CFOs and transformation leaders are constantly seeking ways to maximize the value of digital transformation. Why? Because while most major transformation projects (SAP or not) require a business case to secure funding, keeping the focus on value during execution is rare, per Corporate Executive Board research. Often, attention shifts to “shiny new objects” or the loudest stakeholders, leading to a reduction of realized vs. expected value.
You Get What You Measure
Asked how they measure project success, 90-95% of transformation leaders would likely describe successful projects as “on time and on budget.” Experienced leaders manage to meet these goals, but their efforts to do so often lead to reductions in scope, delaying or eliminating key elements like training, change management, and analytics—components essential for fully achieving the expected business impact.
Without prioritization and timely measurement of value, it is very difficult to achieve these desired outcomes. Key enablers of value may be deferred in lieu of capabilities or features that are more immediately appealing but don’t provide the envisioned value (financial or otherwise) that helped to initially justify the initiative.
The best transformation leaders, however, focus on being “on value,” evaluating and prioritizing the specific value a business transformation will deliver in terms of capabilities, as well as when that value will be realized. This approach avoids the trap of only focusing on the cost of deployment (1. Initial Investment) and go-live date (2. Delivery Timeline), as illustrated in the following chart.
Maximizing value requires a mindset shift to Value Management
Value-conscious leaders also consider the long-term impact after go-live, where most of the value is realized. They ask:
- Will the change increase or decrease the ongoing costs (IT and business, internal and external) of the program? (3. Ongoing Investment)
- Will the change increase or decrease the value that will be realized each year, once the rollout is complete? (4. Annual Projected Benefits)
- Will the change positively or negatively impact the total net value (or NPV) of the program? (5. Cumulative Value)
Quantifying Potential and Realized Value
Properly quantifying the potential value of a transformation, whether building the initial business case, or evaluating and prioritizing scope, as well as the actual realized value post-go-live, isn’t impossible. It does, however, require forethought, preparation, and investment throughout the transformation.
Incorporating Value Management into the Program Management Lifecycle
Key Steps to Embed Value Management into your Project Management Office (PMO):
- Break down high-level financial KPIs into more discrete operational metrics that can be baselined prior to starting the transformation.
- Define specific calculations to be used for measurement up-front and secure business and IT buy-in.
- Confirm all relevant data sources in advance, to ensure no finger-pointing after the fact.
- Build an analytic dashboard that highlights the KPIs that tie to expected value as part of the project so that everyone has consistent visibility to the results following go-live.
- Monitor results for deviations, conduct root cause analysis, and adjust accordingly.
While there is often a ramp-up time as an organization adapts to new processes and tools, having immediate insight into operational KPIs (without having to launch one-off look-back projects) provides the ability to quickly recognize successful operational changes (and thus realized value.) It also helps to safeguard against value leakage by providing visibility to any areas where expected improvements may fall short so adjustments can be made quickly to drive the best results. It is far easier to successfully course-correct if you can identify areas where value realization is falling short of expectations shortly after go-live (such as using embedded analytics or dashboards to provide visibility of value achieved) than having to do so as part of a one-off “lookback” project a year after go-live.
What Customers Are Saying:
The Head of the Value Realization Office for one of our customers recently summarized the impact of their shift from typical program management to focusing on value as a key part of their transformation governance model this way:
“This change that we've tried to instill is moving away from a top-down solution-led approach to a bottom-up value-led approach. It's this value-led approach which helps to really guide the project team into the areas which mean the most to the business. Your transformation impact is going to be really elevated if you move that focus away from just delivering a solution but (shift) that focus to contributing value to the business because the two are slightly different.”
What Should You Do Now To Get Started?
Helping customers move toward adopting a value management mindset is one of the objectives of SAP’s Value Advisory team, which has resources dedicated to helping customers do precisely that (at no additional cost.)
The Value Advisory team engages with customers in a variety of ways:
- Working with you to build a collaborative case for change for an upcoming transformation
- Collaborating to explore how you might start to incorporate value management into your program management and governance processes.
- Helping you benchmark key areas of your business (financial, operational, etc.) so you have a solid baseline that can be used to build a business case to measure against for upcoming projects.
- Providing a new set of self-service industry-focused FLASH maturity benchmarks to quickly provide a snapshot of your company’s current capabilities vs. best practices.
- Facilitating informal conversations about how you can get more value out of your SAP solutions.
In addition, the Value Advisory team is introducing a curated set of value-focused materials through a brand-new Value Management Microsite, being previewed now to ASUG members.
In the coming months, we plan on conducting value management webinars for ASUG Members and sharing more in-depth customer stories on their value management journeys.
Our team is here to help, so please reach out to me (todd.hassell@sap.com), or the SAP Value Advisor or SAP Account Executive assigned to your company.