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Enable Value Realization

If a project enables value realization, then the business will experience a higher return on its investment, but the worth of the project outcome and the cost to produce it needs to be calculated and measured before and after the project is finished.

What exactly do we mean by “value realization”? And if we should help it come to be, what is “value” then?

A simple definition of value is the worth that something has, or what its benefits are, compared to the “cost” of the thing. For example, a toaster wide enough for bagels that doesn’t burn them is important me. I will likely value most the lowest cost toaster with those 2 features.

So, in order to help the value of a developed product or service come to be in a project, we and our buyers need to get real clear about what that is. This discovery effort is the first phase of the value engineering process, sometimes called the Information phase. What distinguishes value engineering from other methods of design, is its focus on function, establishing the monetary value for that function, and how to provide that function at the lowest cost.

Preparing for Value Realization

To get started, identify the project deliverables and understand what function the deliverables play in the buyer’s value chain. Function is what makes a deliverable work or sell, like "toaster slot accommodates 2-inch thick bagel half, and “user can adjust toaster heat."

A very important tool used in the value engineering Information phase is the Function Analysis System Technique diagram (FAST). FAST organizes functions into cause and effect relationships, and helps to:

1) identify product functions, 2) reveal linkage among all functions, and 3) analyze and evaluate functions.

One slightly more sophisticated way to estimate value for projects is called Expected Commercial Value or ECV. ECV uses money to quantify value. ECV is first estimated when developing the project business case for funding decisions. That formula considers the future income stream, commercialization costs, development costs, and the probabilities of commercial and technical success.

Realization

“The future ain’t what it used to be.” - Yogi Berra

After you have completed value engineering of the deliverables you will need to figure the current value of the deliverables during the payback period. For our wide-mouth toaster, you might ask, “How popular is this toaster compared to what we thought it would be?”

The important thing is that you set the expectations up front, in your project planning and during project scope, so that project outcomes will be defined and measured, how, and over what time frames.

When you help a business produce products or services, that are of high value in the eyes of buyers, at costs lower than its peers, that business will experience an increasing market share and enjoy a nice return.

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Wednesday, 22 November 2017
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