Value Delivery is an idea whose time has come. Most notable is its inclusion in the 7th edition of the PMI’s Guide to the Project Management Body of Knowledge. But, it featured heavily at OnlinePMCourses throughout 2021.
Do, here’s what we’ll be covering in this article:
- Three Milestones in the Value Delivery Story
- A Deep Dive into Value Delivery
- What are Value and Value Delivery?
- How Does PMBOK 7 Cover Value Delivery?
- What Extra Does the FLEKS Model Offer to Value Delivery?
Let’s begin…
Three Milestones in the Value Delivery Story
February 2021: Project Benefits Management Course
After a lot of work through the fall of 2020, we released our Project Benefits Management Course in February 2021. This is a comprehensive course for Project Managers who need or want to improve their skills in benefits management and value delivery. At the time, I predicted that either:
- You will gain project benefits management skills that will give you a real career edge today, or
- You won’t gain those skills and soon, you will fall behind in the career opportunities available to you
Of course, I will link you to the course, and the free assets I created to support its launch, below.
OnlinePMCourses Benefits Management Resources
Learn Project Benefits Management Step-by-Step
Our organizations and clients are investing a lot in their projects
So, they will be right to expect us to realize the benefits that those projects promise.
Check out our full Project Benefits Management course and apply coupon code PBM30 at checkout to get a 30% discount.
Free Benefits Management Content
Feature article: Benefits Management: What Every Project Manager Needs to Know [and Do]
Three videos:
- Benefits Management: the Missing Knowledge Area | Video
- What are Project Benefits? | Video
- How to Do Project Benefits Management | Video
And our YouTube livestream: 10 Reasons to Build Active Benefits Management into Your Project Process
May 2021: Coverage of the FLEKS Hybrid Model
2021 was the year Hélio Costa launched his truly hybrid Portfolio, Program, Project, Product Management methodology, and we were glad to help, with:
- A video interview with Hélio
- A feature artcile, by Hélio: Hybrid Project Management: Get Better Results with the Free FLEKS Hybrid Model
FLEKS has three major features that commend it as a superb modern methodology:
- FLEKS is a truly hybrid approach, drawing in approaches and tools from adaptive and predictive Project management, Portfolio theory, and very many oyther sourses.
- It is completely scalable, working at enterprise level, portfolio, program and project level, and down to product level
- And, it has a strong focus on value. It places value at the core of everything and recasts PMOs and Enterprise PMOs as VMOs – Value Management Offices.
Oh yes… There’s another compelling feature of FLEKS:
It’s fully open-source and the core materials and a load of additional thought leadership is entirely free to download, to use, and to adapt. Get your FLEKS Guide here.
And… Let me Declare an Interest here:
I consider Hélio a friend. I have attended his excellent FLEKS training program, and I have contributed an eBook to his series of free eBooks. Mine is (particularly relevant to this article): Value Governance. Download it and all of the series from the FLEKS website.
July 2021: Coverage of PMBOK 7 – the 7th edition of the PMBOK Guide.
The PMBOK Guide 7th edition is a radical departure from its six predecessors. We covered it in full in:
- a comprehensive article: PMBOK Guide 7th Edition: Your 20 Most Important Questions Answered
- our YouTube Livestream: Let’s Talk about PMBOK 7: 7th Edition of the PMI’s Guide to the Project Management Body of Knowledge
This introduced the idea of ‘A System for Value Delivery’ to the ANSI Standard for Project Management. It introduced a huge amount of other great stuff, but I recommend you take a look at our in-depth article, because that’s way out of scope for this one!
And, of course, there is no substitute for reading the real thing, in the original. Get your copy of PMBOK 7 here.
A Deep Dive into Value Delivery
In this article, we will take a deep dive into value delivery. First, we will start by defining our terms:
- What are Value and Value Delivery?
Then, we will understand how value delivery works:
- How Does PMBOK 7 cover Value Delivery?
- What Does the FLEKS Model offer in Addition?
So, let’s get started by defining our terms!
What are Value and Value Delivery?
I always like to start with the big fat reference books. So, how does PMBOK 7 define value?
Value: The worth, importance, or usefulness of something.
