1.6 Business Value – A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Fifth Edition

1.6 Business Value

Business value is a concept that is unique to each organization. Business value is defined as the entire value of the business; the total sum of all tangible and intangible elements. Examples of tangible elements include monetary assets, fixtures, stockholder equity, and utility. Examples of intangible elements include good will, brand recognition, public benefit, and trademarks. Depending on the organization, business value scope can be short-, medium-, or long-term. Value may be created through the effective management of ongoing operations. However, through the effective use of portfolio, program, and project management, organizations will possess the ability to employ reliable, established processes to meet strategic objectives and obtain greater business value from their project investments. While not all organizations are business driven, all organizations conduct business-related activities. Whether an organization is a government agency or a nonprofit organization, all organizations focus on attaining business value for their activities.

Successful business value realization begins with comprehensive strategic planning and management. Organizational strategy can be expressed through the organization's mission and vision, including orientation to markets, competition, and other environmental factors. Effective organizational strategy provides defined directions for development and growth, in addition to performance metrics for success. In order to bridge the gap between organizational strategy and successful business value realization, the use of portfolio, program, and project management techniques is essential.

Portfolio management aligns components (projects, programs, or operations) to the organizational strategy, organized into portfolios or subportfolios to optimize project or program objectives, dependencies, costs, timelines, benefits, resources, and risks. This allows organizations to have an overall view of how the strategic goals are reflected in the portfolio, institute appropriate governance management, and authorize human, financial, or material resources to be allocated based on expected performance and benefits.

Using program management, organizations have the ability to align multiple projects for optimized or integrated costs, schedule, effort, and benefits. Program management focuses on project interdependencies and helps to determine the optimal approach for managing and realizing the desired benefits.

With project management, organizations have the ability to apply knowledge, processes, skills, and tools and techniques that enhance the likelihood of success over a wide range of projects. Project management focuses on the successful delivery of products, services, or results. Within programs and portfolios, projects are a means of achieving organizational strategy and objectives.

Organizations can further facilitate the alignment of these portfolio, program, and project management activities by strengthening organizational enablers such as structural, cultural, technological, and human resource practices. By continuously conducting portfolio strategic alignment and optimization, performing business impact analyses, and developing robust organizational enablers, organizations can achieve successful transitions within the portfolio, program, and project domains and attain effective investment management and business value realization.