Published
Although new ways of measuring project value – for example social and environmental value – have emerged over the last 20 years, there’s a clear sense that the return on investment or cost-benefit approaches we use for major projects just can’t reflect the value associated with a complex system.
I wonder whether there are examples of value assessment from other fields that we might draw on and which might help illuminate the challenge?
For example, Etienne and Bev Wenge-Trayner, two of the world’s leading researchers on social learning, have looked at ways of understanding and measuring the value associated with networks and communities of practice. Their model involves a cycle of five elements (see below)
Cycle 1. Immediate value: the activities and interactions between members have value in and of themselves
Cycle 2. Potential value: the activities and interactions of cycle 1 may not be realized immediately, but rather be saved up as knowledge capital whose value is in its potential to be realized later.
Cycle 3. Applied value: knowledge capital may or may not be put into use. Leveraging capital requires adapting and applying it to a specific situation.
Cycle 4. Realized value: even applied new practices or tools are not enough. A change in practice does not necessarily lead to improved performance, so it is important to find out what effects the application of knowledge capital is having on the achievement of what matters to stakeholders …
Cycle 5. Reframing value: this happens when learning causes a reconsideration of how success is defined. It includes reframing strategies, goals and values
Could this be usefully applied to the major projects context?
Interesting that the first cycle is immediate value, the value experienced by the people brought together to work on the project. Everyone recognises the excitement and enthusiasm when you first engage on a project, either as the initiator or as a contractor who is brought in at a specific stage. You may be dubious about any real value associated with projects at this stage but that’s only because of your mindset. Would you see it differently if you recognised the value inherent in human collaborative activity; value associated with personal wellbeing and growth.
Potential value is something projects know all about and increasingly attempt to frame and capture through things such as benefits realisation. The business case for the project will largely express value in terms of potential – the increase in commercial value associated with the finished asset or, in programme terms, with the new capability.
Applied value to my mind would be the extent to which the project is able to work through and resolve the uncertainty inherent at the start of the project as you progress. Engineering projects have used the earned value methodology to try and quantify how the project achieves value through time but (0ne of) the problems with earned value is that is it a specialized art which means that it rarely speaks to people across the project in any language they can understand. Which suggests that any applied value measures for projects need to be communicated in ways that everyone can follow.
Looked at through the lens of project delivery, realised value and reframing value are part of the same benefits process. Major projects are all about changing end-user behaviour; whether, as in the case of a business project, these end-users are employees or clients, or in the case of public-facing projects, the citizens. In soft systems terms, the process of changing behaviour and the realisation of the value associated with those changes are interwoven; thus the users of the new Elizabeth line may change their commuting practice to save themselves time; they may change their career plans or where they live to adapt to the opportunities the new railway brings and these and subsequent changes will be dependent on those users feeling the benefits.
We all understand today, how inadequate commercial measures of value have become as a measure of major projects success. Finding new meaningful success measures requires us to look at what we understand by the concept of value; what we as individuals and communities value; how this value grows or diminishes in relation to our project activities; and what it is within the project that enables achievement of this value. Is is the outcome of the project, the output in terms of a physical asset, or could it be associated with the process itself of working together on a project that generates value; in the way a successful peace process helps generate trust, reconciliation and resilience alongside the conclusion of a signed treaty or agreement.
What value assessment and measurement systems are you aware of in other areas of your work or life that we might usefully apply to major projects, not as a simple replacement for our current ones (ROI, NPV or cost-benefit) but rather to help us understand how to change our perception of value and then identify the systems and metrics to reflect that new point of view?
This theme will be one of the tracks pursued at the Association’s upcoming annual conference. Join us on the 12th and 13th September at the De Vere Latimer Estate in Latimer, Bucks for Escaping the Major Projects Echo Chamber.