Wednesday, August 17th, 2016
In management, Business Value is a term that includes all forms of value that determine the health and well-being of the firm in the long run. It includes economic value (also known as economic profit, economic value added, and shareholder value) and other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value.
Business Value often embraces intangible assets such us intellectual capital and a firm’s business model.
Business Value is anything that contributes to an organisation’s stated primary goals, e.g. increase or protect revenue, reduce/avoid costs, improve service, meet regulatory/social obligations, achieve market strategy, and develop staff.
Projects should be phased to deliver based on Business Value and cost. Quite simply, a project creates Business Value when it increases or protects profit, cash-flow, or ROI.
A project should deliver Business Value on a regular basis, with small increments being optimum. The longer you take to deliver an increment, the greater the risk that the business will have changed in the meantime.
Business Value tells us when to stop. When the cost of implementing subsequent requirements is greater than the Business Value generated, the project should cease until either more Business Value is identified or the costs are reduced.
Summing-up: business value has both tangible (financial) and intangible components; intangibles are critical to long-term success, and the ability to capitalize on the flow of opportunities is a critical intangible capability for most companies.