The necessity of delivering better and better services, and goods to the market at an increasing pace and at a lower price has always been a challenge for entrepreneurs. Nevertheless, it seems that it has never been under such pressure as it is today. For many business owners, looking for ways to meet growing requirements this means the need to use their resources more efficiently. It can be implemented by increasing work efficiency, but primarily by doing the right job.

The term ‘business value’ has been increasingly popular since the end of the 20th century. This is indicated by the number of publications devoted to this issue, which has been constantly increasing since the beginning of the nineties, and the number of references to it in the literature (Fig. 1.1). Enterprises that first see the changes and opportunities associated with the value system and are able to use it are perceived as leaders and are often more successful than those who are just adapting to the new situation^[1]. Business value, although sometimes understood differently, both among theoreticians and practitioners, plays an increasingly important role in enterprises, often determining the conditions for cooperation with business partners. Less frequently, profit is the only determinant in making commercial decisions. The author’s experience shows that it is often understood as one of the business values.

It can be assumed that business value is not an objective concept, because its assessment depends on many factors, such as time, quality, functions, etc. Satisfying a need can only be justified within a certain period of time after which the need disappears. Its implementation at a low quality level may not generate any value.

On the other hand, meeting the need at a too high quality level may not bring additional benefits. According to M. Łada and A. Kozarkiewicz, “the value of a project is therefore related to the benefits of its implementation, the sense of undertaking project-related activities, its significance, cost-effectiveness and importance in a wide economic and non-economic context”^[2] which are the basis for making decisions about its implementation.

For many years, value was defined as the value for money^[3]. Therefore, to create additional value, it was necessary to increase quality or reduce costs. However, this approach has evolved. Currently, the definition of value takes a different form, depending on when it is considered in relation to various scientific disciplines. In philosophy, it is understood as “what is precious, in accordance with nature, what should be”^[4]. In accounting, it would be: “monetary expression of economic event records in the books of account”^[5]. In management sciences, the semantic interpretation is exceptionally abundant and varied. It is between general terms such as “business value is combined with innovation”^[6], through more specific ones like: “core concept of product, service and business development”^[7] or “total organisation value including the sum of all tangible and intangible elements”^[8], ending with those that present its meaning as closely as possible.

An example is the BS EN-12973: 2000 value management standard, according to which “value consists of achieving a balance between meeting many different needs and resources used for this purpose”^[9], or an interpretation of the International Institute of Business Analysis that value is perceived as “the importance or usefulness of something to a stakeholder in a given context”^[10]. The broad perception of the concept of business value, not only focusing on or lacking financial flows, is particularly important in the case of research and development projects where non-material values may be the only ones that were created during the project implementation.

In connection with the use of the term ‘value’ in many areas, but also because of its use in various contexts, for the sake of clear interpretation it is required to specify which value is referred to. In relation to project management, it can be assumed that the Office of Government Commerce states that “value” is the ratio of satisfying the material and intangible needs of a project sponsor to the resources used for this purpose.”^[11] The Office of Government Commerce is an independent unit at the HM Treasury of the United Kingdom. It is the owner of numerous studies in the field of best practices in management of projects, programmes and project portfolio, as well as risk and project value. The Office of Government Commerce also owns the Prince2 methodology.

The definition of value proposed by the Office of Government Commerce includes both the project principal and its contractor. This is to emphasise the symbiosis between the two entities. Satisfying the needs of the sponsor is the subject of the project. In turn, the resources for its implementation are the sum of the contributions of both parties. In the case of the principal, resources are usually expressed in payment for the implementation of the project in monetary form. In the case of the contractor, they include intangible resources, such as human and material resources – in the form of tools and raw materials needed to perform it.

In projects implemented within the enterprise, the principal may also provide intangible resources necessary to implement the project. However, regardless of whether the project principal is external or comes from within the company, the value can be determined in accordance with the definition of the Office of Government Commerce.

On the other hand, R. Thomsett and R. Wysocki suggest the IRACIS model, developed by C. Gane and T. Sarson, being an acronym of the first letters of English words defining three main groups of values (IR – Increase Revenue, AC – Avoid Costs, IS – Improve Service). According to IRACIS, all the benefits of project implementation can be categorised as business value: having an impact on increasing income, reducing costs or increasing customer satisfaction by improving the service, customer service or product being manufactured^[12].

