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Pereira Diamond benefits model webinar 10th June 2015

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Pereira Diamond benefits mode Webinar 10th June 2015
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Pereira Diamond benefits model webinar 10th June 2015

  1. 1. Webinar: Pereira Diamond Benefits Model CLÁUDIA TEIXEIRA & LEANDRO PEREIRA, Ph.D PMP #apmbmsummit APM Benefits Summit 2015 Thursday 25th June 2015 Look out for “ClickToTweet” buttons in presentation >>>
  2. 2. © 2015 Winning Management Consulting Agenda 2 Beginning The End 12h30 13h15 (45min) — Context — Benefits Management — Pereira Diamond — Scientific Business Case — Conclusions — Questions (10min) 13h25
  3. 3. © 2015 Winning Management Consulting Agenda 3 Beginning The End 12h30 13h15 (45min) — Context — Benefits Management — Pereira Diamond — Scientific Business Case — Conclusions — Questions (10min) 13h25
  4. 4. © 2015 Winning Management Consulting Rupert Murdoch The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.
  5. 5. © 2015 Winning Management Consulting 5 Statistics Companies continue to focus on costs or qualitative benefits 54% of respondents indicated that cost reduction is a primary driver of projects and programmes in their organisation Source: APM, 2014 Up to 70% of change initiatives fail to deliver on the benefits that they set out to achieve 40.5% of respondents answered their organisations have “weak benefits focus” Source: APM, 2014Source: John Kotter, 1995 UK Survey Harvard Business School Study UK Survey
  6. 6. © 2015 Winning Management Consulting Product Life Cycle The Modern Management Challenges 6 Globalization Technological Innovation Planned Obsolescence Social Networking 3 years 5 years Introduction Growth Maturity DeclineBusinessVolume 8 yearsTime Source: Pereira & Teixeira, 2015
  7. 7. © 2015 Winning Management Consulting Global Capex Expenditure The consequence of the product life cycle decrease is the continuous investment in new projects 7 Source: World Bank. 2014
  8. 8. © 2015 Winning Management Consulting Expectation versus Estimation The difference between Common Sense and Scientific Management 8 Expectation Estimation Common Sense Technique… Scientific Management
  9. 9. © 2015 Winning Management Consulting “Two different people will reach very similar conclusions” Scientific Management Principle 9 Common Sense Management Scientific Management Acquired as result of ordinary business and daily living Unreflective opinions of ordinary people Systematic approach to management Pursued deliberately and systematically Is Individual Based on personal experience Is Universal Looks at what is applicable across all situations Process not tested Each time a different process is applied Process tested in several contexts and organizations Results validated Accept the obvious “Of course” Some discoveries are not true Questions the obvious “Why?” Start the search from the common sense answer Cannot rely on consistent results Yields the same results or very similar results when conducted by two different people under the same circumstances Gained through uncontrolled experience Gained through controlled experiment Vague Precise
  10. 10. © 2015 Winning Management Consulting Agenda 10 Beginning The End 12h30 13h15 (45min) — Context — Benefits Management — Pereira Diamond — Scientific Business Case — Conclusions — Questions (10min) 13h25
  11. 11. © 2015 Winning Management Consulting Peter Drucker Efficiency is doing things right. Effectiveness is doing the right things.