A Guide to the Project Management Body of Knowledge 7th Edition, Glossary
This is very much a fluffy, imprecise, lay definition. But clearly, this is the authors’ intent. PMBOK 7 is deliberately methodology-agnostic, so my feeling is they have deliberately chosen a loose definition here, to avoid committing (or appearing to commit) to a specific methodology.
The problem is that this does not help us very much. And, further, I confess that my current edition (v2.2) of our Project Management Glossary, Decode the Jargon of Project Management, does not list a definition of value. (Ooops – job for 2022 Q1).
Therefore, I am going to turn to the excellent definition, which is spot-on in my view, from the FLEKS Model:
Value: the relation between the benefits and the total cost used to obtain the benefits: both meaured in financial units.
FLEKS Model Guide version 1.0
Hélio Costa
Cost, Benefit, and Value
Cost is the total of what we put into our venture. It is, if you like, what we give up to deliver our project, program, or portfolio.
And Benefits are what we get in return. They are the measurable outcomes which, we hope, will be positive (a good thing) but that can also be negative (disbenefits – a bad thing).
We can therefore define the absolute value of a project, program, or portfolio as:
Total Value = Total Benefit – Total Cost
We can also define a relative value as the ratio of benefit to cost:
Relative Value = Total Benefit / Total Cost
Notice that we will express absolute value in financial units. But, relative value is a ratio of two financial measures, and so will be a plain number. Absolute value is more commonly useful to us.
Value Delivery and Risk
In the guide to the FLEKS model, there is also the valuable extension of this to take into account that, at the start of an initiative, the value you will realize is uncertain. So, we can express your expected value (xv to differentiate it from the commonly used EV for earned value) as the value v multiplied by the probability of realizing it P(v).
xv = v.P(v)
Of course, the value of a project, program, or portfolio with many outcomes is the sum of all of the components of value:
XV = ∑xv = ∑v.P(v)
…where v is an element of value and P(v) is the probability of achieving it.
With the concept of expected value, we were implicitly acknowledging the risk of failing to deliver value. Because, with novel initiatives, there is always the risk of failure and the consequent delivery of negative value, where the costs outweigh the benefit. Indeed, the potential for dis-benefits will always exacerbate this.
So, a part of prioritization will always be a consideration of the risk in a project, program, or portfolio. We need to set this alongside:
- the organization’s overall appetite for risk
- the committed risk exposure from pre-existing initiatives
Indeed, the relationship of value to cost and risk are just two of six such relationships in a useful teaching model in the FLEKS guide. Extending the common Time-Cost-Quality and Time-Cost-Scope triangles, FLEKS sees value as the outcome of six parameters.
Sources of Value
Projects and Programs can create value in a number of ways:
- Delivery of assets or capabilities
- Improvements in relationships within its total value chain
- Strategic reductions in risk or enhancements in quality or flexibility
- Operational efficiencies and resilience
- Productivity and time-saving
- Economic benefits
- Regulatory or governance compliance, ethics and transparency
Measuring Value
What are the financial methodologies for measuring value? In our Benefits Management course, we discuss;
- Simple Payback
- Payback Period
- Return on Investment (ROI)
- Return on Capital Employed (ROCE)
- Cost-Benefit Analysis (CBA)
- Present Value (PV) and Net Present Value (NPV)
- Internal Rate of Return (IRR)
Do take a look at our article, PM Formulas: Understanding the Math of Project Management for more details.
Value Delivery System
In PMBOK 7, PMI introduces the term, Value Delivery System:
Value Delivery System: A collection of strategic business activities aimed at building, sustaining, and/or advancing an organization.
A Guide to the Project Management Body of Knowledge 7th Edition, Glossary
PMI’s diagram is helpful. Here is my version of it.
This shows a collection of Portfolios, Programs, and Projects alongside Operations – all within a wider environment. These create products that deliver benefits, and hence, value. PMI says:
‘Working together, these components comprise a system for delivering value that is aligned with the organizations’s strategy’
Benefits
PMI curiously does not define benefits in PMBOK 7. However, PMBOK 7 does say:
‘The components in a value delivery system create deliverables used to produce outcomes.’
It then goes on to define an outcome as the ‘end consequence of a project’.
Then: ‘The outcomes create benefits, which are gains realized by the organization. Benefits, in turn, create value, which is something of worth, importance, or usefulness.’