Despite the existence of numerous categories of benefits, all of them are reflected in the above three categories^[13].  Parker and Benson listed over 100 values in their research and then showed that all of them can be expressed using IRACIS^[14]. 

Thus, it can be concluded that the business value in the project is all the results of activities carried out in the project that lead to increased income, reduced costs or increased customer satisfaction. This approach facilitates the assessment of the value created, which can be a determinant of the need for changes in the project in order to successfully complete it. Defining business value this way can help distinguish it from what the value is not, which in turn helps to focus efforts on creating it.

The IRACIS model was developed in 1979, but in the early years of existence it did not find many supporters. Perhaps the reason was that business value was more often associated with material values, which were measured by numerous tools at the time, such as Return On Investment or Earned Value Analysis. With the increase in interest in seeking business value and the discovery of the impact of intangible assets on business value^[15] the IRACIS model began to gain more popularity. It has become readily used by theoreticians and practitioners in the field of project management, finance and business analytics (Business Intelligence and Business Analyst)^[16].

 

Categories of business values

Categories of business value, similarly as its definitions, are a large group. Among them, the common division into values between the principal and the contractor deserves attention^[17]. It suggests that both business partners pursue different internal goals. For the customer it is to obtain the subject of the contract with minimal expenditure, for the contractor it is usually a financial profit, also with the least possible efforts.

In the author’s opinion, such polarisation does not serve both sides, because one of them will manifest striving to maximise material benefits, while providing a satisfying minimum to the principal. The principal, in turn, for the money spent will try to achieve the broadest possible service or the greatest functionality of the product offered to them, not necessarily paying attention to whether the principal will actually need additional features.

In such a situation, the synergy effect seems impossible. Its source would be cooperation between business partners in order to develop the best solution while using the least possible amount of common resources for this purpose. The antagonistic pursuit of business partners to achieve internal values aptly reflects, in terms of behaviour, bazaar trade transactions undertaken using sales techniques.  The purpose of such transactions is to maximise short-term profits, regardless of the ethics of the actions that lead to this goal. The author’s observations show that this is still a common case in business dealings.

H. Kerzner presents another taxonomy of values, more focused on cooperation in achieving it. He distinguishes four categories:

• financial values,
• future values,
• internal values,
• customer-related values^[18].

H. Kerzner also emphasises that this taxonomy results directly from the categories of success which are in agreement with categories of value, such as:

• financial success,
• future success,
• internal success and,
• customer success,

as opposed to the traditional perception of project management, which was determined only by internal success^[19]. The four categories of values cited above are further divided into basic and strategic values (see Fig. 2).

 

 

Fig. 2. Value categories
Source: H. Kerzner, F.P. Saladis, 2009, Value-Driven Project Management, Wiley, Hoboken, p. 136.

 Basic values are those that must be achieved to ensure continuous operation of the enterprise. Strategic values guarantee the company’s survival in the long run^[20].  Internal values are defined as the ability to have a continuous stream of successfully managed projects that create business value^[21]. These include, in particular:

• implementation of the project in accordance with the schedule, not exceeding the planned budget, ensuring the agreed quality and guaranteeing fulfilment of the project scope,
• joint acceptance of the scope change control process,
• trouble-free work,
• full understanding of goals^[22].

Financial values are defined as the ability to create a stream of long-term income that satisfies stakeholders^[23]. They include, among others:

• integration of program and project success into a common definition,
• maintaining ethical behaviour,
• fulfilling the requirements of regulatory units,
• compliance with health, safety and environmental rules^[24].

Future values constitute the ability to generate a stream of effects that are the subject of the contract and which support the company’s future business values^[25]. The following were qualified to them:

• streamlining processes needed for commercialisation,
• emphasising the fact of following opportunities,
• maintaining high technical class,
• protecting the company’s image and reputation^[26].

Customer-related values constitute the ability to continually meet the customer’s business value needs until the customer treats the contractor as a business partner and not as a supplier or contractor. Attention should be paid to customer satisfaction and building relationships^[27]. These values include:

• keeping promises made to the customer,
• maintaining contacts and a common platform for dialogue with the customer,
• focusing on customer satisfaction throughout the cooperation,
• permanently increasing customer satisfaction^[28].