  12. 12. © 2015 Winning Management Consulting “Value of Something” Value Perception is higher before you get it and after you lose it 12 The value of any asset is measured by the impact generated by having it or not having it. Method of Measuring Value through Impact Value Perception Before getting it When you have it After losing it
  13. 13. © 2015 Winning Management Consulting “Value of Something” Future Wheel Method 13 The value of things is measured by the effects generated and not by what they “are” or “represent” Future Wheel Method Increase the portfolio margins Increase the “word of mouth” Reduce costs with advertising Reduce commercial costs Increase value to the shareholdersReduce Funding Costs Increase the liquidity for change More time to develop the business Reduce the time-to-market More time available for the client Improve the brand image Reduce commissions Projeto Increase Nº Clients Increase retention Reduce internal costs Reduce “dead” times Project
  14. 14. © 2015 Winning Management Consulting TimeBudget Box Define the budget available according to the benefits generated 14 Deadline BenefitsBudget 50% Source: Pereira & Teixeira, 2015
  15. 15. © 2015 Winning Management Consulting Benefits Modelling Benefits are turned into the “increase” of something positive or the “reduction” of something negative 15 ─ Increase Invoicing ─ Increase Retention ─ Increase Productivity ─ Increase Liquidity ─ Increase Geographical areas + ─ ─ Reduce non-compliance ─ Reduce Waiting times ─ Reduce average time of the processes ─ Reduce Rework ─ Reduce Costs with Suppliers ─ Reduce Infrastructure Costs ─ Operational Costs Reduction AS IS TO BE
  16. 16. © 2015 Winning Management Consulting Business Requirement A Business Requirement comes from the need and the related business impact 16 NEED: Optimize a process with computer support BENEFITS:  Reduce time (hours) of employees  Reduce rework  Reduce non-compliance BUSINESS REQUIREMENT BUSINESS IMPACT PROJECT SCOPE= + Benefit 1 Benefit 2 Benefit 3
  17. 17. © 2015 Winning Management Consulting Benefits Stages Each benefit requires a “picture” of the current situation, estimate of potential and track of the results 17 AS IS TO BE REDUCE MATERIAL WASTE REDUCE REWORK INCREASE UP-SELLING ----------------- ----------------- ----------------- ----------------- ----------------- --------------- ----------------- ----------------- ----------------- ----------------- ----------------- --------------- ----------------- ----------------- ----------------- ----------------- ----------------- --------------- ----------------- ----------------- ----------------- ----------------- ----------------- --------------- ----------------- ----------------- ----------------- ----------------- ----------------- --------------- ----------------- ----------------- ----------------- ----------------- ----------------- --------------- Example: DATA COLLECTION EVALUATION TECHNIQUES TRACKING TECHNIQUES
  18. 18. © 2015 Winning Management Consulting Benefits Parameters Metrics identification to quantify costs and benefits 18 How MUCH is a Work Unit? How MUCH is a client worth? − Employee cost/hour (per role) − Process nº hours − Wasting hours − Space Cost per m2 − … − Client Value per month (or yearly) of a client (per segment) − N.º Complaints − Portfolio per client − Churn Rate − Average time of a client life cycle Metrics for the Intervention: − Observation − Simulation − Gap Analysis − Risk Assessment − Performance Analysis − Finance Reports − Compliance Reports Techniques for the Intervention Evaluation: − Market Studies − Surveys − Interviews − Benchmarking − Satisfaction Evaluation − Corporate Reports − Prototyping − … Techniques for the Intervention Evaluation: Metrics for the Intervention: WHAT?HOW? HOW?WHAT? COST DECREASE BUSINESS GROWTH
  19. 19. © 2015 Winning Management Consulting Pareto Principle Identify the three benefits with the most impact 19 Source: The Chaos Report. The 10 Laws of CHAOS. 2013 Small projects with high organization impact Techniques to validate the Scope “frontier”: ─ In/Out Scope (contradictory technique) − Which of the three benefits is affected and by how much, in this case scope component is not included? − In case there is no cause-effect relationship with one of three benefits, the component is out of scope − Avoid: “by the way”, “it would be useful to..”, “it would be interesting if…” 25% 40% 35% 15% 5% 3% 1% Benefits Tangibles Intangibles
  20. 20. © 2015 Winning Management Consulting Poll Question 1: Is there anyone accountable for the benefits management process in your company? a) Yes b) No
