Bridging the Value Gap: How to Demonstrate the Value of Your Projects
Understanding Project Management author Gary Straw draws on recent academic research to demonstrate how a project's value can be expressed to different stakeholders, and how this information can be used to bridge the 'value gap' between project delivery and the value created.
Recently, we have seen a conceptual shift away from the traditional engineering view of projects towards a more value-centric view, in which projects and programmes are considered as value-creation processes. This fundamental change in perspective provides a different basis to review the mid- or longer-term effectiveness of a project and helps us visualize a strategic basis for managing stakeholder expectations.
Click to download table: Perspectives of Value Creation
This discussion leads us to the next observation; namely the discrimination between value creation and value capture. In ‘Value Creation and Value Capture: A Multi-Level Perspective,’ (Lepak, Smith and Taylor, 2007) this authors observe that ‘the process of value creation is often confused or confounded with the process of value capture and value retention,’ and argue that value creation should be regarded as a process distinct from value capture. This resonates with our experience of projects: we build the asset, it is delivered, it provides long-term value.
It is worthwhile reflecting upon the difference between the targets or users ‘for whom value can be created,’ the set who might have originally specified the requirement, and finally the set who ultimately capture the value. This might in fact be three different sets of people or stakeholder groups. This takes the stakeholder analysis into a further dimension, since when we then consider value capture, one group of stakeholders are part of the project creating the value, and a second possibly different set might be involved in the capturing of this value from the delivered project.
Lepak et al (2007) also noted that value creation refers to both the content and process (of new value creation). This is quite significant, since we may not normally place a value on the processes developed within the project. We know that they are important (in order to increase the likelihood of success) but this know-how element could have a quasi-asset value.
A further dimension is that there is a slippage between the ‘value created by one source or at one level of analysis’ and the fact that it ‘may be captured at another,’ (Lepak et al, 2007). Looking at this candidly, there is likely to be a time lag between the creation and capture of the value. For example, if it takes three years to build, commission and hand over the asset, such as a new product, the value has been created, but there will be a project value lag of one or more years- the subsequent period of captured value. Aspects of this should have been captured in the original business plan, but for many projects, especially those of a speculative or innovative nature, this will be difficult. For example, the world’s first underground train travelled between Paddington and Farringdon in 1863 and, in 2012, the London Underground was carrying over 3m passengers per day. Stakeholders currently affected by delays caused by the current works may not be the same stakeholders that benefit from the lagged value.
To summarize, a project is an instrument to create value, and this value will be captured; there may be a lag between the creation and capture of this value. By creating value from strategy and providing value to be captured during the subsequent operational period, the project therefore provides the bridge between strategy and operations.
A project should not be viewed simply as a mechanism to deliver an output or outcome, nor should it be regarded in an over-simplistic triple-constraint style; while they have value in terms of providing metrics during the panning and delivery phases, projects should not be measured solely against a narrow set of parameters including time, cost and quality, or specification. The use of the ‘bridge’ as an example of a project is perhaps prophetic, as the project is itself the bridge between strategy and operations.
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