Costs, Risks & Benefits – Main Components of Value Model


Business value is generally defined as the net benefit of a course of action of an enterprise. In this context, an action usually manifests itself as a program, project or an initiative. Obviously, since the potential value of a “possible course of action” cannot yet be realized, we will have to simulate it to help make the case to the decision makers. The simulation of the value realization is best done through an easy to understand value model. If it is not easily understood, then the possibility of accepting the business case is significantly reduced. So what then are the components of a good value model?

A robust value model should have the following components: (1) benefits expected to accrue from the initiative or course of action, (2) trade-offs to be made (or costs to be offset) in realizing the benefits (there is no free lunch, right?), (3) risks related to the initiative and (4) likely adoption of the initiative results.

In future posts, I will go into greater detail about each of the components.