May 2015

Pursuing Business Value

Business people chasing moneyIn many business contexts, the word ‘value’ is an important mantra. When running a business, it’s important that we create a product that the customer values. If we’re a publically listed company, we may need to ensure that the business creates sufficient shareholder value. If we’re running a business change project, it’s important that we consider the business and customer value that our implemented project will bring. The word value has become widely used – in fact it has become so widely used that there is a real danger that different stakeholders might have different interpretations over what ‘value’ really means. In reality, value isn’t always a straightforward metric to measure, and there are often several competing dynamics.


Let’s take an example: Imagine we’re running a project that will involve changes to our organisational processes and also the implementation of a new IT system. For the IT implementation, there may be several options—firstly there is the decision to build a solution in-house or buy a solution off-the-shelf. Then there is the decision over whether to host the solution on premise or in the cloud, whether to maintain the solution ourselves or outsource to a managed service provider (MSP) and so forth. We might even have the option of subscribing to a software-as-a-service or existing cloud based solution. Throw in a short list of three or four vendors into the mix and there are a baffling range of options.


Conventional business theory would encourage us to choose the option that creates most value for our business and customers. This is undoubtedly good advice, yet to adhere to it we need to analyse what value we are aiming to obtain. Saying “let’s go for the option that generates highest value” is easy. But how do we know what that means?


Value isn’t just about finances

Oscar Wilde famously wrote:


“[Nowadays people] know the price of everything and the value of nothing”

Outsourcing Doesn’t Have to be a Dirty Word

Person giving presentation at flip chartSay the word “outsourcing” in many organisations, and you’ll be met with a frosty reception. People will recount tales of how huge chunks of their company were laid off or sold off, and will talk about how things have never quite been the same since. They’ll talk about how it used to be possible to respond to changing customer demands quickly and swiftly, but now implementing any change takes forever because there is a rigid and inflexible contract in place with an external partner… and they may well argue the case for bringing the outsourced capability back in house.


In fact, in some organisations the word “outsourcing” has become a dirty word. Saying it creates controversy, and can even create ill feeling. There is no doubt that some companies have entered into ineffective outsourcing arrangements—perhaps they have chosen the wrong partner, outsourced a capability that was better serviced in house, or perhaps the relationship went sour.  However, it’s important not to discount an entire solution approach, and in the ever-changing business environment that we live in, strategically outsourcing activities to carefully selected partners or Managed Service Providers (MSPs) can yield significant benefits. Whilst there are undoubtedly examples of outsourcing going wrong, where it is implemented well can be very beneficial indeed. It can help organisations to smooth demand, to expand into new areas quickly, and to secure expertise that they don’t want to (or can’t afford to) employ in house.


I’ll tell you what led me to write this article. Just the other day I realised that my car is overdue its annual service, and I was trying to figure out which garage to take it to. I was discussing this with a good friend of mine who knows a lot about cars, and he offered me some useful advice:


  “Adrian, your car getting old. It’s important that you service it but the service history won’t add to its resale value any more. Why don’t you do a basic service yourself?”