Michel Thiry - CSVA 2013 Keynote - Strategic Value Management
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Keynote presentation delivered by Michel Thiry, PhD, PMI Fellow on the 25 November 2013 to the 20th Anniversary Conference of the Canadian Society for Value Analysis in Montreal, Canada.
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Michel Thiry - CSVA 2013 Keynote - Strategic Value Management
- 1. Michel Thiry PhD, PMP, FAPM, PMI Fellow presents: Strategic Value Management
- 2. Presentation Outline 1. The context of value in today‟s organization 2. Consistently delivering value in a dynamic environment 3. Applications of Strategic Value Management 4. Strategic Value Management as an Organizational Capability 2 © Valense Ltd. 2013
- 3. 1. The context of value in today’s organization 3 © Valense Ltd. 2013
- 4. Of 103 companies studied, strategic blunders (Failure to react to market shifts, wrong strategic decisions or implementation) were responsible for shareholder value destruction 81% of the time.* 4 © Valense Ltd. 2013 * Booz&Co, 2012: C. Dann, M. Le Merle, and C. Pencavel http://www.strategy-business.com/article/00146?pg=all
- 5. A Challenging Business Context Increased Complexity Scope of Change Need for Accelerated Learning Evolution of Market Competitive Deficit Organisation’s Leadership Curve Crisis Organisation’s Competitive Advantage Time 5 © Valense Ltd. 2013 Increased Turbulence
- 6. Lost Value: The Conclusion “…what senior executives need is a more balanced approach to strategic decision making […] and value considerations.” 6 © Valense Ltd. 2013 Booz&Co, 2012: C. Dann, M. Le Merle, and C. Pencavel http://www.strategy-business.com/article/00146?pg=all
- 7. What drives the quality of decisions? Conscious Judgment Clarity on how much we are willing to sacrifice of one value in order to receive more of another Sensible Evaluation Based on alternatives, available information, & expressed value at the time of the decision Viable Choice Options developed from alternatives following analysis and consolidation of information Not all alternatives can become viable options 7 © Valense Ltd. 2013 Adapted from Tom Spradlin, 1997, Decision Analysis Society Website: http://faculty.fuqua.duke.edu/daweb/lexicon.htm
- 8. Need to become more responsive Ongoing Actions Change Actions Stable Focus on Response Focus on Continuity Focus on Results Low Decision Focus on Analysis Execution High Low Complexity / Ambiguity Dynamic High Turbulence / Uncertainty 8 © Valense Ltd. 2013 Adapted from: Thiry, 2010
- 9. Business Competitiveness Frameworks Stable Framework Dynamic Framework Maintenance, predictable controlled outputs Internal competition = Knowledge withheld Strong team culture = Knowledge shared Vertical functional relationships Cross-functional horizontal relationships Efficiency & reliability as measures of value 9 Transformation, emergent unpredictable outcomes Responsiveness as measure of value © Valense Ltd. 2013
- 10. Value Management Value Management is a structured means for achieving: “better business decisions; which can be supported by all stakeholders; improved products and services; enhanced competitiveness by facilitating […] innovation.” BS-EN 12973:2000 VM Standard, p.6 10 © Valense Ltd. 2013
- 11. What is Value … in Business? 11 © Valense Ltd. 2013
- 12. 2. Consistently delivering value in a dynamic environment 12 © Valense Ltd. 2013
- 13. “Most executives […] are still using strategy frameworks and tools designed for achieving a sustainable competitive advantage, not for quickly moving in and out of advantages.” Rita Gunther McGrath The End of Competitive Advantage, 2013 13 © Valense Ltd. 2013
- 14. Potential vs. Realized Value Integrate Formulate Value Planning Run the Business Value Creation Transform the Business Deliver Operate “Track benefits realization past the end of a project through operations to verify return on investment.”* 14 © Valense Ltd. 2013 * PMI Pulse of the ProfessionTM 2013
- 15. The Evolution of Value Mgmt “Hard” Value Management (VE/VA) Quality/Cost Improvement Development of better products “Soft” Value Management (VM) Focus on stakeholder needs/resources used Development of better business solutions Strategic Value Management (SVM) Best use of resources to gain competitive advantage Ongoing development of best portfolio of actions 15 © Valense Ltd. 2013
- 16. Evolution of Value Management Expansive VM Respond to Adapt Soft VM Hard VM Low Deliver Results Value Creation Potential Value Turbulence/Uncertainty © Valense Ltd. 2013 Decision Analyse to Integrate Strategic VM Operate for Continuity 16 High Value Planning Execution Complexity /Ambiguity Realised Value
- 17. How to Measure Value in Business Offered Benefits vs. Expected Benefits 17 © Valense Ltd. 2013 Available Capabilities vs. Required Capabilities