  21. 21. © 2015 Winning Management Consulting Benefits Life Cycle We need to have a benefits perspective from strategic planning through to the project results 21 Benefits Estimation [Step 2] Benefits Tracking [Step 4] Strategic Planning [Step 1] Benefits Leverage [Step 3]
  22. 22. © 2015 Winning Management Consulting Agenda 22 Beginning The End 12h30 13h15 (45min) — Context — Benefits Management — Pereira Diamond — Scientific Business Case — Conclusions — Questions (10min) 13h25
  23. 23. © 2015 Winning Management Consulting Benefits Dimensions The four dimensions of value generation: Pereira Diamond (1st Level) 23 Source: Pereira Diamond (Pereira & Teixeira, 2015) Business Growth Legal Compliance Costs Reduction Efficiency Increase Stock Price
  24. 24. © 2015 Winning Management Consulting Business Growth Leverage business withing four alternatives 24 New Clients Retention Cross-sellingUp-selling Sell more of the same product to current clients Increase the price of the same products Sell new products to the same clients Sell the same product to different clients within the current clients portfolio Increase the lifecycle time of the current clients (work with the current clients) Reduction of churn rates (work with the clients who leave the company) New productsNew geographies Win-backNew segments
  25. 25. © 2015 Winning Management Consulting Costs Reduction and Efficiency Increase Reduce the current impact and avoid a future impact 25 € Period N Period N+1 Period Project Period € Period N Period N+1 Project Reduce costs Avoid Cost Increase Nºhours Period N Period N+1 Period Projet Nºhours Period Period N Period N+1 Project Reduce Time Avoid Time Increase
  26. 26. © 2015 Winning Management Consulting 26 Benefits Classification The four dimensions of value generation: Pereira Diamond (2nd Level) Source: Pereira Diamond (Pereira & Teixeira, 2015)
  27. 27. © 2015 Winning Management Consulting Poll Question 2: How often do you estimate your initiative’s benefits in a quantitative way? a) Never b) Rarely c) Very Often d) Always
  28. 28. © 2015 Winning Management Consulting Primitive Benefits and Instantiated Benefits The difference between the cause and the effect 28 Primitive Benefit Instantiated Benefit Increase the process quality Reduce the process rework due to the n.º of errors Reduce clients dissatisfaction Increase the client lifecycle through a better relationship Increase employees motivation Reduce the processes time through employees’ s motivation increase Cause Effect Business Increase Legal Compliance Costs Reduction Efficiency Increase
  29. 29. © 2015 Winning Management Consulting 29 Benefits Parametric Equations The benefits are measured by the impact generated UPSELLING CROSS- SELLING INCREASE Nº NEW CLIENTS = 5.000 * 30% * (120€ - 80€) * 3 years = 180.000€ = 5.000 * 15% * 100€ * 3 years = 225.000€ + + =TOTAL = 1.020.000€ CLIENTS RETENTION = 1.000 * (8% - 4%) * 250€ * 3 anos = 300.000€ = 10.000 * 15% * 70€ * 3 years = 315.000€ Market Share * % Costumer Entry * Product Price * 3 years Nº Current Clients * % Costumer Entry * (New Price- Current Price) * 3 years Nº Current Clients * % Costumer Entry * Price of the New Product* 3 years Nº Clientss * (Current Churn Rate– Future Churn Rate) * Client Value/year* 3 years + BUSINESS REQUIREMENT BUSINESS IMPACT PROJECT SCOPE = + Benefit 1 Benefit 2 Benefit 3
  30. 30. © 2015 Winning Management Consulting 30 Benefits Parametric Equations The benefits are measured by the impact generated REDUCE HOURS REDUZIR REWORK REDUCE MATERIAL WASTE + + = Nº Units Produced * (% current waste – % new waste) * Product Cost* Nº years = 100h * 40% * 35€/h * 12 months * 3 years = 50.400€ Nº Hours of the process* % Time Reduction* Cost €/h * Nº anos = 40h * (20% - 5%) * 35€/h * 12 months * 3 years = 7.560€ Nº Hours of a process* (% Hours in Rework – New %of Rework) * Cost €/h * Nº years = 500 uni * (10% - 5%) * 100€ * 12 months * 3 years = 90.000€ TOTAL = 147.960€ BUSINESS REQUIREMENT BUSINESS IMPACT PROJECT SCOPE = + Benefit 1 Benefit 2 Benefit 3
  31. 31. © 2015 Winning Management Consulting 31 Benefits Estimation Estimated benefits must be presented with variance analysis
  32. 32. © 2015 Winning Management Consulting 32 Cost Estimation Estimated costs must be presented with variance analysis Total cost Source: COCOMO 2, 1995
  33. 33. © 2015 Winning Management Consulting ROI Sensitivity Sensitivity analysis to economic indicators according to a confidence level 33 ROI % 0% 100% -50% -25% 25% 50% Confidence% Confidence: 99% 95% 80% 50% 25% 1% Net Present Value 20k€ 45k€ 80k€ 150k€ 220k€ 300k€ Internal Rate of Return 2.6% 5.4% 8.2% 12.6% 19.3% 27.5% Benefit Cost Ratio 1.08 1.13 1.23 1.34 1.62 1.75 Return on Investment 8% 13% 23% 34% 62% 75% Payback Period 30 m 28 m 26 m 22 m 18 m 12 m
