Value Optimization for Project and Performance Management

Discover the proven process for maximizing the potential value of any project.

Showing readers how to apply value optimization techniques to project and performance management, dramatically increasing results and efficiency, Value Optimization for Project and Performance Management is written to compliment the Project Management Body of Knowledge, the guidance published by the Project Management Institute (PMI®), making it readily applicable for any project manager.

• Presents methodology applied with hundreds of clients across a range of industries
• Filled with practical facilitation and implementation tips
• Presents a cohesive theory, structured framework, and diverse toolset
• Walks you through the value optimization process, showing you how to transform the way a product or process is perceived

Brimming with examples, Value Optimization for Project and Performance Management provides a link to a free software demo for you to get started in applying value optimization in your own organization.

(PMI is a registered mark of Project Management Institute, Inc.)

Preface ix

About the Cover xiii

Acknowledgments xv

CHAPTER 1 Introduction 1

Today’s Challenges 2

Value Methodology 4

Why Use Value Methodology? 5

Project Management and Value Methodology 7

Value Methodology and Teamwork 8

History of Value Methodology 10

SAVE International 13

Current VM Applications 14

Summary 19

CHAPTER 2 Value 21

The Concept of Value 22

Value Theory 24

Reasons for Poor Value 36

Summary 46

CHAPTER 3 Value Methodology Job Plan 47

The Value Methodology Job Plan 48

Value Metrics 56

Summary 58

CHAPTER 4 Preparation 59

Preparation Phase 60

The Value Team 78

Summary 79

Appendix 4A: Case Study 80

CHAPTER 5 Information 87

Information Phase 88

Gather and Analyze Project Scope Information 89

Gather and Analyze Project Schedule Information 91

Gather and Analyze Project Cost Information 94

Life Cycle Costing 99

Gather and Analyze Project Risk Information 108

Conduct Value Study Kick-Off Meeting 111

Conduct Site Visit 130

Summary 130

Appendix 5A: Case Study 131

CHAPTER 6 Function 145

Function Phase 146

Defining Functions 146

Classifying Functions 150

Evaluating Functions 155

Summary 179

Appendix 6A: Case Study 180

CHAPTER 7 Speculation 183

Speculation Phase 184

Creativity 184

Roadblocks to Creativity 186

Creativity Techniques 191

Summary 196

Appendix 7A: Case Study 198

CHAPTER 8 Evaluation 199

Evaluation Phase 200

The Evaluation Process 200

Evaluation Techniques 207

Selecting Ideas for Development 211

Summary 213

Appendix 8A: Case Study 213

CHAPTER 9 Development 217

Development Phase 218

Develop Value Alternatives 218

Review Value Alternatives 232

Summary 233

Appendix 9A: Case Study 233

CHAPTER 10 Presentation 247

Presentation Phase 248

Selling Change 248

Assess Value—Value Metrics 251

Conduct Exit Briefing 256

Prepare and Submit Value Study Report 260

Summary 260

Appendix 10A: Case Study 261

CHAPTER 11 Implementation 269

Implementation Phase 270

Managing Change 270

Review and Assess Value Alternatives 273

Resolve Value Alternatives 274

Develop Implementation Plan 277

Track and Audit Results 278

Summary 278

Appendix 11A: Case Study 279

CHAPTER 12 Value Leadership 281

Value Leadership 282

Characteristics of Value Specialists 291

Value Methodology Professionals 293

Professional Standards of Conduct 295

Summary 296

Notes 299

Suggested Reading 305

About the Author 307

Index 309

"... filled with practical facilitation and implementation tips." (Government Opportunities, May 2010) ROBERT B. STEWART,CVS, FSAVE, PMP, is President of Value Management Strategies, Inc., a consulting firm specializing in the application of value methodology to projects and business processes. He has led over 300 value studies for clients in private and public sectors and trained thousands of individuals worldwide in value optimization techniques. He is a Fellow of SAVE International and serves as a Director on the Lawrence Delos Miles Value Foundation, a nonprofit organization established to promote and fund the development of educational programs, new applications, and a research library for the study of Value Methodology (VM). Value Optimization for Project and Performance Management

In late 2008, the world was confronted with the sudden end to the unbridled growth that the global economy experienced earlier in the decade. At the heart of this "irrational exuberance" was the delusion that the market could only go up; that growth would be perpetual; that the uncertainty posed by risks could be completely avoided; and that value could be created from nothing. Individuals, organizations, and indeed the global market often behave in a manner that is completely irrational with respect to economic decision-making.

Value Optimization for Project and Performance Management will provide you with a cohesive theory, structured framework, and diverse toolset to apply optimization techniques to dramatically improve project value. Inside, you will discover:

• A methodology that has been used by hundreds of organizations across a wide range of industries

• The nine factors that most commonly lead to poor project value

• Techniques for performance and value measurement

• The power of function-driven thinking

• Insights on creativity, critical thinking, and idea development—the key ingredients for improving project value

• Practical information on the facilitation and implementation of the techniques and processes that are presented

Written by internationally respected value methodology consultant Robert Stewart, this innovative book authoritatively walks you through the value optimization process using a variety of examples and case studies demonstrating how this process is applied. In presenting the concept of value optimization, the author challenges you to look beyond the traditional indicators of value, price, and customer satisfaction, and instead consider value from the perspective of functions and how they are performed relative to cost, time, and risk.

Praise for Value Optimization for Project and Performance Management

"In this book, Rob Stewart has captured the interplay of priority and value optimization in an exceptional way. He has reached beyond a simple mechanical treatment of 'how' to approach value optimization. The book transcends value optimization from an initial concept formed in the labs of GE, where value optimization became an important pursuit, to organizationally enabling value management through teams, development, and implementation, and finally how to lead by value thinking."—Dr. Thomas Saaty, University Professor, University of Pittsburgh, and John Saaty, CEO, Decision Lens, Inc.

"Rob Stewart's book marks the professionalization of a Value Methodology. He brings theoretical and practical insights from many sources and academic research to move this community from its craft-based origins to a social science focused on innovation and creating added value. This marks a new chapter for Value Engineering and Value Management, especially as more and more organizations adopt projects as the means to implement designs that leverage value. It is a must-read for anyone who needs to find ways to deliver outcomes that increase value with minimal investment of time and money to fund such a search."—Dr. Roy Woodhead, HP Transformation Consulting, EMEA Leadership Team

"I translated Rob's first book, Fundamentals of Value Methodology, back in 2005. I initially made the decision to introduce this book in South Korea because of his straightforward and practical approach to value improvement. In his new book, Value Optimization for Project and Performance Management, his approach is much more refined and improved. Of special interest to me is his introduction of risk in the consideration of value. I find it ironic that most people think deterministically with respect to the state of a project's performance, cost, and schedule. This book deals with a methodology that considers the uncertainties related to these key factors. I was also very surprised by the author's creativity in incorporating risk into the definition and measurement of value. I think this book is the best one I have seen since I was first introduced to the value methodology. I have not seen an approach to value that is as well described as this. I believe this book will serve as a kind of oasis to those seeking to find a means to improve the value of their projects, products, or services."—Dr. Jong-Kwon Lim, CEO, Infra Asset Management Corporation

"The text brings the reader up to date on the practice of Value Methodology, as well as the application of Value Metrics that emphasizes the importance of measuring improvements in project performance as being of equal or greater importance than just the realization of cost savings. This book will also become a valuable addition to colleges and universities that are looking for a classroom text or reference on the topic."—Ronald J. Tanenbaum, PhD, CVS, PE, GE, FASCE, President, GeoVal, Inc.