We have a definition of Benefits in our free glossary of Project Management terms:
Benefit: The value that your project will produce and therefore the reason why it has been commissioned. Benefits are usually documented in the business case.
Be on the Inside: Decode the Jargon of Project Management, 2nd Edition
Mike Clayton, OnlinePMCourses
Other Definitions
PMI offers two further useful definitions, in PMBOK 7
Value Delivery Office (VDO): A project delivery support structure that focuses on coaching teams; building agile skills and capabilities throughout the organization; and mentoring sponsors and product owners to be more effective in those roles.
A Guide to the Project Management Body of Knowledge 7th Edition, Glossary
Benefits Management Plan: The documented explanation defining the processes for creating, maximizing, and sustaining the benefits provided by a project or program.
A Guide to the Project Management Body of Knowledge 7th Edition, Glossary
How Does PMBOK 7 Cover Value Delivery?
The chapter has five sections – of which the first 2 carry the burden of PMI’s thinking about what value delivery means:
- Creating Value
- Organizational Governance Systems
- Functions Associated with Projects
- The Project Environment
- Product Management Considerations
Creating Value: Information Flow
The PMBOK 7 articulation of Value Delivery is all about a flow of information from the top tier of an organization – the strategic level – through to the lowest tier – the operational level. Between these are the tiers where change occurs: Portfolios, Programs, and Projects.
PMBOK 7 states that:
‘A value delivery system works most effectively when information and feedback are shared consistently among all components, keeping the system aligned with strategy and attuned to the environment.’
They illustrate this with a series of feedback loops between:
- Senior Leadership
- Portfolios
- Projects and Programs
- Operations
Senior leadership supplies strategy to form portfolios, which set out the outcomes, benefits, and value required of programs and projects. These create deliverables that they hand off to operations.
In use, operations offers information for fixes, updates, and adjustments to products, to the project or program.
These projects and programs escalate progress and performance data to the portfolios, which consolidate it as portfolio performance data for senior leadership.
PMI offers an excellent free download on this: Value Delivery System Explainer.
Organizational Governance Systems
At long last, an edition of the PMBOK Guide talks about governance! It says that:
‘The governance system works alongside the value delivery system to enable smooth workflows, manage issues, and support decision making.’
If only there were more than three short paragraphs, but what is here is sound. I’ll talk a little more about Value Governance, below.
Functions Associated with Projects
Forgive me if I find this section a little odd – and barely related to the topic of Value Delivery. On the surface, PMBOK says that ‘the collective effort of the project team delivers outcomes, benefits, and value.’
True. It then lists eight functions that are found on projects, asserting that ‘other functions may be necessary’.
This seems to me a little lazy. But, here are the eight functions:
- Oversight and coordination
- Objectives and feedback
- Facilitate and support
- Perform work and contribute insights
- Apply expertise
- Provide business direction and insight
- Provide resources and direction
- Maintain governance
The Project Environment -and- Product Management Considerations
Neither of these sections seem to me to offer any significant insight into benefits or value management. They are clearly here as a part of the standard and important background for Project Management learners. They delineate important understanding within basic generic project management.
Project Management Principles
PMBOK 7 sets out 12 Project Management Principles:
- Be a diligent, respectful, and caring steward
- Create a collaborative project team environment
- Effectively engage with stakeholders
- Focus on value
- Recognize, evaluate, and respond to system interactions
- Demonstrate leadership behaviors
- Tailor based on context
- Build quality into processes and deliverables
- Navigate complexity
- Optimize risk responses
- Embrace adaptability and resiliency
- Enable change to achieve the envisioned future state
It’s out of our scope to assess them in any detail, but we should take a look at number 4: Focus on value.
Focus on Value
What PMI means by this is that we must: ‘continually evaluate and adjust project alignment to business objectives and intended benefits and value.’
It describes value as ‘the ultimate indicator of project success.’
A large part of the PMBOK’s discussion of this principle is dedicated to the principles of a Project Business Case, which will establish:
- Business need
- Project justification
- The link to Business strategy
But there is an important point at the end of this section, which brings us to where we started, with the definition of value. It states:
‘Value is subjective, in the sense that the same concept can have different values for different people and organizations.’
