Final Thoughts

I HAVE DESCRIBED a sound analytical framework that is grounded in theory and practice. I could claim my job is done. The truth is, I want you to be successful. This requires me to be realistic about how you should execute what I have discussed. The topics in this section may seem counterintuitive to most of you. One would assume that the techniques discussed in this book would be easily deployed with adequate training in an organization. Most executives think that analytical models are easily embraced by their staff because they are perceived as tools to assist in the decision-making process. Yet, there are a whole set of issues that have nothing to do with the soundness of the tool that need to be addressed for the Step-Wise Approach to Value (SWAV) to be successful. In extreme cases what we have found in our work is that assessment techniques that are vague, illogical, and qualitative are often put in place. They do not link back to value. These methods do not serve the shareholder, but those who are in control of them. As a result, value is destroyed, not enhanced. Consequently, you need to be aware of these issues. They may be present in your organization and can pose significant barriers to success.

We have seen the best analytical tools be dismissed and or misused due to the lack of attention to the dark side of valuation, process issues, and organizational considerations. This not only applies to the SWAV, but to Strategic Alternatives as well. The dark side of valuation deals with the central notion of valuation and measurement. Organizational dynamics focus on the perceptual aspects of the implementation of the SWAV. Process issues are steps that can be taken to increase the probability of success. In this section we will examine each of these issues and then discuss our thoughts on how you can best execute the Step-Wise Approach to Value.

The Dark Side of Valuation

There is a dark side to every conceptual system. The dark side of the SWAV lies in the underlying concept of value and how the framework is perceived by those who use the method. The methods described in the SWAV can be perceived as threatening or even offensive to many individuals in your company. The first problem is with the concept of value itself. Whenever we travel throughout the country to teach a course on the valuation of information technology to upper management, we ask each manager to independently define value and then present the definition to the group. The purpose of the exercise is to demonstrate how diverse the concept of value is and to identify measurement issues. The exercise also helps to create consensus around the notion of intrinsic value and its quantitative attributes. After this discussion the group invariably accepts the notion of intrinsic value with ease. Yet intrinsic value has some blind sides. This measurement of value is monetary in nature—it is appropriate for capitalistic systems. There may be other views of value and hence other metrics to assess them. For example, many development banks (such as the World Bank) measure value by other means. They look at increased value by monitoring infant mortality, distribution of income, and the percentage of individuals suffering from poverty. However, we have constructed the SWAV framework for businesses, not social systems. It is important to adopt the notion of intrinsic value as the goal for the business before implementing the SWAV.

The other aspect to the dark side is the negative perception of becoming a measurement-oriented organization. Some individuals think that measurement is intimately related to judgment of their performance. They connect this with negative connotations—that bad things will happen if a measurement system is put in place. This may be connected to a fear of failure. They think that a change in standards in the future may mean inability to perform to the new benchmarks. The reality is that people will need to become action-oriented and coordinate their activities around the creation of value. This brings us to organizational considerations.