Value creation involves more than incremental revenue and cost savings. It includes indirect benefits -- such as brand value, health and safety improvements, environmental impact, sustainability, and stakeholder perception. It also includes the "Real Option Value" of management's ability to change course with the project as time goes by. PPO provides the tools for your portfolio management office to consider these variables as part of the portfolio decision process.
PPO values indirect benefits, such as environmental impact, talent, and health and safety the same way that you measure financial value (see sample illustration below). As a result, projects that contribute intangible value receive due consideration.
Value delivered by a project is rarely a static measure. The value equation typically includes a number of dynamic variables that can change over time. Also, the initial investment required to fund an initiative is usually front-loaded while the benefits may take time to develop.
PPO lets you project and compare the value of projects by year or the time interval you choose. You can see total value as well as the components of value and how each changes over time. With a more complete view into value, you can deploy capital more efficiently to support your organization’s long-term strategy.