In the past few months, I have been studying value creation and value management. The value management approach is commonly used in different fields, such as construction, engineering, and business management, aiming at optimizing resources, reducing costs, and improving project outcomes. It is a powerful tool for organizations seeking to enhance their performance and achieve their business goals.
A quick search on LinkedIn revealed several people heading value management offices in companies of different sizes across industries and geographies. I reached out to some of these leaders, and we had insightful conversations about how a value driven mindset helps them:
1) connect the decisions on the growth strategy
2) prioritize investment projects spanning from technology to building a new plant to acquiring a company
3) manage through the execution
(4) measure the impact on the business.
Despite different organizational and business contexts, all the leaders I talked to agreed that a structured, professional value management program is essential to achieving real value for the business and they were unanimous about this being no easy task.
Considering that most organizations need to continually invest in technology to enable business transformation and to offer long-term value to their customers, measuring what value is being realized along the value cycle is a business imperative.
In my previous article I touched on the value derived from technology core assets (software, hardware, cloud services, and IT department skills and processes) and how Oracle is helping customers optimize investments in technology, namely by assessing the return-on-investment and projecting future savings expected with new investments.
According to McKinsey, another dimension of IT value relates to the value-in-use by the business, which is more challenging – yet possible – to measure. While IT owns the transformation process and governance, the lines-of-business own the value creation. So, we need to find common levers and metrics between technology and the business.
First and foremost, organizations must decide what their strategic business goals are and dissect them down to multiple value drivers. Deloitte’s Enterprise Value Map, also known as Shareholder Value Map, is a great framework to guide the identification and prioritization of the value drivers. Next steps are quantifying what improvements are required on the value drivers to achieve the business goals and defining priorities. Then, it will be possible to understand what technology investments can impact the value drivers and ultimately contribute the most to achieving the top-level organizational objectives. The last step is making the investment in the selected technology solutions.
Achieving the desired value may seem straightforward, yet several factors will influence the achievement of value following that investment. One of them is time. The amount of time a technology solution takes to implement (time-to-live) and be effectively in use impacts the value derived from the investment. The length of time of a business process directly associated to the value driver is also a relevant indicator for value – reducing the length of time usually results in higher value for the business.
Let’s take an example from Oracle’s own cloud transformation. By implementing Oracle Cloud solutions such as Oracle Cloud ERP, Oracle Cloud EPM and Oracle Cloud Analytics, our finance organization reduced manual accounting by 49%, eliminated 2,000 hours of data gathering, and shortened time to close to 10 days, becoming more empowered to focus on predictions and to make smarter decisions that steer the business forward.
A common pitfall to investing in technology transformation is not focusing on the realization of value. In other words, not measuring the improvements achieved on the value drivers and, consequently, not knowing how much the technology impacted the organizational goals and the shareholder value.
Understanding the challenges and the benefits associated to value creation end-to-end from our own experience, we are committed to our clients’ achieving long-term business value using Oracle technology solutions – cloud, software, and hardware. Oracle’s value-expert teams – from Business Value Services to Software Investment Advisory – work continually alongside our clients in defining value drivers and metrics, projecting future value, assessing return-on-investments, measuring what and how value is being achieved, and finding opportunities to further increase the value realized by the business.
How is your organization managing value and measuring the value realized from investing in technology? Let’s talk today about how we can help.
About the author
Claudia Leite is Senior Director in the Latin American division of Oracle SIA. To learn more about Claudia, please visit her LinkedIn profile. To learn more about Software Investment Advisory, find us at Oracle.com/goto/sia