A PALLADIUM GROUP WHITE PAPER

Delivering Tangible
Value from Your
Strategic Initiatives
Mikhail Papovsky
Managing Director, CIO Services

WHITE PAPER | Ensuring Your Strategic Initiatives Create Tangible Value

Too many organizations see their strategic initiatives fall short of their goals and not deliver
the transformational improvements management - and shareholders - expect. Why? One root
cause we see time and time again is an installation mindset. Most organizations define initiative success criteria in terms of budget and schedule. With a laser focus on budget and schedule,
initiative teams march towards the completion date, reach the finish line of project completion,
and declare victory, unfortunately prematurely. Six months later, the bottom line is unchanged.
What is missing is focus on the real finish line: harvesting the economic value of the initiative. This
requires a realization mindset.
Very often, the business case that defines the value of the initiative is only used to obtain funding.
Once an authorization has been secured, management teams put the business case away and
switch the focus to simply meeting the timeline and the budget. Realizing the value defined in
the business case is no longer a priority. To demonstrate what we mean by a realization mindset,
with a keen focus on value realization, lets consider two technology initiatives, both intended to
improve revenue.
During a recent conversation, a friend mentioned that his company purchased new iPads for
all employees. This was inspired by one salesperson winning a large new engagement through
creative use of her personal iPad. Management approved a business case, extrapolating from
her success, and the devices were purchased and distributed on time and on budget. The finish
line was reached. However, the employees were never given any training on specific applications
that would enable the sales team to improve their personal or enterprise performance. Ergo, the
expected value was not achieved, but the sales force did get shiny new toys.
Much more inspiring was another friends story about the rewrite of his companys customer
self-service portal. Similar to the iPads, the intent was to drive revenue. This time the project
team embedded tangible strategic value into a business case each new feature had to support
identifiable benefits to the customer. The business case was not put in a drawer, but constantly
referenced as the team designed and built a solution that drove desired outcomes and engaged
the end-users in the implementation. They measured performance throughout the life cycle of
the project, which did not end on the go-live date; it ended when the expected value was realized
in the market. As a direct result of the portals new format and features, the company realized
significant increases in revenue and gross margin. The lesson is clear: by focusing on the right
measures of success and pushing beyond the obvious finish line, the company realized the value
they sought.
Management teams that want to develop a realization mindset and deliver the most strategic
value from their initiatives need to:
Define outcomes in tangible, strategic terms, such as performance objectives and measures,
with specific targets;
Monitor performance of the initiative, not just the timeline; and
Manage initiatives with focus on performance.

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Ensuring Your Strategic Initiatives Create Tangible Value | WHITE PAPER

Defining outcomes
Realization of value is rarely immediate. In most scenarios, value is realized over time following the
delivery of an initiative. To ensure that the value is realized, desired outcomes need to be defined
in a logical sequence for each phase of an initiatives life cycle, including post-delivery and implementation. While some organizations attempt to measure returns on their strategic investment
after completion of an initiative, few perform a proactive measurement during all initiative phases.
Comparing a strategic initiative to a new TV sitcom helps demonstrate effective realization planning. A network wants to maximize revenue from the new show. The revenue is directly tied to
the ratings. However, revenue and ratings data are not available in the conceptual or development
stages of the project. The network uses a system of causal objectives and measures to ensure
eventual financial success. The shows concept is first tested against characteristics expected
to drive its popularity. Key attributes, such as elements of the storyline, character profiles, and
setting are scrutinized with comparisons to past and current research. During the next phase, as
the filming starts, the reaction from the live audience is a key measure that prompts the production team to make adjustments. Once the show is on the air it is difficult for the network to make
drastic changes to the show but it continues to fine-tune elements of the show and reassess the
broadcast schedule to create favorable matchups vs. other networks to ensure maximum realization of the investment.
Planning of performance management for an initiative follows a causal logic similar to that of our
sitcom example. We use an adaptation of the Kaplan-Norton Balanced Scorecard framework to
model this causal logic. Our model uses Resource, Process, Stakeholder, and Outcome as the key
perspectives of an initiative. Objectives and measures are organized into these perspectives to
reflect a logical progression of value.

PERSPECTIVE

PURPOSE

Outcome

End goals of an initiative, such as financial returns or delivery of missioncritical factors

Stakeholder

Needs of internal and external customers, as well as community or government

Process

Business process changes necessary to drive the outcomes

Resource

Human capital, technology, facilities, and other resources required to enable

business process changes

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WHITE PAPER | Ensuring Your Strategic Initiatives Create Tangible Value

Resource and Process perspectives are leading indicators because we can affect them internally;
these are levers managers can pull. Outcome and Stakeholder perspectives are lagging indicators
because they tell us how well we deployed resources and managed processes.
There is a noteworthy class of enablement initiatives that create no tangible customer benefits
of their own. They provide a platform to enable follow-up initiatives, which in turn deliver direct
business value. Managers must define exactly what outcomes are required from enablement initiatives because of their interdependencies with follow-up initiatives. Equipping all employees with
iPads is an enablement initiative, where the true value would be realized through implementation
of a new sales process using new applications installed on the iPads.