Conclusion on the PMBOK 7 System for Value Delivery
PMBOK 7 offers us a welcome focus on value (and thereby, on benefits management).
Like the whole guide, it is determinedly ‘principles based’. But those principles are sound. However, the consequence is that it offers us little insight into ‘how‘ to manage for value or benefits delivery. This is deliberate.
And this is why you need a course like our Project Benefits Management course:
Learn Project Benefits Management Step-by-Step
Our organizations and clients are investing a lot in their projects
So, they will be right to expect us to realize the benefits that those projects promise.
Check out our full Project Benefits Management course and apply coupon code PBM30 at checkout to get a 30% discount.
What Extra Does the FLEKS Model Offer to Value Delivery?
Hélio Costa’s FLEKS Model offers us a number of valuable Value Delivery resources. We have already seen above, the ideas of:
- The 6 Value Variables
- Value and Risk
Therefore, the additional ideas I’d like to introduce you to are:
- The Value Cycle
- Value and OKRs
- The Value Management Office (VMO)
- Value Governance
The Value Cycle
For me, the FLEKS Value Cycle model is a perfect recasting of the classic Deming Cycle: Plan-Do-Check-Act.
- Define
It starts with defining the value we want from the product, project, program, or portfolio (FLEKS is highly scalable) - Build
In the build stage of the cycle, we develop the asset or assets that will yield the value we have planned. - Measure
This is where we assess the value the stakeholders receive from the artifacts we delivered - Adapt
FLEKS is fully hybrid. So, we need to address any shortfalls (or additional opportunities) in the value delivery.
Hélio speaks of ‘down-flows’ and ‘up-flows’. The down-flow represents the strategic specification of the value that portfolios, programs, projects, and products need to deliver. The up-flow represents that delivery, passing the value up the organization. This is therefore a complementary articulation to the Information Flow in PMBOK 7.
Value and OKRs
But FLEKS takes the idea further, by linking value to OKRs: Objectives and Key Results. When we convert OKRs into initiatives, we will prioritize these according to the value they can create. Recently, Costa has written compellingly about the importance of bringing an assessment of risk into our OKRs. This allows us to make a more robust assessment of the true value they represent. He describes these improved OKRs as OrKRs. Objectives, Risks, and Key Results.
The Value Management Office (VMO)
I love the idea of recasting a PMO (Project, Program, or Portfolio Management Office) into a VMO, or Value Management Office. Hélio got there before PMI published PMBOK 7, with its description of a VDO, or Value Delivery Office.
PMBOK 7 describes a VDO as:
A project delivery support structure that focuses on coaching teams; building agile skills and capabilities throughout the organization; and mentoring sponsors and product owners to be more effective in those roles.
Costa’s concept of a VMO is far wider.
VMO: A VMO is a strategic organizational structure responsible for coordinating and maintaining a continuous flow of creation and value delivery.
FLEKS Hybrid Model Guide, v1.0Dr Hélio Costa
He tells us that the VMO is responsible for creating the processes that optimize how we will deliver value. It also works to optimize the organization and its inititatives for value creation. And it must do this in a balanced and sustainable way.
The functions of Costa’s VMO include:
- Governance
- Risk Management
- Knowledge Management Defining OKRs (and OrKRs) and KPIs (Key Performance Indicators)
- Selecting initiatives
- Reviewing outcomes
Value Governance
To support and enhance the FLEKS model, Costa has commissioned a series of short eBooks at around 6,000 words each. One in the first tranche was my own: Value Governance. Not surprisingly, I recommend you download your free copy now!
In it, I look at what we mean by the terms:
- Value
- Governance
- Value Governance
And, as you may expect, it is the VMO that has the responsibility for value governance. It discharges this by:
- Selecting initiative for the value they offerfactored in, of course!)
- Driving Value Delivery through the Value Cycle
- Building the capabilities and capacity for Value Delivery at all levels of the organization
- Setting standards and providing oversight to ensure good governance
- Supporting and facilitating good quality decision-making
What is Your Approach to Value Delivery?
Are you sold on the importance of benefits management and value delivery? If so, what have you learned or developed that can add to the knowledge in this article? Or what questions do you have?
The two things I enjoy most professionally are learning new stuff and answering questions from my community. So I’ll respond to every comment…
