Translating Value: Strategic Technology Vendor Management

The Crux

Value comes in many guises and definitions. A major competence of the Strategic Technology Vendor Management is to be able to translate the measure of value into the necessary vernacular so as to enable consensus on risk and opportunity management.

One of the most complex and understated tasks of Technology Vendor Management is the role as “Translator of Value”. The Vendor Management Office needs to be multi-lingual. Not in Greek or French but in its ability to express and communicate value to a variety of stakeholders who each see value through a different lens.

Finance will assess Net Present Value, Internal Rate of Return and Payback Period while reconciling any investments against their CAPEX and OPEX budgeting cycle. If the project generates cash flow they may use more complex valuation techniques such as Net Cash Flow analysis (NCF), Fair Value, Long Run Incremental Cost (LRIC) often used in new product development. The Technology VMO needs to understand these measures of benefit in order to get financial support however VMO also needs to be skilled in translating these financial measures into broader forms of valuation language.

When working with Operational teams to inform Impact Assessments a straight forward Cost/Benefit Analysis can be more effective in assessing change scenarios and help select a direction for further exploration. In contrast, when working with the General Management Team an “Objectives Hierarchy” method of valuation can be more communicative. A simple method of prioritisation based on how each project aligns to the organisational strategy, commitments to investors and the market place. Initiatives with comparatively small investment and financial gain can still have a significant business impact.

For other areas of the business such as Service Assurance and Legal & Regulatory, Criteria Weighting and Risk Level Assessments can be very effective forms of high-level valuation. The UK Government, for example, uses an Impact Level system to identify the commercial impact from all forms of risk, including: technical, reputation, legal, and operating risk.

For rapid assessment my preference is to combine Net Potential Value (a probability weighted potential value less outlay) combined with a risk coefficient to provide an indicator of priority. This is a simple indicator that can be applied to summary reports and executive briefings.

In summary,if the value of an initiative can't be effectively communicated then rarely does it gain support. The interface between the enterprise and its Strategic Technology Vendors is pivotal in ensuring that value get's communicated correctly in a variety of different stakeholder dialects. Without it opportunities are lost and critical risks are poorly mitigated. See www.tsiconsulting.org for more information.