Initiative performance monitoring

Initiative teams often focus only on resources and process objectives for the entire duration of an
initiative. The lack of focus on value realization fuels the wide gap between actual vs. expected
performance. This is very clearly demonstrated in ERP implementations. The Panorama Consulting
2013 ERP Report states that fewer than half of organizations realize at least 50% of expected
benefits from ERP implementations.
Sponsors asking for an initiative status typically receive a report showing progress against a
timeline and budget. What the stakeholders really want to know is if the initiative is on track to
deliver the expected business value. That value is easy to communicate using the four perspectives
described above.
During each phase in a life cycle of an initiative it is typically more appropriate to concentrate
performance analysis on one or two perspectives, instead of all four. For example, in earlier stages
it may only be possible to track the leading measures - Resource and Process. These measures still
need to be clearly linked to desired stakeholder and outcome objectives. The causal logic between
leading and lagging objectives can be established and managed through a system of solution
characteristics, assumptions, and dependencies. As in our example with a new sitcom, developing
a compelling storyline and defining engaging characters serve as leading indicators of the shows
future success.
Status reporting from a performance perspective adds a practical new dimension to initiative
governance. The diagram below shows how an ERP implementation is tracking against its business
case targets during the design phase. Earlier in the project the team converted the business case
into a comprehensive system of features that were expected to create measurable benefits, e.g.
business process cycle time improvement, customer experience improvement, cost savings, etc.
The features consisted of new functions, business process changes, dependencies, and assumptions. Each feature was assigned measures in all four perspectives. At this stage, while it is not
possible to measure outcome or even stakeholder value, we are gauging compatibility of the new

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Ensuring Your Strategic Initiatives Create Tangible Value | WHITE PAPER

ERP system design against a list of process measures, defined earlier as feature characteristics. We
can see how the current design will perform against the value dimensions, highlighting where more
value must still be engineered into the system.

Accommodate
Business Growth
Improve Financial
Management

Improve Security
& Compliance
Management

100
90
80
70
60
50
40
30
20
10
0

Improve Customer
Experience

Target
Current

Optimize Business
Processes

Improve Information
Management

Maximize Return on
Technology Investment
Streamline the
Supply Chain Processes

Improve Resource &

Asset Utilization
Reduce Inventory

Initiative management with focus on value

Tactical initiative managers spend their energy constraining scope against the timeline and budget.
Strategically focused PMOs put their energy into insuring value realization. Yes, timeline and
budget are important, but these are management levers, not the objective function. Keeping track
of value brings transparency to project management since value is the driving factor behind all
project activities. Desired strategic outcomes help define the scope and required deliverables of the
initiative. The scope in turn dictates the budget and the timeline.
Periodic performance measurement and calibration events help validate the effectiveness of
initiative activities completed. Visual representation of progress in value creation serves as a great
communication tool, motivating initiative stakeholders and team members.

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WHITE PAPER | Ensuring Your Strategic Initiatives Create Tangible Value

Performance monitoring matters most when making key choices throughout the life cycle of an
initiative. This includes decisions such as feature selection, in-sourcing vs. outsourcing, business
process design, risk mitigation, scope changes, and more. For example, a late scope change may
normally be rejected purely based on its effect on time and budget. The decision could be different
if it is clear that the scope change carries significant strategic value.
W. Edwards Deming said, You cant manage what you cant measure. This wisdom is very accurate in initiative management. It is the value that dictates initiative scope, schedule, budget, team
composition, and other project management aspects. Moreover, value tracking helps with other
aspects of strategy execution and PMO functions, such as change management, communication,
risk management, or initiative portfolio selection.

Summary
Poorly managed strategic initiatives, governed by installation mindsets, erode, rather than create
value. Three key areas of management focus will develop a realization mindset and help insure
that initiatives deliver the greatest benefits.

AREA OF FOCUS

KEYS TO SUCCESS

Defining outcomes

Align initiative outcomes to the organization strategy

C
 ategorize initiative objectives into four perspectives to reflect causal logic
A
 ssign measures to each objective and connect them to deliverables,
assumptions, and dependencies

Initiative
performance
monitoring

F ocus on leading measures in the early stages on the initiative life cycle
M
 onitor lagging measures in late stages of the initiative to maximize returns
Report initiative status in strategic terms

Initiative
management with
focus on value

Derive initiative scope, timeline, and budget based on strategic objectives

Conduct periodic measurement and calibration activities
Include performance considerations when making key decisions

With budgets for strategic investments scarce and closely scrutinized, organizations must
develop a realization mindset and move towards a results-driven initiative delivery model, where
every dollar spent is justified with a solid demonstration of value creation.

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Ensuring Your Strategic Initiatives Create Tangible Value | WHITE PAPER

About the Author

Mikhail Papovsky
Managing Director, CIO Services
Palladium Group, Inc.
Mikhail Papovsky, Managing Director, leads Palladiums CIO practice, which includes IT Strategy, Project Management, Business
Intelligence, and ERP services. He has over 20 years of international
experience in delivering business value from Information Technology
initiatives, including infrastructure, operations, BI and ERP implementations, systems integration, vendor management, among others. A key to Mikhails success is the diversity of his
experience, spanning Financial Services, Manufacturing, Fashion, Entertainment, Publishing,
Distribution, Energy, and Service industries in the United States, Canada, Argentina, Columbia,
UK, France, and the UAE. Prior to joining Palladium, Mikhail founded and led a successful ERP
consulting practice in North America, where he developed and implemented innovative service
models incorporating business and IT strategy, project methodology, resource utilization, cost
and benefits management, and other best practices.

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Palladium Group, Inc. is the global leader in helping organizations solve pressing strategy execution challenges. We are dedicated to understanding and addressing the strategic issues that drive
successful results. Founded by Dr. Robert S. Kaplan and Dr. David P. Norton, we help clients achieve
superior performance through a set of integrated consulting services. We deliver tangible results,
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approach combines expertise in proven strategy execution with integrated change management and
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Kaplan-Norton Balanced Scorecard, and other best-practice frameworks that translate concepts
into programs that deliver measurable results. The benefits of our approach are demonstrated in the
Balanced Scorecard Hall of Fame for Executing Strategy, which recognizes organizations that improve
performance through outstanding execution. Our offices located throughout the Americas, Europe,
the Middle East, and Asia-Pacific enjoy a successful track record with over 700 clients.

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