A value stream is the set of capabilities required to provide the realization of value through the complete solution to a customer. Each component of the stream must add value in some way by bringing the customers closer to their ultimate goal. For example, document authorship software doesn't just help a novelist save their works to a file, it helps them print and publish a book. Therefore, this software delivers more value by interfacing with printing software and/or saving to electronic publication file formats. Knowing the complete capabilities and the final desired outcome helps to ensure a project delivers value to stakeholders.
Often a project will satisfy one piece/requirement of the entire value stream. Making sure the entire stream is complete is the ultimate indicator of project success - not simply meeting requirements. A project leader should continually evaluate/adjust project alignment with respect to business objectives, intended benefits and value. While most people think to evaluate value at the end of the project, it can be realized throughout the project lifecycle. A team should focus on the benefits that lead to the most value creation.
Value is the ratio of function to cost. Often, this means that the customer intends to make money using the function or resale of the capability delivered to them. Therefore, posing their success in regards to Return on Investment (RoI) can increase the likelihood of sale or increase strategic alignment. When a program's desired outcome is public good, delivering that good at a lower costs increases project success.
Value engineering/management is the practice of analyzing the functions and components of the value stream in order to meet requirements at a lower cost. It promotes the planning and delivery of projects in order to improve performance. Value engineering focuses on reducing costs incurred by adding features or qualities that have no effect on the final desired capability or goal. It also ensures that components within the value stream interface seamlessly or are combined in a manner to increase the efficiency of delivery. For manufacturing companies, this can be achieved by vertical integration - a strategy in which a single company takes direct ownership of various stages in the process.
Value engineering may also identify ways to low cost by allowing for more risk. Increasing risk slightly might significantly reduce the number of resources required for project execution. When there are not fixed requirements or scope, working with the end-user helps priorities the features to provide the desired final outcome. The focus on outcomes vs features and deliverables ensures maximum value of a project.
Value can be both quantitative and/or qualitative. Value is the worth, importance, or usefulness of something. Projects should be initiated with the value defined - or how the project will add value to the stream. How is the project delivering the final outcome more effectively? The business case for the project states it intended value and provide information regarding strategic alignment, risk exposure, economic feasibility study, return on investment, key performance measures, and alternative approaches. A business case contains information on:
- Need - the reason from the project and the business requirements it supports.
- Justification - an explanation of why the project should be addressed at this time (or should have been addressed at an earlier time).
- Strategy - the way in which the project relates to the business's approach to achieving value as well as additional benefits that can be realized by the business going forward.
Desired outcomes should be clearly described, iteratively assessed, and updated throughout the project life cycle. This may cause changes to the project direction/execution as the focus on value may change the assessment of project progress. Changes to the business case should flow into project changes as well in order to ensure the proper project impact. A business case may be updated to capture an opportunity or minimize a risk. Value is subjective, and therefore may change with changes in leadership. The same concept can have different values for different people and organizations. Therefore, knowing and advertising the objective benefits of a project will ensure continued stakeholder support with minimal disruption.
Value should be measurable - and projects should have key performance indicators/measurements aligned to delivering value. These metrics should be delivered to organizational leaders and/or project stakeholders to ensure the benefits are realized over time and delivery can be aligned with priority outcomes.