- 18. SVM as a dynamic strategy tool Redirect Identify opportunities Assess & Improve Optimize & Align Terminate 18 © Valense Ltd. 2013 Set Direction Appraise Realize Value
- 19. 3. Applications of Strategic Value Management 19 © Valense Ltd. 2013
- 20. Change never goes as planned… Rosabeth Moss-Kanter See: 12:58 to 14:02 min http://www.youtube.com/watch?v=owU5aTNPJbs 20 © Valense Ltd. 2013
- 21. Strategic Value Mgmt in Context BUSINESS „Learning cycle‟ „Performance cycle‟ Strategic Objectives Expected Benefits Objectives/ Parameters Corporate Strategy Ongoing Value Appraisal Planning & Execution Realised benefits EXTERNAL OR INTERNAL PROJECTS „Capability Cycle‟ Pressure to change PROGRAM Realized Outcomes Deliverable / Output Strategic VM Application 21 © Valense Ltd. 2013 Traditional VM Application (VA/VE)
- 22. VM as a Structured Decision Process Sensemaking Clarify needs & expectations of stakeholders (expected benefits / functions). Determine & prioritize Critical Success Factors (CSF) Ideation Seek alternative means of achieving CSFs Elaboration Develop alternatives into viable options. Focus on benefits Decision/recommendation Define optimal combination/phasing/pacing of options Mastering Ensure benefits delivery & effective response to emergent inputs 22 © Valense Ltd. 2013
- 23. Decision Management Cycle Learning Cycle Value Mgmt Expected Benefits Ideation Strategic Sensemaking Objectives Expected Outcomes Elaboration Choice Project Mgmt Program Mgmt (Capture Expectations) Delivered Outputs Control Planning Execution Proposed Actions Proposed Deliverables Performance Cycle (Deliver Results) 23 © Valense Ltd. 2013 Thiry, 2002-2010
- 24. Strategic Value profile (Balancing the Portfolio) Alignment with Strategy (Contribution to Benefits) High Program 1 Program Commit to 2 Program 4 Project 3 Reject Project 6 Improve and reassess Project 4 Project 5 Project 1 Program 3 Project 2 Low Realization Capability (Level of Achievability) 24 © Valense Ltd. 2013 Size of bubble represents cost
- 25. Iterative Value Cycle Learning Loops Strategic Choice Choice of actions Development adjustments Implementation adjustments Formulate/Organize Plan/Execute/Control Emergent Input Learning Loop Performance Loops 25 © Valense Ltd. 2013 Benefits Evaluation
- 26. 4. Strategic Value Management as an Organizational Capability 26 © Valense Ltd. 2013
- 27. Why we need to change Management Gary Hamel See: From 1:06 to 4:00 min http://www.youtube.com/watch?v=aodjgkv65MM 27 © Valense Ltd. 2013
- 28. SVM as a dynamic strategy tool Redirect Identify opportunities Assess & Improve Optimize & Align Terminate 28 © Valense Ltd. 2013 Set Direction Appraise Seek New Realize Opportunities Value
- 29. Develop responsive value-based decision management process VM is an ongoing, iterative process Look for opportunities to improve value Regularly reexamine business context and stakeholders' needs and expectations Define „gates‟ or „gateways‟ for assessment of delivery of benefits (use benefits register) Ensure any changes address „real‟ issues and are based on value criteria Focus of VM evolves throughout process 29 © Valense Ltd. 2013
- 30. Managing Value in Context Strategic Direction Portfolio Direction Finance Board / Top Management HR (Resource Allocation) Strategic VM Procurement (Contr./Suppl.) IT (Support) Support Activities / Portfolio Management Demand Activities / Sponsorship Sales & Marketing Research & Development HR (Training & Recruitment) IT (Devel. New Capab./Syst.) Production Processes 30 © Valense Ltd. 2013 Define Needs & Expectations Structure Program Program Management Provide Knowledge Use Knowledge Standardize Apply Select Processes Processes Potential Actions Soft VM Deliver New Increase Capabilities Performance Develop Hard Business Measure VM Measure Case Outputs Outcomes Project Mgmt Use New Capabilities Improve overall capability to respond to market /customer demands Measure Benefits
- 31. Change Management! Foster a value culture in your business Base decisions on benefits/achievability ratio Constantly challenge current equilibrium Use the functions/benefits concept Seek business benefits, not solutions Define measures of value (CSFs and KPIs) Develop and engage dynamic cross-functional multidisciplinary teams Foster mix of competencies and knowledge Encourage divergent ideas 31 © Valense Ltd. 2013
- 32. New York London Geneva Bahrain Pune Sydney Michel Thiry, PhD, FAPM, PMI Fellow http://uk.linkedin.com/in/michelthiry www.amazon.com/author/michelthiry http://www.youtube.com/user/valensepartners? feature=results_main 32 © Valense Ltd. 2013
Editor's Notes
