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I am starting a project of going through the 6th Edition of the PMBOK® Guide and blogging about its contents.    The 6th Edition was released on September 22nd by the Project Management Institute, and the first chapter is a general introduction to the framework in which project management exists, starting with section 1.2 Foundation Elements (section 1.1 describes the purpose of the Guide).

In section 1.2.1, PMI introduces the definition of projects (discussed in the previous two posts) and it is then immediately followed by the relationship between project management and change management (this was covered in the previous post).   Then it goes on to show the relationship between project management and business analysis, which determines the business value that the project is designed to create.

This relationship between project management and business analysis is made explicit in PMI’s new publication “Business Analysis for Practitioners:  A Practice Guide.”   But for the purpose of this introductory section on project management, PMI defines business value as

“the benefit that the results of a specific project provides to its stakeholders”

and it can take the following forms:

“the return, in the form of time, money, goods or intangibles in return for something exchanged.”

Here are some important points to consider regarding this statement.

1.  When people think of “business value”, they might think of money, which is normally thought of when you hear the phrase “bottom line”.   But there are intangible benefits that a company could create a project for, such as brand recognition, reputation, or even goodwill.
2. The description of business value as a benefit for stakeholders is reflected in the name for one of the two project business documents that are inputs to the creation of the project charter:  the “project benefits management plan.”   The “project business case” shows how the project will create business value for the stakeholders, but the “project benefits management plan” shows how this business value, once created, will be maximized and sustained over time.

Because the creation of business value is central to the reason for the project being created in the first place, it is important for the project manager to understand what that value is for a very pragmatic reason:   if conditions arise that prevent the project from creating business value for the stakeholders, then that project may be terminated by the sponsor!

When you ask the question of why a project is being created, there are two answers to the question.    One reason is because the entity requesting the project to be done wants to derive some business value or benefit from it.    But the other reason is that project will align with the strategic objectives of the entity doing the project.   That topic is the subject of the next section in the Guide and will be discussed in the next post.

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