One of the things that you can say about technology projects, of all kinds, is that the industry has overwhelmed us with a plethora of systems, technologies, and spreadsheets that inundate us with massive amounts of data about our projects. Unfortunately, even with all this data we seem no closer to answering very simple questions about these projects and their true progress.

True progress must be a measure that gives the customer (i.e., the buyer and user of the solution being delivered) a meaningful picture of when the benefits offered by this investment will begin to be realized. To the customer, the project is simply an investment vehicle. The result of that investment is a solution that when implemented will generate benefits to the organization. These benefits can be anything that the customer believes will help optimize the organization’s performance and assist it in more effectively achieving its goals. These benefits range from lower costs, less waste, faster responsiveness, simplicity of operation, increased market share, reduced outages, etc.

The point is that from the customer’s point of view, the only measure of progress that matters is ROI. In other words, when will our investment start paying off? When will we see the business benefits of the solution we are investing in?

This is what we mean by value.

The vast majority of project management systems, books, and classes never dwell on this shortcoming, but instead impress on us the importance of the vast analytical array of data that they can collect. Instead of getting insight into what customer’s really want to know, they shower us with “%-completes”, “actual vs. plan”, and other cost accounting analyses. These are easy and look impressive and have a lot of analytical sizzle, but are essentially meaningless when it comes to understanding, much less predicting, when the customer will begin to see real business value.

The reason for this is simple. Cost accounting is not value accounting.

Further, while we have for decades tried to forge a useful link between cost and value, we have nevertheless been left with very unsatisfying results. In fact, it is not too difficult to conclude that the knowledge, however deep we may have, of costs and burn rates brings us no closer (and is, in fact, highly misleading—one has only to look at the typical phenomenon of a task taking three times as long to finish the last 20%, than it did the first 80%) to understanding when the system will be delivered. That is, when we will actually realize the promised business value.

Fortunately, the answer is really quite simple. The elusive value metric we are seeking is right in front of us. It is requirements. More accurately, validated and delivered requirements.

See Golden Triangle diagram.

To see how this works, the diagram illustrates what one could call the golden triangle of value. This golden triangle is true of all technology projects of all types and sizes, and is completely independent of all methodologies, software engineering approaches, or project management styles.

What the golden triangle says is that the way to manage value delivery to your customer is to aggressively manage these three artifacts and their connections.

We start with the premise that customers are seeking not just solutions, but quality solutions. That is, solutions that perform as they expect, all the time, every time. We know from the quality industry that quality is not a subjective sense of “relative goodness” or some arbitrary opinion, but is rather simply meeting the requirements that the customer has laid down for that solution. The more effectively the solution meets those requirements, the higher quality the solution.

Period.

So, as we see in the diagram, if we can say with precision that the requirements fully define the solution we are seeking, and we can say that we have test cases that cover those requirements. Then, when we execute all those test cases against this evolving solution without generating any failures, we can say with confidence that the solution meets the requirements, … that we have a quality solution.

Accordingly, the value accounting metrics become:

  • Productivity, the number of validated and delivered requirements per labor hour (or labor dollar)
  • Cycle Time, the number of calendar days necessary to validate and deliver a requirement
  • Earned Value, the ratio of the number of requirements that have been validated and delivered to the total number of requirements in the solution
Naturally, there are more value metrics than these three, but they provide the foundation.

The key take-away is you should augment your cost accounting with value accounting if you truly want a window into how your project is doing and when it will be done successfully. And, the key to value accounting lies in understanding requirements and how effectively they are being validated and delivered to your customers.