- 103 companies studied, strategic blunders were responsible for shareholder value destruction 81% of the time.When looking at more complex situations with multiple factors, strategic failure still caused more than 60% loss of value.50% loss of value occurred gradually — over many months, or even years if the company took too long to grasp a changed strategic environment or lacked the agility to react.50% lost value occurred in a matter of months, weeks, or even days.Strategic Blunders: Failure to react to market shifts, wrong strategic decisions or implementationOperational: (BP Example in Gulf of Mexico)Ethical: Fraud & otherEnvironmental: Tsunami & Nuclear production
- 103 companies studied, strategic blunders were responsible for shareholder value destruction 81% of the time.When looking at more complex situations with multiple factors, strategic failure still caused more than 60% loss of valueIndividual functions such as accounting, finance, and compliance have improved risk controls.Executives have made their enterprise risk management (ERM) teams accountable for identifying and evaluating the interconnected risks facing their companies.ERM teams can identify and hedge risks related to relatively narrow business decisionsAn ERM team must assume that the strategic course set by senior management is soundSenior executives need is a more balanced approach to strategic decision making, augmenting traditional cost and value considerations…all of which are outside the scope of most ERM teamsThink broadly about what could occur and constantly layer new risks into their calculations as these risks emergeMore conversations at the top levels, looping in key individuals as needed to acquire full understanding of the uncertaintiesHow strategic decisions can affect resiliency and always be on the lookout for more strategically resilient alternatives
- Real value consists of “achieved benefits”. Therefore there are 2 dimensions to value:The fit with expectationsThe achievability of the solutions.Benefits are based on long term measures, not short term financial measuresEXPLAIN THE NEED TO MEASURE OPERATIONAL BENEFITS BEYOND DELIVERY
- p. Xiihttp://www.youtube.com/watch?v=sYiaAtPSp2s
- Typically, organizations are divided into a series of management processes destined to run the business (Governance, portfolio, operations and maintenance) the role of which it is to provide continuity to the business. Another set of business process are destined to transform the business (Strategy, Program and Value Management, innovation and project management), the purpose of these actions is to maintain the competitive advantage of the organization in regard of a changing market context (competition, new technologies and others)The more turbulent the context, the shorter the cycles of transformation. But transformation only produces potential value, it is only when the changes are implemented through operations and integrated that they produce real business value.Central to the change management process in organisations is recognising when change is needed. Some steps include:deciding who needs to implement the changes (whole organization or one department)selecting a model or framework to guide the processdeciding who is responsible for implementing the changesknowing your desired outcome.In the next few slides, I will discuss and example.
- Expansive value management (EVM) three main propositions:1) evaluating and stimulating the creation of value with a constant comparison with the dominant designs2) sustaining the exploration by tuning the degree of undecidability3) stimulating the emergence of new ecosystems by the creation of new platforms projects.
- Typically, organizations are divided into a series of management processes destined to run the business (Governance, portfolio, operations and maintenance) the role of which it is to provide continuity to the business. Another set of business process are destined to transform the business (Strategy, Program and Value Management, innovation and project management), the purpose of these actions is to maintain the competitive advantage of the organization in regard of a changing market context (competition, new technologies and others)The more turbulent the context, the shorter the cycles of transformation. But transformation only produces potential value, it is only when the changes are implemented through operations and integrated that they produce real business value.Central to the change management process in organisations is recognising when change is needed. Some steps include:deciding who needs to implement the changes (whole organization or one department)selecting a model or framework to guide the processdeciding who is responsible for implementing the changesknowing your desired outcome.In the next few slides, I will discuss and example.
- Bernard Marshall, Portfolio Prioritisation presentation at APM Portfolio Management SIG, 14/06/2012
- Bernard Marshall, Portfolio Prioritisation presentation at APM Portfolio Management SIG, 14/06/2012