Chapter 14: Using the Scalable Decision Process on Large Projects

1. Chapter 14: Using the Scalable Decision Process on Large Projects The process outlined is meant to be scaleable. Individual steps can be removed, changed, or added but the basic stages should stay the same: structuring, evaluation and agreement.

2. Segments of the SDP • Structuring: Develop a shared understanding of the problem. Members of the DP team should learn about each other’s views and generate creative alternatives to be considered at the next stage. • Evaluation: Use sensitivity analysis to discover value. Alternatives, probabilities and outcomes are evaluated so that a decision can be made. • Agreement: Decide if a suitable course of action has been found and how the decision will be implemented.

3. At the core of 10-step SDP are the Principles of Good Decision-Making: • Develop a shared understanding • Learn where and why value is created • Create enthusiasm to decide and act

4. Understanding the SDP Surrounding the ten steps of the process are the Project Team and the Leadership Review Board. The Project Team carries out the steps of the process while the Leadership Review Board provides guidance and is accountable for the final product.

5. Structuring Step 1. Identification of Problem / Opportunity “Define the problem or opportunity and what is to be accomplished.” This stage is where the process is set up: who will work on the problem, who will make decisions, and the time and commitment expected of each participant. (Structuring cont.)

6. Recognize the need • Identify project sponsor and team leaders – A project sponsor (either the decision maker or a proxy for the DM) should be involved with the project leader. • Establish leadership review team and responsibilities – identify who can sign the check at the end of the day… • Develop project objectives – use a project hierarchy • Create team incentive plan – give the team members extra incentive to be on the team (vacation, extra pay, stock options, etc.) • Build project team(s) and commitment • Establish team roles, responsibilities, and ground rules • Leadership Team – facilitate communication and review key findings • Team Leaders – manage the work done by the team and support team members • Team Members – do the day-to-day work of the analysis • Project Modeler – take findings from the analysis and synthesis a model of the findings • Process Facilitator – guides the team through the steps of this process • Project Assistant – maintain records of work done by team (Structuring cont.)

7. Develop project vision, scope and character • Generate initial set of project issues • Educate the team in methodology • Develop project plan and time line – create a Gantt Chart for the SDA process • Create a project resource list • Set the valuation criteria • Create a decision hierarchy and matrix • Establish a project information system • Develop a communication plan (Structuring cont.)

8. Step 2. Assess the business situation It is important for the team to meet the same objective as the stakeholders when doing the analysis. Usually the decision maker shares these objectives. • Perform stakeholder analysis • Identify and understand current momentum – determine where the company is at and where it is currently headed • Perform market segment analysis • Develop Key Processes and Organizational Map – understand the process the company uses to create value • Develop core enabler assessment – determine how the company matches up to the competition • Develop value creation template • Perform competitor analysis • Identify performance benchmarks • Discover best practices • Develop performance gap analysis • Document key learning and communicate findings (Structuring cont.)

9. Step 3. Generate creative Alternatives • It is important to have compelling possibilities to be compared in the analysis. • Create future business history • Develop model of ideal competitor • Brainstorm ideas, issues and alternatives • Create strategy table • Develop strategy write-ups • Test strategies for creativity and distinctiveness- alternative mapping • Create influence diagram(s) • Record assumptions and key uncertainties • Hold peer+1 focus groups – review the findings so far with some else (like the next level on management) • Develop alternative communication packet – communicate with the rest of the organization what has been found this far (Structuring)

10. Evaluation Step 4. Model the opportunity • Develop a financial black diagram – create a simple model of the evaluation • Educate team on evaluation methodology • Identify content experts – review initial model with experts to make sure they agree • Develop assessment templates • Assign assessment tasks • Gather key uncertainty assessments • Create financial spreadsheet • Create decision model – use software such as Supertree or DATA • Develop base case economics (cont.)

11. Step 5. Discover what is important • Perform sensitivity analysis – determine which variables are important to the strategies • Build tornado diagram – show how variation of each variable effects outcome of strategy • Determine key variables affecting value – use tornado diagram • Validate key inputs • Develop key inputs communication package – document and communicate to the rest of the organization the findings thus far (Evaluation cont.)

12. Step 6. Quantify risk and return • Build decision tree • Probabilistically evaluate key inputs – generally evaluate only the top 3 to 6 variables • Create risk profile for each strategy – plot the value measure vs the probability of success for each strategy • Test strategies with leadership team • Determine inputs causing negative valuation or risk - determine where the risks are coming from • Develop strategy hybrid – maybe combine some of the best strategies, taking into account where risk comes from and input from leadership • Create resource needs assessment • Develop Organizational Impact Assessment – determine how the strategy is going to impact the organization and communicate this to the rest of the organization (Evaluation cont.)

13. Step 7. Determine value of new information • Determine key uncertainties to evaluate – choose variables from the top of the tornado diagram • Evaluate information of uncertainties – determine how much value more information will give the model • Identify possible sources of new information • Estimate quality of new information • Evaluate value of imperfect information – determine the maximum that should be paid for extra information about each variable • Develop evaluation communication packet – document and communicate findings to the rest of the organization (Evaluation cont.)

14. Agreement • Step 8. Decide on course of action • Compare and contrast strategies • Decide on acquiring new information – decide what information will add value to the model • Make strategy decision – decide if current strategy is good enough, or if another iteration is needed to refine the strategy with more information • Understand organizational impact • Develop integration timeline and milestones • Review decision quality matrix • Develop change/decision plan • Create strategy document (cont.)

15. 9. Allocate appropriate resource • Identify financial resource requirements • Identify human resource in effected organizations • Identify technical and systems resources • Allocate financial, human, and technical resources to meet strategy commitments (Agreement cont.)

16. 10. Integrate the solution • Form integration team • Develop and define new policies • Define links with other organizations • Implement tools and training • Set up measurements and rewards • Create on-going communication plan and systems • Establish on-going review team • Examine process to redesign • Redesign key processes (Agreement)