- Defining the value of knowledge is elusive because of the number of variables that can influence outcomes.
- Information may have no value if it has no project impact.
- Determining if information impacts variable costs can facilitate decision making.
- Reviewing the value of information as part of a lessons learned review can help improve your intelligence efforts on future projects.
Your Mileage May Vary
Few will dispute that information is “good” but defining its value becomes difficult because of the variety of perspectives possible. Simplified approaches tend to allow for specific answers, but they may overlook intangible value for simplicity's sake.
The world of experimental design may make this point clearer. Proving that doing A causes B would provide a great tool for making decisions. If we are interested in lowering our healthcare costs, we might believe that a lower cholesterol level would reduce your lifetime costs. However, there are many variables that affect your cholesterol level. Improvements may be explained by a very large number of variables, though we end up focusing only on specific variables because we are able to prove they have a strong correlation. Considering that businesses are not as easily controlled as laboratories, it is extremely difficult to make general claims about the value of information.
The various knowledge areas of Project Management might suggest some possible strategies for evaluating the value of information. Combined with experience and judgment, the information can be leveraged on future projects. Over time, a review of your own data might reveal the value of information within your organization's operating environment.
Knowing More About the Unknowns
Information can help determine if a risk is about to occur, and may impact your risk responses. Initial risk planning activities provide budget input. Knowing about a potential risk vent allows you to consider the event in your qualitative risk analysis, and if significant enough, you were able to include that event as part of a quantitative risk analysis and include those costs in your budget. If you know the risk is no longer relevant, then the dollars allocated to the risk can be released and reallocated to another project. If the dollar amount is significant, some capital costs could be incurred.
Decision trees are often used as part of a quantitative risk analysis. The basic analysis is performed by identifying events that contribute to a final outcome, the cost of each event occurring or not occurring, and a probability multiplier. Additional information represents a new limb in a decision tree analysis. For example, a branch might represent the information gained from an engineering study or the creation of a prototype. Before knowing the results of this pursuit, you would need to have some idea of the possible outcomes, and their associated values and probabilities. That information would help you determine if the new information is likely to increase or lower your costs.
What is the impact of knowing about this risk later rather than sooner? Chances are that you found out about the risk by the event occurring. In addition to the original costs that should have been identified, additional costs for rework and work delays are incurred. There will also be some amount of time (money) lost in having to discuss the incident, and the costs associated with task switching between issue management and the project asks in question.
If a Task is Late and Nobody Notices, Does it Make a Sound?
Project Time and Cost Management can answer some basic questions about the value of information if it can be expressed in terms of increased or decreased task duration. Suppose that an information related to an issue is estimated to account for 3 days of task elapsed duration due to administrative delays. The value of a day might include:
- Project Manager's time
- Additional revenues/avoiding lost revenues
- Cost of fixing an error
- Rework costs
- Cost of lost opportunities
Then again, the cost of that information may be close to $0 if nobody really notices. For a simple project with most or all tasks on the critical path, somebody will likely notice a 3 day delay. If the project is more complex and the portion of the project impacted is not on the critical path, then the only saving would be for any direct labor expended on addressing the issue plus rework.
It may be more relevant to consider whether the information you seek is relevant and how much better off the project would be for knowing the information. Focusing your intelligence on the critical path will likely deliver your projects the greatest value. Certainly there's a cost for unnecessary research and discussion.
Follow the Money Stream
Lean and Six Sigma suggest that an improved process, likely due to new information or insight, should be determined so you can make better decisions on what initiatives to perform first. This would likely have value beyond a single project. A basic Value Stream Analysis is performed for incidents or unnecessary non-value add work by taking the number of such events and multiplying by the cost of the event. Costs should consider wastes such as defects, waiting, and excessive activities that can be eliminated.
But Wait There's More
What is the cost of knowing of a requirement sooner rather than later? Project Managers need open communications from the sponsor and stakeholders so that their needs can be expressed as they are identified. CAI's Advanced Management Insight platform is ideal for improving stakeholder communications, as it allows that data to be collected regularly without heavy project management involvement. Narrative responses can be brought to project management's attention. If an important “late requirement” is identified sooner rather than later, the value of this information likely impacts the project's critical path.
Knowing the Score
Both end of project lessons learned reviews and reviews conducted at the end of an issue or incident are opportunities to determine costs after the fact. These are data collection opportunities that can be useful in planning your next project or identifying a process improvement initiative. This is where having the services of a project management office can be helpful. A PMO can help perform these activities, and are efficient disseminators of this information.