Metrics to measure the value contribution that can be added from a Global in House Center to its parent organisation.

1. Site Contribution and Value Analysis
August 2016
1

2. 2
Maturity
assessment and
gap analysis
Value metrics
definition
Value contribution
assessment
Strategic
analysis and
outcomes
Data collection
process
Strategic
objectives
Current state analysis and
future state identification
• As – Is understanding of current
maturity and definition of future
state for each BU
• Identification of gaps and future
state including high level
initiatives
Stakeholders’ interviews, primary research
Survey based data collection from Stakeholders
Metric identification and
dashboard
• Identify metrics for share holder
value creation for each
BU/support function
• Define and develop dashboard
for all BUs, support functions
and overall
Identification of value
contribution
• Estimate overall enterprise value
for each centre
• Calculate Unit value contribution
for each BU/support function and
overall for each centre to the
parent
1 2 3
How we assess the value contribution of a Global In-house Center site to the Global Parent

3. 3
Maturity Assessment

4. 4
Maturity Assessment Model
A structured approach and proprietary maturity models are used to determine maturity of each
function / BU at a center
Methodology and
outcomes
Data collection
process
Stakeholders’ interviews / Primary research / Data collection from India teams
Maturity Analysis
Strategic
objectives
• Maturity analysis for each BU /
support function using Zinnov’s
proprietary Maturity Framework
Current State Maturity
Analysis
• Desired future state articulation of
each BU / support function
Future State Identification
• Gap identification – areas of
focus and improvement
Gap Analysis
Maturity assessment
and gap analysis
1
Key parameters for maturity assessment of product development team (Example)
Business Talent Organization Process
• Product budget
• Role in product
management
• P&L
accountability
• Roles
• Scrum type
• Team size
• Activities
• Ability of team
to work
independently
• Organization
activities
• Management
• Process
activities
• Job design
• Measurement
• Technology
Organize
Activities

5. Maturity assessment
4321 5
Organization
Talent
Organize activities
Process
Business
Current maturity level Desired maturity level within 2-3 years Current state same as desired state
Desired StateCurrent state
• Assists in creating product roadmap
BUSINESS
TALENT
• Significantly influence the product road map, strategy, budget
ORGANIZE ACTIVITIES
ORGANIZATION
• Development, QA, release managers, product managers • Executive leadership from India
• Activities include conceptualization, design, development, testing
and release.
• User experience for the product.
• Activities include conceptualization, design, development, testing
and release.
• User experience for the product
• Structure for assessing ideas
• Product managers defined
• Common portal for submitting of ideas. Unbiased evaluation by
top management
• Project managers responsible for P&L
• Resource allocation is coordinated
• Some repetitive tasks have been automated
• Prioritized resource allocation
• All repetitive tasks automated
PROCESS
5
Maturity assessment
and gap analysis
1
Maturity Assessment

6. 6
Value Metric Definition

7. 7
Value Metrics
definition
2
Revenue Opportunity indicates how well
a team is able to identify and fill a need
within a chosen market.
Operating Efficiency reflects how well the
team is able to turn demand for its products
and services into profits and value
Risk Control and Expectation
Management helps define stakeholder
confidence in team’s ability to own and
deliver on higher responsibility
Shareholder
Value
Revenue
Opportunity
Operating
Efficiency
Asset Productivity
Risk Control and
Expectations
Management
• Anything that grows ‘Top
Line’
• Anything that grows the
‘Bottom Line’
• All cost categories
• Anything that reduces the
amount of money tied up in
the assets needed to run the
business, or allows those
assets to be better utilized
• Anything that enhances the
team’s ability to lead, plan,
manage, execute its stated
strategies
• Anything that demonstrates
the team’s ability to control
risk
Asset Productivity reflects how well a
team is able to turn invested resources
(talent, real estate, cash, etc..) into
profits and value.
Current
performance
Expectations for
future
performance
Shareholder Value Contribution
The following levers will form the basis to identify the key metrics for measuring value contribution of the
BU/team

8. Product Development Team Dashboard
35% 20% 25%
Target achieved
Target achieved Target achieved Target achieved Target achieved
30% 20% 30% 10%
30% 30% 30% 20%
60% 60% 60% 60%
40% 50% 30%
70% 30%
Mean time to resolve
Overall cost
Average ramp up time for
a new hire
Attrition
Avg. hiring time
Asset productivity
No. oflearning hours per
FTE
Average utilization
Cost/ FTE
Riskcontrol and expection
management
Design approval in first
pass
No. ofPOC generated
No. ofcustomer found
defect
Lever
Revenue opportunity
No. ofproducts launched
No. ofideas submitted
No. ofexternal interaction
Operating efficiency
No. ofreusable
components
Average time to resolve
critical
Man-hour invested in re-
work
Revenue opportunity Operating efficiency Asset productivity Risk control and
expection management
20%
8
Value Metrics
definition
2
Shareholder Value Contribution
In a similar way, dashboards will also be defined and developed for each Business unit and support
function

