“Creating business value”, or “adding value” are terms that we frequently hear today, as organizations seek to expand, or even survive in a very competitive and often global environment.

Often, a lot of the planned value creation takes the form of cost cutting, and particularly that of reducing human resources. However research shows in some instances this action can be self-destructive, particularly in the longer term, but we continue to rely on this approach I would suggest for the following reasons.

1. It is a quick approach that will most likely provide some short-term visible results. Those making these decisions often feel compelled to obtain quick results because of pressures they are under to demonstrate performance.
2. Today's organizations are very complex, and it is often difficult and takes some effort to understand all the connections that contribute towards value creation. Many front line employees would find it very difficult to articulate their contribution towards company profitability or achieving business outcomes.
3. There are different views of value depending on your position in the organization, as the table below seeks to illustrate, value is contextual.
   
   
   

For example, we all intuitively know that when a valued employee leaves the organization there is a loss, but we would find it very difficult to quantify that loss or understand the ways it ripples through the various layers to impact on profits or business outcomes.

There have been a number of attempts to show how various activities build on each other to create ultimate value for the organization. One well-known approach is that of the Balanced Scorecard, by Kaplan and Norton, which has been used by them in developing their Strategy Maps technique to show how financial returns require the organization to develop and nurture human,  information and organisational capital, improve processes, and engage with customers in order to produce the final financial results. The maps in essence are a way of understanding the connections between the various components. Another technique known as Results Chains have been developed to show how IT investments need to be linked with other business activities, including organization change, in order to realize the business outcomes and the benefits from them.

There are a number of other sources which have the same theme of understanding the connections, since it is only when we manage these connections effectively that we can hope to obtain the ultimate value. (see OGC “Managing Successful Programmes”, and Val IT from IT Governance Institute).

Many suppliers, IT vendors in particular, will explain the benefits or the value of their product or services will bring to your organization, which may be true if you make the necessary effort and invest in the supporting activities required in order to implement it effectively and integrate it within the organization's business processes and operating model. Unfortunately in many instances, this does not occur, either due to a lack of understanding or the desire for a speedy result. CRM (Customer Relationship Management) system implementations  are a good example of this as they often turn out to be IT system implementations  rather than a business change program, and therefore fail to produce any of the planned business benefits.

Alignment can be a very powerful tool for creating value in organization's, and there have been many books written on the subject, where they have demonstrated this through reference to case studies of organization's that have managed to align their business operating models, people, processes, structure (roles and responsibilities and culture) and even technology so that they are all or directed towards the same end and support each other. We all can relate personal experiences of organization in which we worked, when this was not the case, and the result was much less than optimal.

Techniques such as those described above are useful in engaging stakeholders in understanding how the alignment will be achieved in practice.Value creation is not easy and requires us to understand the business model and consider the various connections between parts of the business and ensure they are aligned and therefore come together to create business value.  Effective dialogue and engagement is required at all levels in the organisation, including the front line staff. Whilst this may be somewhat time consuming the payoffs are worth the effort. It also needs acknowledgement that today organisations are complex entities that require thoughtful and holistic solutions.