Decision Making with Cost, Value and Risk


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Quick overview of the concepts behind CVR. Please contact me if you would like to put the concepts into action ! I can guarantee a coaching session with me will change the way your managers and executives view decision making !

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  • Decision Making with Cost, Value and Risk

    1. 1. Making Business Decisions: A New Look at the Basic Elements of Business Value Paul Morse
    2. 2. Agenda Background The Essence of Business Spending Cost Value Risk Cost Value Risk Business Layers Discussion Throughout
    3. 3. The Essence of Business Spending Some Spend - $ Equals some Unit of Work Over Time $ = Work Unit Time
    4. 4. CVR – Cost Value Risk The three elements of any decision What is it going to cost? What will I/we get for that cost? What are the risks if I/we do it, or don’t do it? Cost Value Risk Risk Value Cost
    5. 5. Alternate Decision Timelines T0 Option A – CVR Profile Option B – CVR Profile CVR Profile Decision Point
    6. 6. What is Cost ? Many ways to look at cost TCO – Total Cost of Ownership Looks at Lifecycle costs Hard/direct and soft/indirect costs ROI - Return On Investment Hurdle Rate is key - % return to beat EVA – Economic Value Added Similar to ROI Not Common is US Internal to Company Most common – Spreadsheet jungle
    7. 7. What is Valued ? Support Partners Security Interoperability Seamless Upgrades Technology Roadmaps Availability/uptime Strategy Integration Assessment help – studies, POC, training, etc. Indemnity
    8. 8. Common Risks Opportunity Cost – wrong decision Technology – obsolete/change ? Implementation Issues/timeframe Cost Overruns Legal Organizational User Acceptance/Training effort Vendor longevity/stability
    9. 9. Ideal CVR Profile C V R Strive For a Better CVR Profile Than the Competition And be ready to prove it …..
    10. 10. CVR Summary Universal decision making method Works on everything Streamlines decision making at all levels of an organization Very flexible/expandable Every “suggestion box” should use it Great way to stand out from the competition.
    11. 11. Strategies Expense Asset/Equity Management Sales Governance Key Business Elements/layers Assess CVR TCO ROI TVO Technical RFI/P Etc. Project Portfolio InfoWorker User Apps App Plat LOB ERP CRM Portal Infra Network Storage Cloud Email F&P Cogs/Sales SGA/Sales IT/Sales Key Perf Indicators Rec’v days Invntry days Cost/invoice IRR NPV ROI, Etc. Cash Flow Corporate Objectives Revenue Net Income Return on Assets/ Equity Business Results
    12. 12. Resources IBM Institute for Business Value http://www- Oracle CIO Central Microsoft -server-tco.mspx MIT Sloan CISR Business/dp/0471227331 There are many, many more…
    13. 13. Discussion Audience example if time
    14. 14. Thank You … no, really.
    15. 15. Labor Capital Technology Natural Resources Partners, Etc. Organizational Boundaries External ForcesOrganizationResource Pool Market Regulation Natural Competition Etc.