Clarification Workshop

1. Clarification Workshop

2. 1. Classify & Plan 2. Clarify Intangibles & CBA 3. Conduct Measurements 4. Conduct VIA 5. Conduct Risk & Return Analysis 6. Make Recommendations Clarify Cost/Benefit Model • Purpose: Develop a comprehensive spreadsheet-basedmodelof the costs, benefits and risks of the proposed system investment • Approach: Use clarification methods to develop a specific cost/benefit formula

3. Measurements 5% 10% 15% 10% 20% 30% $6 mill $2 mill $4 mill Calculate Risk/Return Position "expected" ROI Probability of a negative ROI Probability of a positive ROI -50% 0% 50% 100% 150% 200% 250% 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

4. Schedule Highlights

5. 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

6. 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

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

8. 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 ?

9. Clarifying Intangibles • 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) 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

10. 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

11. 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.

12. 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

13. 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

14. Model Concept