Wherefore Art Thou, Business Value

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Wherefore Art Thou, Business Value?

• Leadership Summit
• November 14, 2008

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First, A Contest

• How much was wasted on a project you led?
• Also, I have revised these slides.

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The Big Ideas

• Aligning around purpose is a smart, simple way to
  improve decision-making.
• Designing our work around purpose helps us
  quickly identify how to optimize business value.
• Cascade the purpose decision filters through the
  organization to achieve focused alignment.

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Purpose Alignment (the SLM)
High
Differentiating
Partnering
Market Differentiating
Who Cares?
Parity
Low
High
Low
Mission Critical
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In Practice
High
Differentiate, Create, Unique Might be Good
Do We Take This On?
Market Differentiating
Achieve and Maintain Parity, Mimic, Unique is
Likely Bad
Who Cares?
Low
High
Low
Mission Critical
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OK, What Is the Big Deal?

• How about an example?

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This Really Happened

• Software for financial document management
• Initial project plan included development of over
  3000 function / story points.
• Filtering functionality through the model yielded
  about 350 Differentiating function / story
  points.
• Company revised the plan to make these 350 even
  better and simplify the rest.
• Result Better product in half the time and 60
  of the original cost.

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Graphically - Before
Project Tracking Document Mgmt Document
Edit Document Library Search EDGAR Integration
High
Market Differentiating
Low
High
Low
Mission Critical
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Graphically - After
High
Document Edit
Portal
Market Differentiating
Project Tracking Document Mgmt Document Library
Search EDGAR Integration
Low
High
Low
Mission Critical
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I Am Interested But How Do I Start?

• How about a case study?

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Case Study Specialty Retailer

• Seven years of losses. Decided to replace legacy
  systems with a system that provided information.
• Started the traditional way (gather requirements,
  create RFP, select software, customize software,
  spend three years and lots of money).
• I introduced the SLM

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Start With Strategy

• Use the SLM to identify strategy.
• Strategy sustainable competitive advantage.
• Strategy decision filters we use to identify
  the Differentiating activities.

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Not Sure About Strategy? Use the Billboard Test
You Think My Products Are Good? You Should See
My Chart of Accounts!
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Or . . .
We invest more in our WMS than we do in product
development
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Returning to Our Case Study

• Differentiating activities were
• Product Selection
• Customer Service

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Next, Filter the Processes

• Two differentiating activities. The rest are
  something else.
• Will this help us select winning products? Will
  this help us improve customer service?
• If not, we accept standard practices, functions,
  features.

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Now, Assess the Differentiating Gap

• Poor product performance
• Launched project to segment customers.
• Identified four segments with different needs.
• Aligned marketing and product selection to these
  segments.
• Designed analytics in parallel with software
  project.
• Lousy customer service.
• Defined new metrics and standards.

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Then, The Parity Gaps

• Would unique accounting, purchasing, inventory,
  point of sale, SCM analytics, et cetera help us
  select better products or improve customer
  service?
• Since parity, resolved the gaps by selecting
  market leading software (since it embodied the
  standardized, simplified practices we should
  mimic).

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Remember the Before
High
Accounting, WMS, SCM, eCommerce, POS,
Inventory, Financial Close, Infrastructure, CCP
Market Differentiating
Analytics, Product Mgmt, Customer Service
Low
High
Low
Mission Critical
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Finally, Prioritize and Fill the Gaps
High
Segmentation Analytics Customer Service
Market Differentiating
ERP POS CRM Infrastructure
Low
High
Low
Mission Critical
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Example Split Payments

• eCommerce and catalog order management system
  supported split payments?
• Split what? Pay with a combination of credit
  cards (as many as you want).
• Required a significant customization. Are split
  payments differentiating or parity?

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Split Payments

• Differentiating includes product selection and
  customer service. Therefore differentiating.
• Not so fast, if differentiating, split payments
  pass the billboard test.

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How About . . .
Give Me Your Tired, Your Poor, Your Maxed Out
Credit Cards
Fist Full of Credit Cards
Treat exceptions like exceptions. Inelegantly
handled with standard functionality.
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Example Community

• Four segments, four purchase triggers.
• One segment was influenced by thought leaders.
• How to expose this segment to thought leaders?
  Unique Social Network laden with quality content
  from thought leaders to influenced the influenced.

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Results

• Within 12 months, profitable business.
• Within 36 months, acquired primary competitor.
• System project was complete in 11 months (not
  36).
• System project was done at 50 of original
  budget.
• (In other words, BIG VALUE!)

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Returning to the Big Ideas

• Better Decisions?
• More smart stuff, less stupid stuff.
• Optimized Business Value?
• Invest in what needs to be better. Dont
  over-invest what can be good enough.
• Focused Alignment?
• Two simple, easy to remember questions.

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A Related Topic Value Model
Did the Inputs Change?
Purpose
Decision Chunk
Assess Results
Considerations
Costs
Benefits
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Caveats

• This approach is common sense but not common
  practice it changes thinking and behavior.
• Emphasize the mission critical nature of the
  parity activities.
• What is differentiating changes over time so
  innovate!

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Questions?

• nnick_at_headwaters.com

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Shameless Plug
Stand Back And Deliver New book by Pixton,
Nickolaisen, Little, and McDonald Published by
Addison Wesley in early 2009