Concepts
Understanding the intrinsic worth of a deployed solution in a business environment is of essential importance to the evaluation of a business case and value proposition. Such understanding can be achieved using diverse valuation techniques or methods. These methods are particularly applicable and crucial for IT project managers and PMI Professional in Business Analysis (PMI-PBA) candidates.
Valuation Techniques for a Deployed Solution
Valuation techniques provide a quantitative measure for the assessment of a deployed solution. Some of these techniques include:
- Net Present Value (NPV): This method compares the present value of the money on hand to the present value of expected future cash flows the solution will generate.
- Internal Rate of Return (IRR): This valuation technique estimates the profitability potential of the solution. It is the rate at which the net present value of the project’s cash inflows and outflows equals zero.
- Payback Period: This represents the time required for the initial investment in the solution to be recovered from the cash inflows.
Evaluation of Deployed Solution Against Business Case and Value Proposition
The business case reflects the justification for undertaking a project or solution, detailing the expected business benefits. Meanwhile, the value proposition provides a clear statement of the tangible results a customer gets from using the products or services. To evaluate the deployed solution against these components, you should consider:
- Measuring Operational Efficiency: Determine how well the solution has increased the efficiency of the business process. Assess if it has improved speed, reduced errors, or reduced the cost of operations.
- Evaluating Customer Satisfaction: The solution should meet the customers’ needs effectively. You can measure customer satisfaction using surveys, customer feedback, or through the Net Promoter Score (NPS) metric.
- Assess Employee Adoption and Productivity: The deployed solution should make it easier for employees to carry out their duties effectively. Employee resistance to the new system can be an indicator that the solution does not meet the intended purpose.
Additionally, consider comparing projected benefits in the business case to actual outcomes after deploying the solution, assessing whether the solution provides the value it proposed to customers and checking if it has achieved its ROI within the predicted payback period.
Let’s consider an example of implementing a new Customer Relationship Management (CRM) system in a company. Using the Net Present Value (NPV) method over a period of, say, five years might project an increase in profits due to improved customer relations. Once the CRM has been established, compare these proposed profits to the actual profits. Also, take into account operational efficiency, like the reduction in time spent on data entry, and increased employee productivity by examining changes in sale closure rates.
Conclusion
In conclusion, by utilizing valuation techniques and strategically measuring the effects of a deployed solution against the business case and value proposition, you can provide a solid base to evaluate and ensure that the investment meets stakeholder needs and adds value to the business. With a clear understanding and skill set in valuation analysis, a PMI-PBA professional can evaluate the effectiveness of a solution and contribute to business growth and success.
Answer the Questions in Comment Section
The purpose of evaluating a deployed solution is to confirm if the solution delivers added value to the organization. (True/False)
a) True
b) False
Answer: True
Explanation: Evaluating a deployed solution is crucial for an organization to confirm if the business case was justified and if the solution is delivering the expected returns.
Evaluating a deployed solution only involves measuring its performance against the project’s primary objectives. (True/False)
a) True
b) False
Answer: False
Explanation: In addition to measuring a solution’s performance against the project’s objectives, the evaluation should also assess if the solution meets the business case and the value proposition.
Which of the following are commonly used valuation techniques for evaluating a deployed solution? (Select all that apply)
a) Return on investment (ROI)
b) Net present value (NPV)
c) Beta analysis
d) Earned value (EV)
Answer: a, b, d
Explanation: ROI, NPV, and EV are common valuation techniques to evaluate a deployed solution. Beta analysis is more commonly used in finance for analyzing investment risk rather than project solutions.
The process of evaluating a deployed solution should only be done once, immediately after deployment. (True/False)
a) True
b) False
Answer: False
Explanation: Evaluation of a deployed solution should be a continuous process to monitor if the solution keeps meeting the business case and value proposition over time.
The chief financial officer (CFO) is the only stakeholder responsible for evaluating the solution’s ROI. (True/False)
a) True
b) False
Answer: False
Explanation: Although the CFO plays a critical role, evaluating a solution’s ROI should involve all key stakeholders, including project managers and business analysts.
If a solution is meeting the business case but not the value proposition, it should be considered a successful deployment. (True/False)
a) True
b) False
Answer: False
Explanation: A truly successful solution needs to meet both the business case and the value proposition.
The projected value of a solution can be accurately determined only during the post-deployment phase. (True/False)
a) True
b) False
Answer: False
Explanation: Despite the post-deployment evaluation being important, the projected value should ideally be determined in the pre-deployment phase and compared with actual value after deployment.
The solution’s ability to meet the organisation’s strategic objectives isn’t a consideration while evaluating its effectiveness. (True/False)
a) True
b) False
Answer: False
Explanation: A solution’s alignment with the organization’s strategic objectives is a critical factor in evaluating its effectiveness.
Earned Value (EV) is a method used to measure a project’s performance and progress in an objective manner. (True/False)
a) True
b) False
Answer: True
Explanation: EV is a commonly used valuation technique in project management to track and evaluate a project’s performance over time.
What do ROI, NPV, and EV have in common?
a) They are key performance indicators (KPIs).
b) They are valuation techniques for evaluating a deployed solution.
c) They are methods to track project schedule variance.
d) None of the above.
Answer: b
Explanation: While they may contribute to KPIs, ROI, NPV, and EV are primarily used as valuation techniques for evaluating a deployed solution.
Evaluating a deployed solution is not necessary if the project was completed on time and within budget. (True/False)
a) True
b) False
Answer: False
Explanation: Even if a project was completed on time and within budget, it’s still crucial to evaluate the deployed solution to confirm if it meets the business case and value proposition.
Stakeholder feedback isn’t a necessary component in evaluating the effectiveness of a solution. (True/False)
a) True
b) False
Answer: False
Explanation: Stakeholder feedback offers crucial insights into how well a solution is meeting its intended objectives and delivering value.
Great post! I appreciate the detailed explanation of valuation techniques.
Could someone please elaborate on how NPV is used in evaluating business solutions?
Thanks for the informative post!
Can someone explain what a value proposition means in the context of business analysis?
Appreciate the insights shared in this blog.
What role does ROI play in evaluating a deployed solution?
This post is incredibly helpful for anyone preparing for the PMI-PBA exam.
I do not fully agree with the points on NPV. Cash flows can be very unpredictable, affecting the accuracy of NPV.