Clarification Workshop

Clarify Cost/Benefit Model 3. Conduct Measurements 4. Conduct VIA 5. Conduct Risk & Return Analysis 6. Make Recommendations 1. Classify & Plan 2. Clarify Intangibles & CBA 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

Risk/Return Analysis Intangibles Measurements Value of Info. $ $$$ “Customer Satisfaction” “Strategic Alignment” “Flexibility” “Technology Risk” “Information Quality” etc.. . 5% 10% 15% 20% 30% $2 mill $4 mill $6 mill Measurements Value of Info. $ $$$ 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.. . $$ Each company will decide on its own what “compliance”, “strategic” and “economic” mean precisely. Also, they will determine their own boundaries on the classification chart and the specific analysis requirements in each “zone” of the chart. Risk Calculate Risk/Return Position "expected" ROI 50% 100% 150% 200% 250% -50% 0% Probability of a negative ROI Probability of a positive ROI Organization's investment limit Acceptable region of investment Return

Schedule Highlights

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

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

Workshop 2-3 Objectives Clarify the Intangibles & identify key variables Benefits Costs Risks Develop spreadsheet models

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 ?

Clarifying Intangibles The “Intangible” Possible Meanings After Clarification “Employee Empowerment” Less management overhead Certain decisions are more accurate and faster “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 (I’ve never lost)

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

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.

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

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

Model Concept