In a world that is increasingly becoming digital, companies with good IT systems are becoming more competitive. They can satisfy customers in a better way, grow faster, provide services at lower costs and manage their working capital in a better way. That is how shareholder value is created.
Recently McKinsey and the University conducted research on more than 5,400 IT projects larger than $15M and they concluded that 46% of these projects were over budget, 7% were over time and the value was 56% less than predicted. 17% of these projects go so bad that they can threaten the very existence of a company.
So how do companies maximize the chances that their IT projects deliver the expected value on time and within budget? To address this SAP has created a Value Management framework. Value management represents a new way of managing business transformation brought about by IT initiatives. It is intended to keep companies focused on choosing the right projects (what to improve), clearly defining ownership and accountability for business results (what is the measurable business value), and delivering on commitments for these results (how to attain and sustain value).
Value management can deliver significant bottom-line benefits. According to a joint SAP and AMR survey of over 400 participants, organizations that have adopted the Value Management framework are twice as likely to deliver project benefits on time, are 1.9 times more likely to deliver projects on budget and deliver 60% higher business benefits.
SAP’s mission is to share Value Management best practices to help every company become a best-run business. It helps companies in three stages:
- Discovery: Invest for impact
- Identify and prioritize investments that have
the highest business impact - Establish a means for benchmarking performance
- Ensure that executives are accountable for
outcomes - Clarify initiatives, with defined success metrics
communicated through a business case
- Identify and prioritize investments that have
- Realization: Deliver for business outcome
- Develop a shared definition of success and keep
all stakeholders committed to achieving it - Design process changes to deliver expected value
of technology - Ensure that value drives project priorities throughout
implementation - Include ongoing measurements and communication
of progress in project design
- Develop a shared definition of success and keep
- Optimization: Govern for performance
- Build organizational model that supports
institutionalization of value management capabilities across the portfolio - Govern projects to ensure visibility and
sponsorship - Foster performance-based thinking on value
- Build organizational model that supports
Value Management is not just a simple process adoption. It requires a cultural shift new ways of thinking about performance improvement & benchmarking,
collaborative business case development, project sponsorship, value realization, business strategy & IT alignment, governance and organization excellence.