths and Weaknesses vs Opportunities and Threats); the project management’s
scope and quality vs time and cost; or the programme management’s Alignment vs
Achievability. To make sense of value, we must examine how value can be defined and
mastered in every situation.

2. Author - Michel Thiry 2 November 19
Copyright: Michel Thiry
Making sense of value
In today’s VUCA (Volatile, Uncertain, Complex and Ambiguous) context, realised
organisational value can be described as the balance between the alignment of an initiative
with strategic objectives, or expected benefits, and the achievability of the agreed solutions.
Alignment with strategic objectives has been linked to benefits realisation management and
achievability can be linked to the overall risk.
In order to realise value for the organisation, when managing a change initiative:
• Benefits must be identified, agreed, delivered and sustained; their alignment with strategic
objectives must be clearly demonstrated.
• Overall risk must be based on the boundaries imposed on the initiative and to its level of
uncertainty; value cannot be realised without achievability.
• Value balances and integrates both concepts to give managers a means to identify the
solutions that will align best with the organization’s strategy and offer the best achievability
factor; I have called this: The Value Index.

3. Author - Michel Thiry 3 November 19
The value index: how to measure value?
This paper discusses the use of value management to develop and implement business
initiatives (programs and projects) that are well aligned with the strategy, deliver benefits
and are achievable. In the second blog of the series, I will address the measure of value and
how to create a value index that can be used to compare a range of business initiates.
What is the value index?
Strategy developers, portfolio managers and program managers typically assess the
alignment of options with the strategic objectives and compare them on that basis. A high-
level risk analysis is performed to assess uncertainty and value is usually reduced to return
on investment (ROI).
A true value index enables a comparison of strategic initiatives and portfolio or program
components based on tangible and measurable factors. Decision makers can compare
options or rank potential initiatives on their broader value contribution by combining a
measure of alignment with strategy, with a measure of achievability in a value score.
Alignment
Alignment is a measure of how well an initiative, be it a strategic initiative, a programme or
a project, contributes to achieving a strategy, or adds value to the organisation or its clients.
A measure of the alignment requires a clear statement of the agreed initiatives’ objectives.
Typically, key stakeholders are consulted and asked to state their expectations for the
initiative, which are mapped and prioritised from strategic objectives to benefits, outcomes,
outputs and capabilities. This creates a benefits map or Benefits Breakdown Structure (BBS).
Value Management (VM) offers creative team methods to elicit expected benefits from
stakeholders and functional analysis can be used to methodically develop the BBS.
Critical Success Factors (CSFs) are then identified and weighted; they are the benefits that
matter. Weighted CSFs provide the alignment target score. Each initiative is then assessed
against their contribution to these weighted CSFs to provide an alignment score. The
conformity to those targets will also offer an alignment monitoring measure throughout the
programme or project.

4. Author - Michel Thiry 4 November 19
Source: Program Management, Gower Publishing with permission Michel Thiry
Achievability
Achievability is assessed against four main factors: financial, boundaries, resourcing and
complexity. Each of these groups can be divided into individual measures. For example,
what is the proportion of the initiative’s expected cost against the total available budget?
What is the availability of the resources required to undertake this initiative? Is the
expertise required to carry out that initiative sufficient? How familiar is the work that needs
to be undertaken?
For all these questions, levels are set, and measures are agreed, like in risk analysis. Once
the measures are agreed, each initiative’s achievability is assessed against an ideal score.
The measure of achievability is a measure of the overall risk of that initiative against a series
of known factors. And, the measures of achievability are also the measure of success of that
initiative. It can also be used to set risk thresholds for portfolios or programmes.
Calculating the value index
The value index is the combined score of alignment and achievability, where alignment is
favoured over achievability as it is of higher importance to value realisation. The calculation
of the value index offers an opportunity to negotiate the balance between available
capabilities and expected benefits with the sponsors and key stakeholders.

