Useful Charts and Figures

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Useful Charts and Figures
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• Where are we investing IT money?
• What value is it bringing to the business?
• How do I communicate this value to my senior
  management and other stakeholders?

• What channels, marketing efforts do we have
  underway and what is the ROI of those efforts?
• What are the best marketing channels, efforts to
  utilize?

Information Technology
Marketing

• Enterprise
• What were trying
• All investment types
• Total company

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• What does our RD/Innovation pipeline look like?
• What is our mix of disruptive vs. incremental
  innovation?
• Are things progressing quickly enough?
• What is the viability of RD/Innovation efforts?

• What opportunities does my sales force have
  before them?
• Are the opportunities available sufficient in
  value?
• Are all the people on my sales team bringing
  enough value?

RD/Innovation
Salesforce
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2 1
3 4
Risk-Payback Period
Return-ROI
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• Galvanize
• Build business case for CPM effort
• Educate and get organizational buy-in
• Senior sponsorship

• Analyze
• How are we doing with regard to CPM?
• What are our challenges?
• What are we good at?

• Standardize
• Standardize financial, strategic and risk
  evaluation methods
• Standardize models and refine

• Optimize
• Leverage data to make better decisions
• Integrate with tracking systems to improve future
  projections
• Utilize appropriate frameworks

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Nirvana
Evolved
Unconsciously Competent
Organizational Behavior
Unevolved
Evolved
Unevolved
Process / Discipline
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Evolved
Organizational Behavior
Unevolved
Evolved
Unevolved
Process / Discipline
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Area of Business
IO Capabilities
Line of Business Optimization

• Prioritization of funded investments within lines
  of business (LOB)
• Inventory of unfunded initiatives
• Determination of which investments are flexible
  should investment cuts be required

Business Unit Investment Review Team (IRT)
Optimization

• Optimize across unit to focus on business unit
  (BU) priorities and metrics
• Maintain inventory of unfunded investments across
  the entire unit
• Determine which investments unit-wide which are
  flexible if cuts are required

Enterprise Optimization

• Ensure appropriate mix (short vs. long-term,
  risky vs. non-risky)
• Fund transformational initiatives
• Drive enterprise strategic priorities
• Predictions of future opportunities and issues

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Real Options Analysis

High
High
Stage-Gate Decisioning
Prediction Markets
Complexity of Investment and/or
Variability/Uncertainty of Returns
Sensitivity Analysis/Monte Carlo Simulation
Complexity of Evaluation Framework or Metric
NPV/IRR
ROI/Payback Period
Low
Low
Small
Large
Upfront Investment Required
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What we see/hear today CPM philosophy How do we enable this?
Decibel-driven decisions I know what my business needs How loud does one yell? Who do you know? Who gave the best presentation? If it is not being measured, it is not being managed.famous business axiom Robust modeling to understand financial, strategic, risk, and so on-costs and benefits. Understand key performance indicators (business drivers) to model the right thingsmeasuring the wrong things is useless.
Not fully utilizing in-house experience We dont have time to look back. We are managing our business for the future. Those who cannot learn from history are doomed to repeat it. George Santayana Utilize historical results to help improve future year projections. Leverage this historical learning to improve resource allocation. Investment tracking on an ongoing basis lets decision makers identify and intervene before it is too late. Increased data around initiatives forces greater accountability.
Exogenous factors used to explain misses The project was going well until ____ stepped in or until _____ happened. Accountability breeds response-ability. Stephen Covey Utilize historical results to help improve future year projections. Leverage this historical learning to improve resource allocation. Investment tracking on an ongoing basis lets decision makers identify and intervene before it is too late. Increased data around initiatives forces greater accountability.
Silo approach to allocation My business needs this money to achieve its goals. I have too many good projects and too little money within my own world. Pursue goals that best serve the organization. Jack Welch Provide a discipline that can be used by decision makers to optimize their own portfolio of investments. Aggregate these portfolios to arrive at an enterprisewide optimized portfolio. Use a meritocratic method to allocate resources.
The annual performance trap This investment was approved at the beginning of the year, and the money is ours to spend as we see fit. Innovation is stifled by rigid adherence to fixed plans and resource allocations agreed to 12 to 18 months earlier. Jeremy Hope Investments are alive and treated as such. Get rid of annual performance contract to allow flexibility to cut or increase investment spending as performance dictates.
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• Distributed knowledge improves performance.

• Knowledge is key in driving improved decisioning.
• Again, knowledge must be disseminated to be
  useful
• Knowledge lives on in an organization even after
  people leave

• Information often remains resident with a small
  segment of people.
• No mechanism is in place to efficiently share
  this information.
• Information lets people focus on more thoughtful
  analysis resulting in greater satisfaction.

and ultimately this can drive

• Companies have plenty of data.
• They need to determine whether this is good data.
• If it is good data, tap into it.
• If not, create mechanisms to capture good data.

which can be synthesized into
can become
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Finance
Tech
Evaluation Framework
Investment Review Team - IRT
Low
Contingent Continue
Cancel Contingent

• Execution Risk
• Milestones being met?
• Other external risk factors?

Business
Initiative Owner-Tech
Initiative Owner-BU

• Agenda
• Discuss project milestones and CBA expectations.
• Remediate or remove potential underperformance.
• Find better bets.

High
Low

• CBA Risk
• Benefits achievable?
• Costs contained?

• Continue
• Recommit funding and personnel resources.
• Reward consistent solid performance.
• Frequency of project milestone checkpoints may
  decrease.

• Cancel
• Free personnel and money for new ideas
• Solicit ideas from other initiative owners
• Document reasons for project cancellation for
  future
• Admonish poor project delivery (BU, Tech, and
  Finance)

• Contingent
• Recommit funding and personnel resources.
• Reward consistent solid performance.
• Frequency of project milestone checkpoints may
  decrease.

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Project Completed
Stage Gate 3
Stage Gate 2
Stage Gate 1
Cost Benefit Analysis (CBA) Review
Project funding and resources requested
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Well-defined Criteria

• Effective Process
• FunnelNot tunnel
• Transparent

Mgmt Buy-in
Empowered Review Team
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(1) Investment projections fed into CPM system.
Driver-based models (DBMs) Source for investment
projections
CPM central system composed of database and
reporting
Data repositories Where tracked results reside
(2) Tracking results feed CPM, allowing
comparison with projections.
(3) Tracking performance informs future
projections.