The above division includes the division into values of the principal and contractor mentioned earlier. In addition, customer-related values are undoubtedly included in future values, because the lack of customer satisfaction with the values achieved by them during the project will not build their will for future cooperation. Internal values in the light of the above definition could also belong to values associated with the customer.

In the author’s opinion, the division of values proposed by H. Kerzner is not very precise and therefore of low practical value. Classification of the values obtained as a result of the project implementation into individual categories may constitute an area for discussion. As a consequence, different researchers could come to different conclusions based on the same research results, which would directly affect the quality of these studies.

The classification of values proposed by C. Gane and T. Sarson seems to meet the problems associated with the practical application of the taxonomy of H. Kerzner’s values. It assumes, as mentioned above, the division of values into those that have an impact on increasing revenues, reducing costs and increasing customer satisfaction.

There is also no division here between values specific to individual parties to a business contract. The authors of this categorisation probably therefore assumed that the values of the principal also constitute a value for the contractor. Obtaining value by the contractor can also be a value for the principal, because during the application of free market rules, the will of both parties is needed to conclude a contract.

Full customer satisfaction with the solution provided to them, together with significant financial losses of the supplier incurred as a result of aggressive customer policy, may contribute to the lack of willingness of the project contractor to establish future cooperation. The opinion of the author is confirmed by recent research in this field^[29].

N. Pulles, H. Schiele, L. Veldman, J. Huettinge prove that the customer has a chance to become the preferred customer, i.e. one where company resources are assigned with the biggest priority to work with such a customer, when cooperation with the customer is satisfactory, that is, the quality of cooperation results meets or exceeds expectations. This determines the attractiveness of the customer and can encourage investment into such a customer, which with a high level of customer satisfaction leads to a high return on this investment^[30]. According to the author, this classification also has a practical value, as proved by M. Parker, R. Benson and H. Trainor.

The taxonomy of values do not exhaust all possibilities, however they reflect the dominant trend occurring in literature on the subject. They also express the opinion of one of the most important representatives of project management.

 

Forms of business values

The business value can come in many forms – including as flexibility and reliability[31], product features and attributes^[32], quality and price^[33], time and money^[34], know-how^[35] or trust and commitment^[36]. All of them relate to tangible goods or services and intangible goods. Originally, only tangible items or effects of services provided solid evidence of value^[37]. The size of the issue may have been a disputable issue.

Tangible business values could easily be stored, transported, kept at a warehouse or shared and transferred. Due to their measurability and relatively high ease of indicating them, these values could be subject to relatively easy assessment. Many models have been created for this purpose. One of the most widespread is the Porter’s value chain^[38]. However, both this concept and similar ideas have not worked well in assessing intangible assets, whose significance and share in all values has been constantly increasing^[39].

Only in a period of 10 years, between 1982 and 1992, an increase in intangible assets – from 38% to 62% – was observed at the expense of tangible assets^[40]. In the following years, the difference between intangible assets continued to grow, and in 2015, among S&P 500 enterprises, intangible assets accounted for 87% of the total values of the enterprise.[41]

So what are intangible assets? According to B. Lev, these are claims for future benefits that have no physical or financial embodiment^[42]. They can therefore be constituted by know-how, patents, a brand or own project management methodology. Since there has been a tendency for many years to increase intangible assets, they must be an important area of business activity. In response to the question about the reasons for this phenomenon, B. Lev argues that intangible assets are the main determinant of innovation^[43], and they are based on three pillars: discovery (R&D), organisational practices and human resources.

The first of them is a prelude to the creation of all new products and services. In this case, an intangible asset, which can be, for example, a work in the form of a design of the invention, or the concept of certain innovative solutions, which, when industrialised, turns into a material product, which in turn can be a form of tangible values.

An example of intangible assets in the area of organisational practices may be Dell’s approach to retail sale of hardware-personalised laptops and their service within 24 hours of filing a complaint. Everything to meet the need to reduce losses caused by the inability to perform work due to failure of business clients’ computers.

Human resources, which are the third pillar of intangible assets, enable the existence of the two previously mentioned pillars. Employees are able to create know-how, develop new concepts of goods and services, create networks of relationships with customers and suppliers.