5. Author - Michel Thiry 5 November 19
How to balance benefits delivery with risk optimisation
to realise value
This paper discusses the use of value management to develop and implement business
initiatives (programs and projects) that are well aligned with the strategy, deliver benefits
and are achievable.
In the previous two blogs we talked about the concept of value and how to measure value.
In this final blog we will explore the actual process of value generation.
Source: Program Management, Gower Publishing with permission Michel Thiry
Value realisation
Value realisation is only possible if benefits are achieved, therefore the continuous
monitoring of both alignment with strategic objectives and achievability of the initiative are
essential to realising value. Value management is based on the balance of alignment and
achievability and offers a robust method to combine benefits realisation with risk
management to ensure that initiatives undertaken will not only fulfil stakeholder’s
expectations, but also be realistic in regards of available capabilities.
The change recipients, sponsors, programme and project managers collaborate to set
objectives that are agreed and achievable and align with the organisation’s strategies.
Typically, through creative thinking-based workshops a value management facilitator will
help elicit stakeholders’ expectations and creatively identify potential alternatives to
achieve them.

6. Author - Michel Thiry 6 November 19
• The first step of the process is based on sensemaking concepts; it allows different stakeholders with
diverse perspectives to agree on a set of common objectives that can be linked to value goals.
• The second step entails the facilitation of an ideation process that consists of identifying as many
potential alternatives as possible to achieve these objectives.
• Finally, in the third step, all those alternatives are assessed in regards of their achievability and a
choice is made on a set of options that will form the project or program.
During the performance cycle of decision management, value management will consist of
monitoring benefits realisation, continual risk assessment and sustaining value targets.
Benefits delivery
Sensemaking is aimed at identifying, mapping and prioritising benefits. The output will be
the benefits map and key performance indicators to measure their achievement.
In today’s VUCA context, organisations must be creative to maintain or gain a competitive
edge. Ideation is a creative group process aimed at finding innovative alternatives to
achieve the agreed benefits. This process enables a clear mapping of benefits to outputs
The benefits realisation management plan will combine the above elements with transition
and integration support activities, their milestones and their ongoing monitoring.
Benefits realisation is subjected to high ambiguity and is a creative team process.
Risk optimisation
Value management must include an assessment of probability of achieving the benefits and
overall value objectives. Risk thresholds define the achievability of a change initiative; once
achievability factors are defined, they are used to assess the achievability of the initiative.
When the initiative has been approved for execution the team will perform a risk analysis
that will lead to the definition of contingency reserves and risk responses. Management
reserves are based on the level of achievability, or overall risk.
During execution, risk responses will be implemented, reserves managed, and achievability
issues monitored. If achievability, based on the factors used to approve the initiative, is
questioned, the initiative’s owner or board could challenge it.
Risk management is subjected to uncertainty and requires an analytic process.

7. Author - Michel Thiry 7 November 19
Conclusion
As organisations operate in increasingly complex and volatile contexts the concept of value
continues to evolve. The organisations that can strike the right balance between benefits
realisation and risk optimisation, whilst fostering adaptability and responsiveness, will
deliver value to their stakeholders. Selecting the most innovative business initiatives, based
on their alignment to the strategy and achievability is a difficult task which can be supported
by the application of a value index.
Value management is an integrating process that enables diverse stakeholders to identify
their common objectives. Its creative approach ensures that the solutions they propose are
innovative and achievable.
About the Author: Michel THIRY, PhD, PMI Fellow, Managing Partner Valense Ltd.
Michel Thiry has an extensive worldwide experience
and has worked in many cultural environments. He is
recognised as a worldwide authority in strategic
applications of project, program and value at
organisational level and has supported the
development and implementation of a number of
strategic programs for major corporations in various
fields, including construction, financial,
pharmaceutical, IT and IS, telecom, water treatment,
transportation (air and rail), local government and
others using agile and change concepts.
He is a regular Keynote Speaker for major International events, both at the Academic and
Practice levels since 1996 and been invited to sit on expert panels in International Academic
and Practitioner forums.
Michel has obtained an MSc in Organizational Behaviour with the School of Management
and Organizational Behaviour at the University of London and a PhD on the
Contextualisation of Project Organizations at Middlesex University. He is also the author
of Program Management and various chapters for many publications. He is currently in the
process of writing a book on Value, benefits and risk to be published by Wiley end of 2020.