Business Value is creating and delivering benefits that exceed the costs involved.
Definitions
Business value is the combination of tangible and intangible assets, capabilities, and relationships that a company possesses and leverages to create and capture value for its stakeholders.
Through the effective use of portfolio, program, and project management, organizations
will possess the ability to employ reliable, established processes to meet
strategic objectives and obtain greater business value from their project investments:
Project Management Body of Knowledge (PMBOK® Guide) – Fifth Edition (PMI, 2013)
Business value is the benefit that a company provides to its stakeholders or customers that is greater than the cost of producing or delivering that benefit.
–
It is the alignment between a company’s strategy, culture, and performance,
and its ability to create value for its stakeholders and achieve its goals.
Types of Business Value
- Financial value: Tangible Business Value
This refers to the value that a business generates in terms of revenue, profitability, and return on investment. Financial value is a critical metric for investors, shareholders, and executives, who seek to maximize their returns and growth.
- Customer value: Intangible Business Value
This refers to the value that a business delivers to its customers in terms of quality, reliability, convenience, and satisfaction. Customer value is a critical metric for businesses that seek to build customer loyalty, retention, and advocacy.
- Employee value: Intangible Business Value
This refers to the value that a business provides to its employees in terms of compensation, benefits, training, development, and work-life balance. Employee value is a critical metric for businesses that seek to attract, retain, and motivate talented and engaged employees.
- Social value: Intangible Business Value
This refers to the value that a business creates for society in terms of environmental sustainability, social responsibility, ethical practices, and community engagement. Social value is a critical metric for businesses that seek to build a positive reputation, enhance their brand, and contribute to the well-being of society.
- Innovation value: Intangible Business Value
This refers to the value that a business creates by developing and implementing new products, services, processes, or business models. Innovation value is a critical metric for businesses that seek to stay competitive, grow, and adapt to changing market conditions.
Financial value is tangible because it can be easily measured and quantified in terms of numbers such as revenue, profit, and return on investment.
Customer value, employee value, social value, and innovation value are intangible because they cannot be easily measured in terms of numbers. These values are more abstract and difficult to quantify, but they still play a critical role in the success and sustainability of a business.
Steps to deliver Business Value
When someone starts a project, they need to understand why they’re doing it, and what benefits it will bring to their business. This is called the “vision” and “business value” of the project. It’s important for the person leading the project to make sure everyone on their team understands these things too, so they feel excited and motivated to work towards achieving them.
To do this, the project leader needs to create a good working environment where everyone feels valued and able to contribute. They should also regularly check on the project’s progress, to make sure they’re still on track to achieve the vision and business value. This will help the team stay focused and motivated, and make sure the project is a success.
How to measure Business Value
| Matrics | Example |
| Financial metrics: | revenue growth, profitability, return on investment (ROI), and net present value (NPV) |
| Customer metrics | customer satisfaction, customer retention, and customer lifetime value |
| Social metrics | social impact, environmental impact, and corporate social responsibility (CSR) |
| Business process metrics | process efficiency, cycle time, and quality |
| Balanced Scorecard | The balanced scorecard is a comprehensive framework that measures business value using a combination of financial, customer, process, and learning and growth metric |
“The business of business should not just be about money, it should be about responsibility. It should be about public good, not private greed.” – Anita Roddick
In conclusion, business value is a critical concept that refers to the worth of a business in various dimensions such as financial, customer, employee, social, and innovation value. Businesses that focus on creating and delivering value in these areas are more likely to achieve sustainable success, growth, and profitability. To measure business value, businesses must identify the metrics and methods that are relevant to each dimension of value and continually monitor and improve their performance. Ultimately, businesses that prioritize creating value for their stakeholders are more likely to achieve their goals and create a positive impact on society.