Constant gaining of interest in forms of intangible assets is the result of the effects of investing capital in them. By stimulating innovation they bring returns on investments that are significantly higher than the outlays incurred and higher than returns on investments from fixed assets^[44]. However, this is done at the expense of increasing the company’s operational risk. The value of investments in workshop equipment can be relatively easily assessed and it should not differ from the outlays.

It is different in the case of investments in intangible assets, such as research and development projects, which are successful only in one to two cases out of ten^[45]. Therefore, financial outlays on the implementation of such an undertaking may not bring any benefits several times. However, when the intended success is achieved the next time, the profits from such an investment may many times exceed the losses incurred so far. It is a feature that definitely distinguishes both forms of value.

Enterprises that produce tangible goods are usually different from those that use them. It is different in the case of business entities creating intangible assets, as these companies are often both their producer and beneficiary. In such a situation, there is no pure sale and purchase transaction as for enterprises producing tangible goods. This can cause problems with differentiating between company expenses that were used to achieve intangible assets and those that were dedicated to other purposes.

Similar difficulties apply to the assessment of intangible assets alone. As a result of problems with their measurement, they were not included in the financial statements until recently, as they constituted an immanent part of the products manufactured and services offered.

In the case of products in which intangible assets were not disclosed immediately after the sale transaction, their actual value remained underestimated. This, in turn, could cause a misunderstanding of the reason for obtaining additional material benefits in the future as a result of intangible assets. For this reason, defining, searching for and extracting intangible values from the group of all values and measuring intangible values have been the subject of intensive research in recent years.

The significance of intangible values is emphasised by the research of Lusch, Morgan and Vargo, which prove that there are no material goods that customers desire. What they want is the effect that these goods have on them^[46]. Perception of the issue of values in the context of the above-mentioned studies may lead to the belief that in reality intangible values are more important than tangible values.

This is also confirmed by the observations at the beginning of the article regarding the trend of the increase in intangible values at the expense of tangible values. Tangible goods can often have a positive effect only when combined with intangible goods. These, in turn, do not need material goods to produce the desired effect. According to the author, when assessing business values, intangible values should be taken into account, as they have strategic significance for the company’s future revenues^[47].

^[1] M. Kukushkin, T. Otto, T. Howard, 2015, Value-centric business development. Descriptive and Prescriptive Research Into Five Different Companies, Proceedings of the Estonian Academy of Sciences, vol. 64, 4S, p. 543-543.

^[2] M. Łada, A. Kozarkiewicz, Project value management, C.H. Beck, Warsaw 2010, p. 19.

^[3] H. Kerzner, 2015, Project Management 2.0. Leveraging Tools, Distributed Collaboration, and Metrics for Project Success, Wiley, Hoboken, p. 56.

^[4] O. Martyniuk, K. Stańczak-Strumiłło, 2012, Determinants of a family-onwed business, Finance, Markets, Insurance, No. 56, p. 138.

^[5] P. Czajor, 2012, The role of management accounting in the management of Polish power plants in the conditions of liberalisation of the electricity market, University of Łódź Publishing House, Łódź, p. 69.

^[6] L. Schlenker, A. Matcham, 2005, The Effective Organization. The Nuts and Bolts of Business Value, Wiley, Chichester.

^[7] M. Kukushkin, T. Otto, T. Howard, 2015, cited issue, p. 543.

^[8] Project Management Institute, 2013, A guide to the Project Management Body of Knowledge, Management Training & Development Center; Management Training & Development Center, Warsaw, p. 15.

^[9] M. Thiry, 2002, Combining value and project management into an effective programme management model, International Journal of Project Management, vol. 20, No. 3, pp. 221-227.

^[10] International Institute of Business Analysis, 2015, A Guide to the business analysis body of knowledge, International Institute of Business Analysis, Toronto, p. 22.

^[11] Office of Government Commerce, Management of Value, TSO 2010, p. 5.

^[12] R. Thomsett, 2002, Radical project management, Prentice Hall PTR, Upper Saddle River, p. 104;

R.K. Wysocki, 2014, Effective Complex Project Management. An Adaptive Agile Framework For Delivering Business Value, J. Ross Publishing, Plantation p. 131.

^[13] R. Thomsett, 2002, cited issue, p. 114.

