Thursday, July 15, 2010

Quality and value

I've been reading some of Michel Thiry's thoughts about quality and value.  Thiry is a expert in value management, with skills and experience from his London-based consulting practice.

About quality, he says: "Quality defined as the ratio of what is offered versus what is expected; if the offered exceeds [in some sense] the expected, quality responds to the need" From the project side, resources required to deliver quality must also be in balance: to wit: the resources needed must balance the resources available.

Here's a diagram to help make the point:

About value, he posits four definitions:
  • Use value: the amount we are willing to pay for a deliverable that serves our functional need.  
  • Esteem value: the amount we are willing to pay for the pleasure of owing or possessing the deliverable
  • Cost value: the cost to achieve a functional deliverable; 
  • Exchange value: the amount of current resources required to trade for an equivalent function
Here are some of my musings about this:
  • Quality certainly has many dimensions.  You can catch up on my thoughts about quality with this blog.
  • Use value and esteem value are really the benefit streams to the business from the customer: sum up the risk weighted present value (PV) of all the benefits--what customers are willing to pay for the need or want--and you have a good way to compare the economic benefits of this project to any other that might be competitive
  • Cost value is really the project budget; in EVM terms its the earnable value because it should be only the cost that investors want to pay, not the cost value they have to pay to get done. 
  • Exchange value: if we ever get to barter, this one may be a good one!  But on a serious note, if there is competition for resources--and when isn't there?--then the exchange of resources between one project and another certainly makes the case for which is the more valuable.

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