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What is a Value Path

What is a Value Path

A value path is a process which links process performance, business outputs, and organizational goals to focus on value creation. 

A common question we get is, “how do I pick the best fit measures”? 

While organizations usually have several—often too many—measures for tracking performance, they typically question how many they should have and how to know if they’ve captured the value of their goals or processes. One tool organizations can use to help make sure they define the right measures is a value path. 

What is Value Path?

 
Why Use a Value Path? 

A value path ensures a direct link from an opportunity to a goal. Creating a value path is an opportunity for planners and project teams to stop and ask: 

  • Which goals/outputs does the improvement opportunity address? 
  • What’s the relationship? 

These questions can answered by mapping a value chain and ensuring each step has appropriate accompanying measures that align with strategic goals for the organization.

How to Use a Value Path 

There are three key steps to using a value path to identify the measures that will create value for your decision making. 

  1. Set Research Questions and Expectations—step one looks at creating clarity around what the purpose and expectations are from an improvement opportunity, strategy, or process. This can be posed as a research question (i.e., the x input) and an expectation or hypothesis (i.e., the y input). So, the question more specifically becomes: How do you expect the business input to affect the business outcome? 
  2. Choose Measures—step two looks at identifying the measures that match the business input (x) and business outcome (y). This is where most organizations struggle in their difficulty to line up measures with inputs. The key is specificity; but there are several tools and criteria organizations can use to help scope which measures match the purpose. 
  3. Develop Hypothesis Matrix for Measures—the third step focuses on testing and refinement. This involves collecting data on the previously identified measure for the x and y inputs and running an analysis. Once this is done, the planners and project teams should ask: 

             a. Does the analysis results answer our question(s)?
             b. Is there evidence that the business input has the expected impact on the business outcome? 

If the answer to these questions is no, then the measures need refinement, which means re-valuating the measures identified in step 2. The goal of this iterative approach is to ensure the inputs are based on collected data and e the collective analysis is precise. 

When it comes to picking KPIs, most organizations leverage best practices and combine stakeholder engagement with criteria used to balance strategic alignment with data availability, quality, and access. However, iterative approaches like a value path can help organization start with understanding the value of what they want to achieve and systematically think through measure selection so they know they have the “right” measures for the job. 

For more templates like these, see APQC’s collection of Benchmarking and Improvement Tools.