  34. 34. © 2015 Winning Management Consulting Poll Question 3: Are you aware of your initiative benefits confidence level when presenting the benefits plan? a) Yes b) No
  35. 35. © 2015 Winning Management Consulting Balancing to decide Benefits vs Investment 35 Business Growth Legal Compliance Costs Reduction Efficiency Increase
  36. 36. © 2015 Winning Management Consulting Portfolio Prioritization Sequential analysis for decision-making 36 Quit Go Ahead 1. Qualitative Analysis 2. Quantitative Analysis 3. ROI Analysis Portfolio Prioritization Projeto 3 Project 2 Project 1 4. Decision-Making Legal Compliance Increase Revenue Reduce costs Increase efficiency
  37. 37. © 2015 Winning Management Consulting 37 Traditional Budgeting vs Zero-Based Budgeting The relevance of justifying each monetary unit for budgeting approval Sources: Wetherbe, James C “ A general purpose strategic planning methodology for the computing effort in higher education: development, implementation and evaluation “, unpublishded Ph.Dissertation Texas Tech. University 1976. Wetherbe, J; Montanari, J: “ Zero Based Budgeting in the planning process” - Strategic Management Journal , Vol. 2. 1-14 (1981) Traditional Incremental Budgeting Zero-based Budgeting Budget changes only occur to increase the current amount (positive variations) Justification is based on the amount incremented The entire budget is thoroughly reviewed with a clear justification of the costs estimated for each project [zero-budget principle] It does not consider the historic records. Every cost unit is subject to approval
  38. 38. © 2015 Winning Management Consulting 38
  39. 39. © 2015 Winning Management Consulting Business Life Cycle From strategic plan to operational results 39 HIGH PERFORMANCE TEAMS GOVERNANCE, RISK & COMPLIANCE STRUCTURE & PROCESSES PEOPLE & CULTURE Business Cases Requirements & Project Management Benefits tracking Grow the Business Run the BusinessChange the Business Strategic Plan Vision, Mission Goals Benefits & Performance Projects Portfolio Source: Pereira & Teixeira, 2015
  40. 40. © 2015 Winning Management Consulting Agenda 40 Beginning The End 12h30 13h15 (45min) — Context — Benefits Management — Pereira Diamond — Scientific Business Case — Conclusions — Questions (10min) 13h25
  41. 41. © 2015 Winning Management Consulting 41 Scientific Business Case Hypothesis Validation through the appropriate Business Research Methods THENIF Two different teams will reach the same conclusions about ROI of a specific project. Effect Business Growth Legal Compliance Costs Reduction Efficiency Increase Stock price Benefit 1 Benefit 2 Benefit 3 Initiative “What is intended to do” Cause Hypothesis Yes? / No? How Much? Business Research Methods (…) - Regression Analysis - … Historical Experience Interrogative - Control Group - … - Survey - …
  42. 42. © 2015 Winning Management Consulting 42 Business Case Canvas Template Example: critical information for the decision-making GO/NO-GO Cost € [95% confidence level] Benefits € [95% confidence level] Solution Economics Problem Business Drivers Strategic Align Customers’ loyalty increase Business Increase: 3,208,013 Cost Reduction: 3,609,015 Campaign from our competitors with high price reduction (50%) New offer: Service package with more functionalities at a slightly higher price OPEX: 415,104 CAPEX: 799,720 Leader in the quadruple play market NPV (k €): 7,633 ROI (%): 870.7 ERR (%): 135.2 Payback w/ interest (months): 3.7 Increase of presence of our services in the client Decrease operational costs Strengths Weaknesses Opportunities Threats High Return on Investment Expertise of our commercials Failures in our Internet Services High demand on Internet + Mobile Phone services A downturn in economy and less spending budget of people 1st place in customers satisfaction rank
  43. 43. © 2015 Winning Management Consulting Agenda 43 Beginning The End 12h30 13h15 (45min) — Context — Benefits Management — Pereira Diamond — Scientific Business Case — Conclusions — Questions (10min) 13h25
  44. 44. © 2015 Winning Management Consulting 44 Conclusions Pereira Diamond within the Business Case Process Based on the business case good practice, the overall business case steps and benefits mindset may be synthesized on the following steps: 1. Listen to the market 2. Listen to your company 3. Start the process with a benefit in mind 4. Budget is only a means to achieve the benefit 5. Uncertainty is a fact and needs to be estimated 6. Two different people must achieve the same results
  45. 45. © 2015 Winning Management Consulting Leandro Pereira The biggest problem for an organization is … its assumptions!
