The Business and People Side of BPM Joe DeMarco Black Belt Consultant Motorola Schaumburg, IL

What type of projects? BPM ProjectsBPM Projects IT ProjectsIT Projects Process Change ProjectsProcess Change Projects Six Sigma Improvement ProjectsSix Sigma Improvement Projects Lean InitiativesLean Initiatives Corporate InitiativesCorporate Initiatives Etc.Etc.

Measuring effectiveness E = Effectiveness of Improvement Project Q = Quality of Improvement Project A = Adoption of Improvement Project 100 = Total Effectiveness (10 x 10)

Key driving factors to determine Q (quality) and A (adoption) Communicate the criteria for success Define the return on investment Integrate with Org. Process Govern and sustain the improvement Gain executive commitment Develop organizational acceptance to deploy Sustained business improvement Have It Getting There Not Yet

Define the return on investment Was an initial financial model created to validate ROI from the project?Was an initial financial model created to validate ROI from the project? Are the returns from the project worth the cost of deploying and sustaining the change?Are the returns from the project worth the cost of deploying and sustaining the change?

Gain executive commitment Does the sponsor agree with the end state?Does the sponsor agree with the end state? Does the team sponsor understand the potential productivity dip?Does the team sponsor understand the potential productivity dip? Does the commitment to deploy the change cascade down and across the organization?Does the commitment to deploy the change cascade down and across the organization? Is success part of team sponsor’s performance review?Is success part of team sponsor’s performance review?

Develop organizational acceptance to deploy Has the pilot deployment been successful and all feedback assimilated?Has the pilot deployment been successful and all feedback assimilated? Has the change been communicated to the affected target groups?Has the change been communicated to the affected target groups? Are the impacted target groups willing to accept the change?Are the impacted target groups willing to accept the change? Has over 70% of the target audience taken the proposed training?Has over 70% of the target audience taken the proposed training? Have reward plans been created and executed to motivate deployment of the change?Have reward plans been created and executed to motivate deployment of the change?

Communicate the criteria for success Have metrics been identified to track project success?Have metrics been identified to track project success? Have goals for sustaining returns been identified and are they readily available?Have goals for sustaining returns been identified and are they readily available? Is the measurement system for data collection well defined and digitized?Is the measurement system for data collection well defined and digitized?

Integrate with Organizational Processes Have the changes been packaged into organizational processes and tools?Have the changes been packaged into organizational processes and tools? Has deployment plan for adopting the change been created for the impacted target groups?Has deployment plan for adopting the change been created for the impacted target groups?

Govern and sustain the improvement Has a Process Owner been established for monitoring the new process/change?Has a Process Owner been established for monitoring the new process/change? Does process owner agree to track performance and provide feedback for improvements?Does process owner agree to track performance and provide feedback for improvements? Is the organization structured to adopt and support the end state?Is the organization structured to adopt and support the end state? Does the business have a review mechanism in place to validate gains from the project?Does the business have a review mechanism in place to validate gains from the project?

Define the Return on Investment Project / Process Area Action Items Gain Executive Commitment Project / Process Area Action Items Develop Organizational Acceptance to Deploy Project / Process Area Action Items Communicate the Criteria for Success Project / Process Area Action Items Integrate with Common Process Project / Process Area Action Items Govern and Sustain the Improvement Project / Process Area Action Items Communicate the criteria for success Define the return on investment Integrate with Org. Process Govern and sustain the improvement Gain executive commitmen t Develop organizationa l acceptance to deploy Sustained business improveme nt Roadmap to success with actionable plans

ROI Models Measuring the impact of business improvement projects

The impact of engineering improvement initiatives Inputs - Requirements Process Performance - How much effort and time does it take to produce a product that meets requirements with quality? Outputs - Products (HW & SW) - Defects Improvement Initiatives Historical Process Capability - Productivity - Quality Goal is to increase process performanceGoal is to increase process performance –Reduce effort –Decrease cycle-time –Increase quality

Where are the savings? New Process Performance - Productivity - Quality Improvement Initiatives Impact Process Performance Value to Engineering - Effort Savings

Re-Invest to Leverage Gains! Improvement Initiatives Value to Engineering - Effort Savings Value to the Business - Deliver More Products - Deliver Faster - Deliver Higher Quality New Process Performance - Productivity - Quality

Quantifying Value to Engineering $ Value of Effort Savings =$ Value of Effort Savings = –Effort Reduction (in Staff Months) x –$ Cost for Engineering (in $ per Staff Month) Very Straight-forward Value to Engineering - Effort Savings

Quantifying Value to the Business $ Value to the Business = Sum of$ Value to the Business = Sum of  $ Value of additional products delivered  $ Value of time for introducing new products  $ Value of quality More Complex Value to the Business - Deliver More Products - Deliver Faster - Deliver Higher Quality

Value to the Business Deliver More ProductsDeliver More Products –Effort Savings x Value of Engineering Investment to the Market Deliver FasterDeliver Faster –Time Savings x Value of Time (value of delivering a product early to the market or cost of delivering a product late) Deliver Higher QualityDeliver Higher Quality –Reduced Defects x Value of Quality to the Market How can we determine approximate business factors?

Some examples Use what makes sense for your business and markets – scale down as appropriateUse what makes sense for your business and markets – scale down as appropriate Example approximations:Example approximations: –Value of 1000 Lines of Software Code Annual gross margin on software / total KLOC per yearAnnual gross margin on software / total KLOC per year –Value of Time Annual product gross margin / # products per year / 12 monthsAnnual product gross margin / # products per year / 12 months –Value of Quality Perceived customer perception of the cost of a defect or value of not having themPerceived customer perception of the cost of a defect or value of not having them

What to do with the model Use it across multiple projects for consistencyUse it across multiple projects for consistency Compare relative benefits of various projects that impact multiple driversCompare relative benefits of various projects that impact multiple drivers Make better investment decisions on which projects to prioritizeMake better investment decisions on which projects to prioritize Finance typically uses NPV of investment with hard savings onlyFinance typically uses NPV of investment with hard savings only

Cost Benefit Analysis

Conclusion – Make better decisions and drive improvements by: Understanding the full value of initiatives to your businessUnderstanding the full value of initiatives to your business Understanding the total cost of initiativesUnderstanding the total cost of initiatives –IT costs –Organizational deployment costs –Sustaining costs

Thank You Questions – Comments?