Structure in Threes: A Question of Value
September 5, 2013 Leave a comment
There are a lot of IT Vendors throwing around the term “Business Value“. So much so I think the term is losing its value. The trouble is that almost everyone is trying to justify to the widest customer base some form of rationalization as to why their product or service is worth procuring. Typically, in the IT world, the simplest way to profess value to customers is the ever famous Return on Investment (ROI). In concept there is nothing wrong with ROI. However, ROI is not value as much as a financial measure that when applied to Enterprise Priorities and Goals models value. I use the term model in this instance same as models are used in engineering or other design professions. A model is a simplification to indicate performance of specific attributes under examination. A model is not the real entity, same as ROI is not the real value but an proxy for value using a financial measurement system.
Consider all those supposed hard to quantify intangible benefits. There may be a value in these, there may not. The modification of “beauty is in the eye of the beholder” could equally applied as “value is in the eye of the recipient”. When I was co-developing/teaching Microsoft’s Rapid Economic Justification Methodology (REJ), one of the hardest concepts to get across was this conditional nature of value. Many of the technologist wanted a hard and fast “A x B = C” formula and in many instances you could use some standard applications. However, not ensuring that these were applicable with your customer is a recipe for disaster.
Yesterday, I had some of this discussion with a peer of many years. We discussed all the training sessions I gave over the years, its limitations and the follow-on course I was going to develop to address this issue. As mentioned I had been teaching this course and other economic justification courses for IBM, DMR and Microsoft over the years. During classes students could easily grasp the mathematics, the syntax of the language if you will. But the semantics and pragmatics eluded most. I would often hear from students “How can you pick out the right areas of value so easily?”; “Is there something you could relate to us that would enable us to perform better at this.
My response today is the same two part response back then:
- First all value falls in to one or more of three categories; Your value comes from making something Better, Faster or Cheaper. I use those terms in the broadest sense
- Value is in the eye of the beholder; you need to ask and understand your customer’s value system. Perhaps saving 10 minutes a day per person would not be view as value by the CFO –“Employees would only waste the time at the water cooler” So, maybe expressed as the ability to generate 20 more proposals with the same quality and success rate would resonate better [True Scenario]. It is the same ten minute per employee, but the application of that time savings is directed towards a corporate goal or value (generate more revenue per person hr.) The theme of this scenario is that you need to ask your customer what is of importance to (s)he and express value in that context.
I bring this up more for my own benefit to keep an important concept at the forefront as I continue to detail out sections of the book and develop the methodology on how to determine a customer’s value system (not the financial measuring previously eluded to) so one can truly build Business Valued Portfolios.