What is business value realization?
Several sources define value realization as:
“The value extracted from a process or project shown over time”
A demand of businesses is the ability for organizations to generate more ‘value add’ from existing products, processes and customers.
Different disciplines have in the past used different language to mean value realisation in one flavour or another. This can be seen to include the term “evaluation” in Learning and Development, ROI in capital terms. Of course purists will argue that they are all different things. In many ways they are. But I wanted to highlight that the concept of value realization is not really new. But it is less common. It does require whole business thinking to be successful.
Whilst value realization can be applied to all parts of an organization, it is the world of IT systems, and in particular the environment that surrounds ERP that has adopted the term “value realization” most strongly.
In essence, value realization is about showing the tangible or actual business value of an IT system or improvement. For example conversion of x customers on a portal before the change. The value realization of the improvements generated y customer conversions resulting in $$+ spend per month/ or transaction etc. Often this is quoted as the additional revenue per customer life time.
Sometimes this is called Business Value Realization BVR or Program Value Realization PVR
- Spend per transaction,
- customer lifetime revenue per month/ year etc
A base line of key measures needs to be obtained. Staged measurements can be made as the solution or change process evolves.
Advantages of value realization
With the need to have baselines, it also means that there needs to be internal transparency across the business. Business stakeholders need to buy-in to the value, and be seen to support the transition and the desired results. The stated results need to be realistic.
Often IT and other business processes will need to adapt and change to both enable the measures as well as the new processes. One of the major mistakes organizations undertaking such changes makes is not to work in collaboration with all stakeholders. No matter how little it is perceived their stake is.
Don’t just focus on the larger stakeholders
One common mistake in transitional based projects like those seeking to add value, is that the larger stakeholders are on board. But the smaller ones are left on the side lines. Unfortunately, too many change projects realise too late, that the difference that makes the transitions a success is often.
because the smaller stakeholders have the key. They are often the ones that enable or disable the realization of value.
IT projects are not just for geeks
The days when IT personnel were locked in rooms, often away from ‘normal’ employees are fast disappearing. Almost every function in business is dependent upon the success or failure of the IT implementation at one time or another.
The ability to ‘see the bigger picture’. Increasingly being able to take data from one place and use it in another is a competitive advantage.
On many MBA programs around the world show the success of McDonald’s and the “do you want to go large” campaign, was the result of data analysis of one individual. Data showed that one worker in one restaurant had higher average sales values than anyone else- in the world! They went to observe that member of staff and discovered their magic question. That one piece of data was use to generate millions of extra profits. It took the business to realise the important, and the training people to listen and implement globally.
Some years earlier, one employee using the phrase: “Would you like fries with that?” (cross sell), was also used.
Use of data to add value to an existing market or customer is important.
Changes in the world of data and business success
In the past, activities like value realization were separate processes that were implemented after the introduction of systems and system upgrades. Due in part to IT being more integrated in operations of businesses, value realization is a key part of any change or development project.
I was recently involved in a large global project that had the value realization at the front of the business drivers for the transition and implementation.
Online loyalty schemes
Many online retailers use gamification as a way of increasing retention. Increasing site or store return frequency. Data collected through such systems can help to influence and indeed increase value realization for businesses. The use of VIP or loyalty schemes is just the start.
Challenges in implementing value realization
One of the biggest challenges is getting all stakeholders to accept the “added value” as proposed. Sometimes these added values reduce costs in one area, only to add work load to others. The net result should be improvement for the organization as a whole. This can be a hard sell for the change agents involved.
Take value realization out of the hands of the IT suppliers
Look at the major IT suppliers; SAP, Microsoft, or the major consulting firms, Accenture, PWC
And you will see they all ‘specialise’ in it. For value realization to really work it needs to become a collaborative approach in any business. It needs to be truly cross functional. It needs to meet the strategic needs of the business, not the needs of one functional kingdom.
The true key to a successful implementation of business value realization needs:
- A focus on business before technology
- A clear strategy of where the business is going and HOW it wants to operate
- Communications, communication, communication!
I hope this introduction to business value realization has sparked some interest. Start your learning journey. Know that there is no magic bullet or formula for guaranteed success. What will make a successful implementation is organization wide collaboration for the benefit of the business, through a common goal!