Hubbard

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Clarification Workshop
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Clarify Cost/Benefit Model

• Purpose Develop a comprehensive
  spreadsheet-based model of the costs, benefits
  and risks of the proposed system investment
• Approach Use clarification methods to develop a
  specific cost/benefit formula

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Risk/Return Analysis
Intangibles Customer Satisfaction Strategic
Alignment Flexibility Technology
Risk Information Quality etc.. . . . .
Value of Info.


Measurables Errors in Decision X Change to
Strategic Measure M Productivity in Activity
Y Cycle Time of Process Z Chance of cancelation
of Project Etc.. .

Risk
Organization's investment limit
Acceptable region of investment
Return
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Schedule Highlights
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Workshop Schedule

• Workshop 1
• Workshop 2 -
• Workshop 3 -
• Workshop 4 -
• Workshop 5
• We will also rely on additional interviews and
  assignments outside of workshops to complete the
  objectives

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Workshop 1 Objectives

• Confirm investment objectives and approach
• Scope the decision model
• Identify parts of the investment are fixed vs.
  optional
• Confirm the list of independent investments
• Confirm the acceptance criteria for investments
  (annual review, etc.)
• Identify key benefits, costs and risks
• Repeat for each investment in portfolio

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Workshop 2-3 Objectives

• Clarify the Intangibles identify key variables
• Benefits
• Costs
• Risks
• Develop spreadsheet models

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The Object of Measurement

• Objects are the costs, benefits and risks that
  impact the return (i.e. cash flow) for the
  investment analysis
• If an object seems like an immeasurable
  intangible it may just be ill-defined

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Clarifying Intangibles
The Intangible
Possible Meanings After Clarification

• Less management overhead
• Certain decisions are more accurate and faster

Employee Empowerment
Information Availability

• Time and cost of searching is reduced
• Certain costly errors are less frequent

Strategic Alignment

• Stated organizational objectives (which should
  be measurable) are more likely to be met

• Tools like The Clarification Chain are used to
  identify unit-of-measure variables hidden beneath
  the intangible label
• I offer a challenge that given any intangible, I
  can clarify it and identify a method of
  measurement within 15 minutes (Ive never lost)

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Ambiguity vs. Uncertainty

• Measurement requires unambiguous definitions
• Ambiguity and uncertainty are not the same
• Ambiguity is an unclear definition
• Uncertainty still exists after ambiguity is
  removed
• Narrowing the possible values of a quantity is a
  reduction in uncertainty

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The Clarification Chain

• AIE assumes that if a benefit or cost is defined
• unambiguously, then it is measurable.
• If it is Better it is different in some
  relevant way...
• If it is relevantly different then it is
  observable...
• If it is observable it is observable in some
  amount...
• If we can detect in some amount then it is
  measurable.

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The Clarification Thought Experiment

• Imagine that you are a scientist capable of
  making clones of entire companies and that you
  have a cloned pair of your organization
• Change one of the organizations so that one has
  the stated intangible and the other does not
• Ask what would you actually observe that would be
  different between the two organizations

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Overview for Clarification

• Remember that one of the reasons things may seem
  to be immeasurable is that we do not understand
  the object of measurement
• Use unambiguous definitions (ambiguous benefits
  always seem to be Intangible)
• Use the Clarification Chain and Thought
  Experiment
• The output of the clarification step should be to
  agree on a specific spreadsheet model

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Model Concept