  46. 46. © 2015 Winning Management Consulting Agenda 46 Beginning The End 12h30 13h15 (45min) — Context — Benefits Management — Pereira Diamond — Scientific Business Case — Conclusions — Questions (10min) 13h25
  47. 47. Thank you! Any questions? Contacts: claudia.teixeira@winning.pt leandro.pereira@winning.pt #apmbmsummit APM Benefits Summit 2015 Save the date! Thursday 25th June 2015
  48. 48.  APM Benefits Summit Thursday 25th June, Hatton Garden, London http://bit.ly/bmsummit  Projects and programmes: a sure-fire way to create business value? Wednesday 24th June – breakfast briefing, London SW1  Visualising the relationship between projects and benefits Wednesday 24th June –workshop [pm] [Note: Also at Milton Keynes on 23 June] #apmbmsummit Leandro.Pereira@winning.pt Claudia.teixeira@winning.pt @apmbmsig I #apmbmsummit
  49. 49. © 2015 Winning Management Consulting Leandro Pereira Ph.D, PMP, ROI 49 CEO of Winning Management Consulting Associate Professor at ISCTE Business School Director of Executive Master in Program and Project Management at INDEG President and Founder of PMI Portugal Chapter PhD in Project Management Certified by DEA in Knowledge Management PMP Certification of PMI Certified in ROI Professional Mobile: +351 91 599 10 20 email: Leandro.Pereira@winning.pt Background Leandro Pereira is the CEO and founder of Winning Management Consulting. With over 14 years of working experience in functions of executive management in management consultancy organizations. Having a degree in Information Management from Escola de Engenharia da Universidade do Minho, with a GPA of 18/20, he obtained the distinction of Best Student of Universidade do Minho. Later, he took a PhD in Project Management at the prestigious Universidade Pontifícia de Salamanca, where conducted a pioneering project in the project recue area. Regarding the PhD program, he has received from the faculty an award for developing the investigation with highest final grade. At ISCTE, Leandro Pereira is the Director of Executive Master in Program and Project Management as well as Guest Associate Professor in the Strategic Management, Business Project and Project Management, being the advisor of several PhD and Master’s theses in the same areas. He detains the Project Management Professional (PMP®) Certification from PMI® and ROI Professional Certification from ROI Institute. Throughout his professional experience, he was responsible for the conceptualization, design and implementation of management solutions not only at organizational level but also at technical level, including conceptualization and design of organizational units – PMO’s in several companies within Banking, Pharmaceutical, Utilities, Services, Infrastructures and Civil Engineering sectors. As instructor, he detains the CAP and has wide experience in this area which goes from the conceptualization of advanced courses in Business Cases, Business Analysis, Project Management and Cost Management to the preparation of numerous applicants for PMP® and CBAP® in Portugal. Moreover, Leandro Pereira is the Director and Founder of PMI Portugal Chapter. Author of several articles in management magazines (RH Magazine, Pessoal, Dirigir), he recently published a book called “Gestão de Conhecimento em Projetos” from FCA. During his professional and academic path, he received many distinctions, being The Best Professor of Executive Master in Project Management at ISCTE and 8 Merit Awards with highlight on Prémio Senado Universitário, for being the best student at Universidade do Minho and Prémio Governo Civil de Braga, for being the student with highest final GPA in the entire university. Besides, he was awarded with the diploma supplement to the degree developed by UNESCO. Before the admission in the higher education, in 1994, he received the Prémio de Distinção Nacional: "Juventude e Defesa Nacional", awarded by Ministério da Defesa.
  50. 50. © 2015 Winning Management Consulting Cláudia Teixeira 50 Manager at Winning Management Consulting Degree on Business Management & Administration (Catholic University) Master Student at ISCTE Business School (Thesis on Benefits Management) Mobile: +351 91 474 05 58 email: Claudia.teixeira@winning.pt Background Cláudia Teixeira is a business case consultant specialist at Winning Management Consulting responsible for projects from different sectors such as banking, insurance, IT and telecommunications. Cláudia trains others in benefits management and business case topics and is currently undertaking a Master degree at ISCTE-IUL Business School specializing in benefits management. Her dissertation thesis aims to identify business case gaps in organisations and make recommendations based on worldwide good practice. She has also a foreign professional experience in UK (London) for two years and a half where she worked in the hotel management sector in several roles such as Guest Relations, Revenue Management & Pricing Strategies and Sales & Events. Cláudia is also an author of several articles in business magazines and international journals such as the Executive Digest Magazine and the International Journal of Business & Management

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