How do we measure project success? Do we measure budget and schedule or do we measure net value delivered to the organization? Today, we tend to measure the former. But it is the latter, delivered value, which is the truer measure. This is the way projects will be evaluated in the future. The current Triple Constraint focuses on the delivery portion of a project, rather than its business value. It focuses on a single project, and is primarily based on a cost view.
The Value Triple Constraint is an evolution of the Triple Constraint. It is a framework for measuring the on-going value delivered through projects and for bringing to light the "value left behind". It is pictured below
Exhibit 1 - Value Triple Constraint
The Value Triple Constraint states:
Value delivered is a function of the Scope of the business opportunity and of our Capability to identify, decide and deliver to the opportunity.
From a business perspective, a project is aimed at taking an organization from one level of measured performance to a higher level of measured performance. To determine if we have achieved that objective we need good methods of measurement.
The Value Triple Constraint: Tracking Four Distinct Phases
The Value Triple Constraint (VTC) tracks an opportunity through each of four distinct phases as follows, from last to first:
- Realization Phase. This is where we implement the output product or service and begin to harvest the results. Naturally, we want to deliver a positive value. In reality, this may be considered mostly outside the project, since it occurs after the project is complete.
- Delivery Phase. This is our current focus of attention. It consumes most of the effort, attention and costs of the project. It is the phase where we apply the classical triple constraint. However, the conditions for business success are largely set before this phase, outside the actual project. Also, while the project is being delivered, the eventual benefits are being delayed and so speed of delivery is important.
- Decision Phase. This is the phase where we select among the many to decide which projects will go forward and when. Although this phase doesn't consume significant costs or effort, it does often consume significant calendar time. It focuses on cost-benefit, not value delivered.
- Identification Phase. This is not a phase with which many organizations are even familiar. There is a point at which we recognize that there is an opportunity. However, that opportunity may have existed for many months or many years. Just because we didn't see it until now, doesn't mean it didn't exist.
We tend to focus on the delivery phase. That's where our budget lives. The decision and identification phases contain very little budget costs. But they represent significant opportunity costs. However, opportunity costs don't show up on any P& L statements. There are no statements that present us with value that did not show up. The Value Triple ConstraintTM measures both value delivered, and value not delivered that could have been delivered. This is largely ignored, yet represents a significant opportunity. To understand how the VTC approaches measurement, we need to understand the major value components in the VTC and how they are related.
Project Value - Measuring the Outcome at the Project Level
The four major components that affect long term value delivery are:
- Realized Value
- Project Cost
- Decision Opportunity Cost
- Identification Opportunity Cost
Let us explore each of these in turn.
