Chapter 1: Project Value: The Source of all Quantitative Measures
Project value is a consequence of successful application of resources to an agreed scope, taking measured risks to balance expectations with capability.
John C. Goodpasture
Successful projects return value to the business. Successful projects are relatively easy to identify; we usually know them when we see them. They are the projects that improve processes or product, reduce costs and operational inefficiencies, make contributions to the technical and functional competence of the organization, or add capacity and capability to serve customers and markets with greater satisfaction. They are projects that make good on the promises of the project charter, deliver the intended scope, and deliver that scope within a time frame commensurate with business objectives. The value cycle of successful projects is presented in Figure 1-1.
Figure 1-1: The Project Cycle of Value.
Mindful of the fact that projects, all projects, are one-time temporary endeavors  burdened with uncertainties, and not blessed with the error-reducing opportunities of repetitive ongoing operations, the project manager faces many risks arising from internal stresses and external uncontrollables. The project manager's mission is then to accomplish the assigned scope with the available resources, taking measured risks to do so.
More often than not, successful projects "make the numbers." In the project's value equation, the resource commitment is to be more than paid back by the project benefits. That said, it might be the case that the numbers to make are spread over the life cycle of the project from concept through implementation, deployment, operations, and retirement. Figure 1-2 illustrates the life phases of a project.
Figure 1-2: The Project Life Cycle.
The numbers may not be all financial; indeed, quantitative measures of resource consumption, customer satisfaction scores, market share, supplier value, and other business measures may be every bit as influential in judging project success. What would be your judgment of New Coke® or the Edsel automobile or the Apple Newton®? Very likely, the concept and development project efforts were sufficiently successful by conventional measures to warrant production, but over the product life cycle these were not very successful projects, largely due to customer dissatisfaction with feature and function, and perhaps inadequate product differentiation with competitors.
Valuable projects are "instruments of strategy."  Project value is made traceable to opportunity by means of flow down from opportunity to goals deployed through strategic plans, as illustrated in Figure 1-3. We see in Figure 1-3 that opportunity is at the head of project value. Opportunity is the untapped market value that must be processed into business results. Tapping into opportunity provides the fuel to achieve goals. Goals are a state of being, quantitative and measurable, a destination to be achieved with strategy. Strategy is actionable steps toward the goal state. Strategy is a plan. To implement a planning step, a project may be needed. Therein lies project value: a means to an end to execute strategy and achieve goals. Once completed, a concept of operations employing the deliverables becomes day-to-day organizational activity.
Figure 1-3: Value Flow Down.
Really valuable projects enhance core competencies; indeed, for many companies, project management and the ability to execute projects as envisioned is a core competency. As defined by Gary Hamel and C.K. Parahalad in their 1990 Harvard Business Review article, "The Core Competence of the Corporation,"  and subsequently expanded in their 1994 book, Competing for the Future,  core competencies are integrated bundles of skills, often cross-departmental, that provide business with "gateways to future opportunities." To be a core competency in Hamel and Parahalad's view, an integrated skill set must meet three tests. First, it must be employed to make a material contribution to customer value in the products and services offered by the business. Certainly, the skill set required to pull off mission-enabling projects would meet this test. Second, a core competency must be competitively unique and add to the differentiation in the market between the firm and its competitors and substitutes. For example, within the defense industry, program management of complicated cost-reimbursable contracts is considered a core competency. The ability to manage huge complexity in a semi-regulated environment — with all of the unique accounting and contracting processes, procedures, and rules that are associated with the defense industrial community — separates defense firms from their commercial counterparts. Even within the defense community, integrated program management skills set apart firms into opportunity spaces by their ability to manage scope. Finally, a core competency enables extensions of the business into new products and services. If not for this, many companies might remain the best buggy whip manufacturers of all time.
A Guide to the Project Management Body of Knowledge (PMBOK® Guide) — 2000 Edition, Project Management Institute, Newtown Square, PA, p. 204.
Goodpasture, John C., Managing Projects for Value, Management Concepts, Vienna, VA, 2001.
Hamel, Gary and Parahalad, C.K., The core competence of the corporation, Harvard Business Review, pp. 79–90, May–June 1990.
Hamel, Gary and Parahalad, C.K., Competing for the Future, Harvard Business School Press, Boston, MA, 1994, chap. 9.