Projects are designed to create value in many ways. That includes value for the client, markets, and society broadly. So, an understanding of the value created by projects can be very useful not only for realization of value but also for designing and integrating value into the project’s output(s).

While research on project benefits is developing, the knowledge on project value is not well established. Value is different from benefits in “benefit is an advantage, help, sake or aid from something while value is the quality (positive or negative) that renders something desirable or valuable” (source: Wikidiff.com).

It raises the question: what is project value or net project value?

To build an understanding let’s first define it. Given that no clear-cut definition exists, we define project value as the perceived or actual positive impact of the project’s output, both in short and long-term, right up till the moment the output is no longer deemed desirable or useful by all relevant stakeholders.

Following the above definition, the net project value (NPrV) will be simply the positive impact minus the negative impact (both perceived and actual) of a project. Sometimes the net present value (NPV) of a project is equated to net project value (NPrV). However, we do not consider NPrV and NPV equivalent. This is because NPV is calculated based on financial cash flows, whereas we consider NPrV a broad multi-contextual concept comprising of many elements and not just the financial aspect.

The question then is what could or should be the make-up of NPrV? Or what should be the constituent parts of NPrV?

Obviously, there are no easy answers. But to build some early thought we propose a conceptual framework ‘7Ps of NPrV.’  The proposed framework encapsulates seven value-driving elements of a project over its lifecycle. Needless to say, the framework and elements are preliminary in nature and are neither conclusive nor exhaustive.

7Ps of NPrV framework – The constituent parts

1) Product(s)

The first project element that drives value for relevant stakeholders is product (being the output of the project). The value boundary here is quite extended when it comes to projects, simply because the stakeholder boundary is wide. The stakeholders could be client(s) of the project, customers who will purchase the product, could be distribution channel parties (wholesalers, retailers, partners), service providers, and so on so forth.

The product created by the project has to have value for all stakeholders to survive the competition and carry through the value chain. What it means is that everyone in the value chain is able or willing to keep the chain alive because they see a positive impact of the project’s output. The break in the chain means value perception of the project’s output is diminishing or no longer exists.

2) Processes

The project’s processes, methods, and routines constitute the second impact element in the 7Ps framework. If the processes and methods used by the project are not compatible with the project needs and not well managed, the output created by the project could carry defects and quality problems from the word go denting the value proposition of the output. Processes and methods involve planning, design, execution, and control over the project lifecycle.

To ensure value creation is effective and viable, the processes and methods used by projects for the creation of output should also consider processes and methods to be used by other relevant stakeholders for selling and survival of the product in the market till it is considered no more valuable by such stakeholders.

3) People

The third element in the NPrV framework is people. Having people with the right skills, knowledge and commitment is critical to building a value-driving output. Efforts should be made to bring in people with value-creation in mind rather than just filling in the slots. People with the right mindset will be critical to value creation efforts and hence people hiring or selection process, should not be taken lightly.

4) Planet

The planet is the fourth element. Project output must not be unsustainable or harmful to the short or long-term needs of the planet. Hence, efforts should be made to identify, recognize and take into account those considerations which ensure that project’s output is in alignment with sustainable development goals. Using materials and methods that help in creating sustainable products will be construed to create value from NPrV perspective. People having awareness and knowledge on sustainability should be another consideration to factor-in for value management.

5) Profit

The project’s output must be able to generate legitimate profit(s) for the relevant stakeholders. It includes both monetary and non-monetary (e.g. enhanced image in the market). Technology, material, methods and knowledge are some of the key profit-driving elements. Project organizations need to have the capabilities to know and use all possible elements so that the project’s output is able to generate legitimate profit(s) for the relevant stakeholders.

6) Philosophy

The sixth element in NPrV framework is the philosophical disposition of value to be created by the project. Value could mean many different things. So, project organization needs to first understand and document the value proposition of the project’s output for all the relevant stakeholders. If it is not clear what does value mean for the relevant stakeholders, the steps in creating value will not help the cause of creating value anyway. So, understanding and recognizing the philosophical disposition of value is pivotal.

7) Pledge

The last element in the NPrV framework is the pledge to create value. If the project organization is not committed to creating value, then the project’s output may have deficiencies and quality problems. As such, every person working on the project should pledge to create value. It does not have to be written but should be part of project culture or project DNA that the project must create value that is deemed fit for the relevant stakeholders.

Conclusion:

Projects are in value creation business. Hence, it is imperative that there should be some mechanism to understand and document project value. There seems to be some void in knowledge in relation to the understanding of Net Project Value (NPrV). Equating NPrV to NPV remains another challenge. As such, this article proposes a framework of seven major elements of impacts to build some early thought on the subject.

The article was originally published on IPMA World webpage, 29th July 2021.

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Jiwat Ram

Professor in Project Management

Ram is a Professor in Project Management. He has considerable experience of working internationally in diverse cultures and business environments. He is currently serving on the Editorial Board of International Journal of Project Management.

Ram actively contributes to project management community. His work has been published in top scientific journals and four of his published papers have remained in Top25 most downloaded papers. Additionally, two of his papers have been ranked as the Most Cited article published since 2012. More recently, he has published a number of articles on some of the issues confronting project management in various industry-based outlets.

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