^[14] M. Parker, R. Benson, H. Trainor, 1988, Information Economics. Linking Business Performance to Information Technology, Prentice-Hall, Englewood Cliffs.

^[15] Chartered Institute of Management Accountants, , The Digital Finance Imperative. Measure and Manage What Matters NextS, 2015, www.cgma.org, 29 July 2016, p. 6.

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R.K. Wysocki, 2011, The Business Analyst. A New Partnership for Managing Complexity and Uncertainty, Wiley, Hoboken,  p. 26; L. Russell, 2015, Project Management for Trainers, ATD Press, Alexandria, p. 14;

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^[18] H. Kerzner, F.P. Saladis, 2009, Value-driven, cited issue, p. 134.

^[19] Therein, p. 132.

^[20] Therein, p. 137.

^[21] H. Kerzner, 2015, Project Management 2.0…, cited issue, p. 61.

^[22] H. Kerzner, F.P. Saladis, 2009, Value-driven…, cited issue, p. 140.

^[23] H. Kerzner, 2015, Project Management 2.0…, cited issue, p. 61.

^[24] H. Kerzner, F.P. Saladis, 2009, Value-driven, cited issue, p. 142.

^[25] H. Kerzner, 2015, Project Management 2.0 …, cited issue, p. 61.

^[26] H. Kerzner, F.P. Saladis, 2009, Value-driven…, cited issue, p. 144.

^[27] H. Kerzner, 2015, Project Management 2.0 …, cited issue, p. 61.

^[28] H. Kerzner, F.P. Saladis, 2009, Value-driven, cited issue, p. 146.

^[29] N.J. Pulles, H. Schiele, L. Veldman, J. Hüttinge, 2016, The impact of customer attractiveness and supplier satisfaction on becoming a preferred customer, Industrial Marketing Management, No. 54.

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^[31] J. Lapierre, 2000,  Customer‐Perceived Value in Industrial Contexts, Journal of Business & Industrial Marketing, vol. 15, 2/3, pp. 122-145.

^[32] J. Karlsson, Ryan K., 1997, A cost-value approach for prioritising requirements, IEEE Software, vol. 14,

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^[34] H. Kerzner, 2015, Project Management 2.0 …, cited issue, p. 55.

^[35] C.P. Blocker, 2011, Modeling Customer Value Perceptions in Cross-Cultural Business Markets, Journal of Business Research, vol. 64, No. 5, pp. 533-540.

^[36] A. Walter, T. Ritter, 2003, The influence of adaptations, trust, and commitment on value‐creating functions of customer relationships, Journal of Business & Industrial Marketing, vol. 18, 4/5, pp. 353-365.

^[37] M. Randmaa, K. Mougaard, T.J. Howard, T.C. McAloone, 2011, Rethinking Value. A Value-Centric Model of Product, Service and Business Development, International Conference of Engineering Design, Copenhagen, p. 4.

^[38] M.E. Porter, 1998, Competitive Advantage. Creating and Sustaining Superior Performance, Free Press, New York, p. 46.

^[39] Chartered Institute of Management Accountants, 2015, cited issue, p. 6.

^[40] J.R.M. Hand, B. Lev, 2003, Intangible assets. Values, Measures, and Risks, Oxford University Press, Oxford, pp. 19-47.

^[41] OCEAN TOMO, Annual Study of Intangible Asset Market Value from Ocean Tomo, LLC, http://www.oceantomo.com/2015/03/04/2015-intangible-asset-market-value-study/, accessed on 11 February 2018.

^[42] B. Lev, Intangibles. Management, Measurement, and Reporting, Brookings Institution Press, Washington 2001, D.C., p. 5.

^[43] Therein, p. 2.

^[44] Therein, p. 61.

^[45] C.W.L. Hill, M.A. Schilling, G.R. Jones, 2015, Strategic Management. Theory, Cengage Learning, Boston, p. 140.

^[46] R.F. Lusch, S.L. Vargo, 2006, cited issue, p. 29-42.

^[47] R.S. Kaplan, D.P. Norton, 2014, Measuring the strategic readiness of intangible assets, Harvard Business Review, http://nosolosoftware.com/files/2013/12/HBR_Feb2004.pdf, accessed on 15 July 2016.