value management organization_guide

Value Management Organization

SAP Business Transformation ServicesJune 2011

© 2011 SAP AG. All rights reserved. 2

Value Organization Objectives and Benefits

Manage value attainmentManage value attainment

Ensure value accountability is in place, managed and value is realized Manage the Value Scorecard KPIs Improve overall Maturity/level of best practice adoption Provide oversight and adoption of specific best practices – greater maturity of:

Business Strategy and IT Alignment

Performance Benchmarking practices

Justification Practices

Value Realization Practices

Governance/Portfolio Mgmt. practices

Organizational Excellence practices

Improve time-to-value and on-budget performance Ensure line of business or Cross-functional business case approval responsibility: correlated

with ROI Determine the degree to which expected value is used to prioritize and measure value:

correlated with benefit realization


Establish a Value Management Organization:SAP Best Practice to Ensure Value Achievement

A value focused organization is focused on reducing risk and driving strategic initiatives

Purpose: Successfully manage the delivery of value from the SAP investment

Provides an opportunity to… align and prioritize business and IT investments and ownership across the enterprise

including visibility into the associated metrics

manage and refine a shared, communicated value proposition for all projects aligned to the business strategy and required business value

establish value management as an integral element of the company’s management and operating system

provide a vehicle to bridge the gap between project/program managers and executive decision-makers

build a common knowledge repository and provide a single, coordinated support infrastructure for value delivery and management over time

enforce uniform monitoring, tracking and reporting

ensure the results of projects are aligned with the business goals and objectives


Value Management Organization

Builds organization unit or roles to drive value in IT investments

Ensures and governs value accountability for all investments

Manages value realization throughout the entire lifecycle

Uses proven best practices to realize more value

Serves as a basis for value-based decision making

Improves time-to-value and on-budget delivery of initiatives

Value Management Organization addresses these challenges...

…And will ensure that you receive the maximum value from your IT investmentBenefit Realization: % of expected benefits from the business case which are actually achieved

The average company attains 53% of the expected benefits from the business case, while the 1 st Quartile (Q1) performance who adopt VM disciplines on average achieve 76% of projected benefits.*


Primary Focus Area of the Organization: Manage value realization ….

t

P1 P2 P3 P4 P5

Cas

h ou

tflow

Cas

h in

flow

Cash flow

Cost savings

Revenue increase

One-time and project cost

Ongoing costs

Investment costs

Cash outflow and inflow according to period of occurrence as basis for investment appraisals.

upfront

Value potentials are sustainable cash inflows derived from quantified and monetized business benefits

These cash inflows are resulting from either revenue increases or cost savings Corresponding investments costs have to be considered as cash outflows Cash flows can vary over time

For value potential to be realized, benefits must be quantified and monetarized in order to compare real bottom-line improvements with the investment costs

Value potentials(direct bottom-line improvements)

Price is what you pay…

… Value is what you get.

Value Potentials are identified in the Business Case


Estimation is an iterative process which might start with benchmarks as initial values which then are refined successively in workshops and adjusted as required.It is crucial that the values estimated are owned and accepted by the customer.

Assumptions and estimates for future values can be obtained in different ways:

Benchmarks Internal and external benchmarks SAP project experience (references, colleagues, best practice)

Benchmarks are often available from past projects or external sources and include the following:

Estimates Customer quote Educated guessing

Estimates can often be obtained from the customer in interviews and workshops:

Analysis Analysis of cost drivers / main influencing factors Measurement and calculation

Detailed values can be obtained from process analysis:

The most suitable approach depends on the level of detail required and the different ways can also be used in combination.

Time constraints and effort planned for the estimation process are another limit Detailed analysis leads to more profound and accepted results, however require more effort Benchmarks, if available, can quickly be applied and adjusted with customer estimates

…. and make future decisions based on value


Value Management Organization Design: Key Steps to Setting up the Organization

Define the VMO Strategy

Define the Structure

Define the Governance

Who does what? When is it done?Where is it done ?

What is the mission? Why is it needed?

How will the organization operate ?How will the organization be managed?

Company-specific Value Management Organizations are different, but all start with a clear strategy and mission which leads to the structure, operational processes and governance


Is There a Standard Value Management Organizational Model?

Just as there is not a standard SAP customer center of expertise 1, there is not a standard Value Management organization model.

It is recommended to align value management with your company’s structure.

20%

31%

49%

To which internal organization unit does Value Management report?

To IT

To Business

To Both

1 SAP and Forrester research


Implementation Models Key Customer Characteristics Company-wide value implementation (across and within all

projects) Managed at the enterprise level, and strong focus on Value Lifecycle

(Discovery, Realization and Optimization)

Modifications to existing PM organization to include stronger emphasis on Value Management (Crosses all IT projects)

Managed at the PM organization level, project-by-project basis

For companies focusing on delivering value in key strategic initiatives (implemented for specific strategy projects)

Managed at the executive / steering committee level, for specific project(s)

Managed within one central group across multiple divisions (implemented for cross division projects)

Managed by central organization, for one or multiple projects

Four Archetypes of a Value Management Organization

Controlling

VMOrg. Units

Org. Units

Org. Units

The Value Management Organization structure depends on the customers needs, wants, and readiness for managing the delivery of value.

PM/BT*

PPM Tool Owner

Metrics Cord.

Program Mgr.

Process Owner VM

Shared Service Center

VMHR Other Org. Units

IT

Portfolio Mgr.

Program Mgr.

Process Owner

Financial Mgmt

Change Mgmt

VM/BT

*BTO = Business Transformational Office


Typical Roles to Consider in a VM Organization:Focus is on sustainability and adoption

Portfolio Manager Facilitates evaluation & prioritization process Supports development of business process

improvements within the value plan

Value Manager Maps the IT architecture to business strategy Aligns the IT architecture, business processes

& VM

Value Coach Transfers knowledge of VM tools & methods Performs VM activities including Benchmarking

& Value plan development

VM Champion Defines VM Organization Charter, org. setup &

governance Facilitates the customer in Value Community Leads Value planning

Technical Coach Provides customer with mid-term IT support

strategies for upgrade & implementation Ensures best practice running of SAP solutions

Change Manager Ensure employee adoption of IT, business

processes, and best practices Align with stakeholders

BI Advisor Ensure dashboards are correctly configured

and aligned with KPI’s Provides qual. updates about project status

Key Value Management Organization Roles that help ensure success


VM Organization Process Design:Focus on Continuous Improvement

Define

Execute

Measure

Review

Improve

The Value Management processes, procedures, and methodologies should be included in the Continuous Improvement cycle to ensure sustainability and maximize value attainment

value management organization_guide

Documents

business value

delivery of value

value delivery

value accountability

value achievement

measure value

maximum value

value focused organization