Program value realization

Executive summary

HealthCare.gov recently completed the second wave of Affordable Care Act plan enrollment, with all signs indicating that most of the program’s early problems have been addressed. That said, the program’s launch in 2013 remains an object lesson in how transformation efforts can go wrong. This instance was a highly public debacle, but it is not the only one. Across industries, organizations continue to struggle to implement change effectively. Often, the struggle has a compounding effect, leading to missed milestones and budget overruns, along with a significant drain on management focus. Companies cannot avoid this issue, but they can effectively manage it. As business becomes more complex and interconnected, companies must respond to changing market conditions — and implement larger and increasingly cross-functional initiatives that span the organization. This trend is particularly true in healthcare, where organizations are now trying to adapt to a highly dynamic environment. Given these factors, the traditional project management office approach is no longer sufficient.

To successfully implement transformational change, companies need a more advanced approach that is built on value management (What is the intended value for the initiative?) and a capabilities-driven strategy (What capabilities are required to achieve value objectives?). Based on our experience in implementing change efforts across a range of industries, we believe the solution is program value realization (PVR). PVR includes six components: (1) program capability planning; (2) value management; (3) operational model and governance; (4) sourcing management; (5) program management; and (6) complex decision support. When connected to a capabilities-driven strategy,¹ these six components provide organizations with a significant advantage in implementing transformational change by ensuring that initiatives meet their objectives for scope, schedule, and budget.

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¹ For a summary of the concept, see “Capabilities-Driven Strategy: Gain the Right to Win,” by Paul Leinwand and Cesare Mainardi, Strategy&, Dec. 3, 2014. For a more in-depth analysis, see The Essential Advantage: How to Win with a Capabilities-Driven Strategy, Harvard Business Review Press, 2010.

Putting it all together

These six major components come together to provide a holistic approach to maximize return on investment and achieve the business case for the program. PVR changes the game by fostering independent assessment and management of programs on behalf of the business, protecting the best interests of the organization, and realizing maximum value. It should span the entire program life cycle, including the following aspects:

• Program/PMO initiation: ensuring consistent and accurate status reporting and risk management for the new program
• Program value assurance: independently assessing the program status at major milestones and determining whether it is on track to deliver the intended value
• Program diagnostic and rescue: rapidly identifying problems and defining the best go-ahead strategy
• Program competency support: helping to transform program management processes and personnel to best in class

Once the plan is built and in execution, all stakeholders, from leadership to implementers, can be expected to roll up their sleeves and get their hands dirty. Yet it is the foresight and planning that are essential to controlling cost and mitigating issues, risks, and gaps.

Case study

A large U.S.-based health organization wanted to transform its claims operation into a national sharedservices model with a common technology platform. The goal was to achieve efficiencies through scale and standardization. The rollout would take place over several years, but after the first implementation phase, the company ran into significant problems. Among other issues, the IT vendor had problems delivering the product on time, leading to escalating budgets and slippage on implementation time lines. Worse, the vendor decided to retire the platform, limiting the potential for needed future upgrades.

In response, the company adopted a PVR approach, broken into three phases. During the first phase, it developed a clear, objective baseline of the new claims program, along with risks, gaps, and challenges along functional, technical, and financial dimensions. The company used a benchmark-based approach to estimate the program’s actual budget, along with high-level remediation steps.

Next, the company compared its current IT platform with another option, and weighed the cost of switching midstream. As a result of this analysis, the company decided to switch, requiring a 90-day transition plan and the reorientation of more than 300 employees.

In the third phase, the company used a PVR model to implement the change. It developed the operating model, defining the organizational structure, roles and responsibilities, and governance needed to support the new program. To define the value to be captured, it developed a business case, including detailed spending across different cost components and the operational efficiencies the company would generate, which was ultimately presented to the board of directors. Finally, the company developed a program management office, with a dashboard based on clear KPIs to objectively measure and report implementation progress. To address complex decision support, it created a SWAT team that could address the program’s most critical issues with senior leaders.

Conclusion

At a time of growing complexity and a mandate for change in many industries — particularly healthcare — organizations must get better at delivering transformation programs. The PVR framework offers a clear six-part structure to improve the odds of success. By ensuring that these components are in place at the beginning of a transformation, companies can ensure that they keep their projects on track to deliver their objectives and better position themselves for success over the long term.