9. 9
Shareholder Value Creation - Metrics

10. 10
Individual Centre’s Value Contribution Analysis
The articulation of value contribution can showcase the value each centre generates
Value Contribution
Assessment
3
How do we
calculate it?
Revenue Opportunity
Operating Efficiency
Asset Productivity
Risk Control and
Expectations Management
Shareholder Value Stack
Actual Value
Contribution
The actual value contribution of a center to the parent will be arrived at by adding together the contributions from
individual BUs / Support functions.=
Actual Value Contribution
Value contribution is a function of each business unit’s maturity and the target they
achieve on the identified metrics
BU Unit Value
Contribution =
BU Unit value contribution will be calculated separately for each BU and support function. It takes into account
the enterprise values of all levers, avg. salary proportion, targets achieved, maturity score.
Value contribution
Value contribution of a center to the global parent quantitatively articulates the value
generated by a center and contributed to the parent, thus, helps in driving strategic
investments for that center

11. 11
Terminologies used for value assessment
Value Contribution
Assessment
3
# Terminology Meaning/ Full form
1 h Head count ratio
2 Shareholder value
Function of Revenue, Operating efficiency, Asset productivity, Risk control and
expectation management
3 EV Enterprise value (TTM EV)
4 EV’ Enterprise value prime ( EV * h)
5 Vx ,Department Value contribution of a department within a specified centre
6 m Maturity score of the department
7 R’, O’, A’, E’ EV’ broken down by levers of Shareholder Value
8 r, o, a, e Percentage Targets achieved on each lever of Shareholder Value metrics
9 Vai Value contribution of the entire centre
10 Pd
k Proportion of average salary cost of a kth department/function
11 Dk kth department
12 Td
k Generic variable to call out targets achieved by kth department
13 Md
k Normalized maturity score of the kth department

12. 12
Key Facts
• The Shareholder Value = f(Revenue, Operating Efficiency, Asset Productivity, Risk
Control and Expectation Management)
Key ratios
• Headcount ratio (h) = Total number of people in centre ‘X’ / Total number of
employees
Centre ‘X’ Potential Value Contribution
*Note: Potential contribution on each of the lever is arrived at by distributing equally the remainder of potential enterprise value less potential revenue contribution across Operating
Efficiency, Asset Efficiency, Expectations
Centre ‘X’ Value
Contribution
(Vx)
Sum of value contribution of all Centre ‘X’
departments
(∑ Vx,Department)
=
Centre ‘X’ - Potential Enterprise Value
broken by levers of Shareholder Value
(EV’)
Global Average TTM
Enterprise Value (EV)= Headcount Ratio (h)x
Centre ‘X’ Actual Value Contribution
*
• Centre ‘X’ Value Contributions = f(average TTM enterprise value, headcount ratio,
proportion of avg. salary cost, maturity level, and target achieved on metrics)
Centre ‘X’ Dept. Value
Contribution
(Vx,Department)
=
Value Analysis
The value that a centre contributes is a function of average TTM enterprise value, headcount ratio,
maturity level, and the target achieved on metrics
Revenue Opportunity
Operating Efficiency
Asset Productivity
Risk Control and
Expectations Management
Shareholder Value Stack
Value Contribution
Assessment
3
f (EV’, Pd
k , Td
k, Md
k )

13. 13
Change in Maturity(m) gives more value
• The Value Curve equation: Vx = (Rx, metrics contribution + Ox, metrics contribution + Ax, metrics contribution + Ex, metrics contribution ) * m2
OR
• Vx = a * m2 (Keeping the targets achieved on the metrics constant)
• Instantaneous rate of change of Vx is 2*a*m
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
ActualValuecontribution(Vx)
Normalized Maturity(m)
A
B
*
*
The Value Curve
Hence at point ‘A’ the instantaneous rate of change of Vx is lesser than the instantaneous rate of change of Vx at ‘B’
1X of Cost
arbitrage
1X to 2X
2X to 4X
6X to 7X
7X to 8X
• Value contribution curve is not linear
and rises rapidly with changes in
maturity levels
• Incremental changes in maturity at
higher levels of maturity gives higher
incremental gains in value
• Hence the value curve is a parabola
Value Curve
The value contribution increases rapidly at higher levels of maturity
Value Contribution
Assessment
3

14. 14
Case Study

15. Value Analysis– Maturity Assessment, Value Metrics Identification, and
Value Contribution
15
Project Summary
In order to further leverage its India R&D centre
investment the client, who is a leading CDN service
provided undertook a review of their India center
operations and governance. The scope of the
project included analyzing the current and future
desired maturity state, value metrics and next steps
– for each function and also assessing the value
contribution of the India centre
Business Issues
The client initiated the project in order to respond to a number of business issues, including:
Increasing the value contribution of
the India centre to the Global
organization
A strategy to leverage the existing investments
in India R&D center and increase investments
in India
The current competitive market environment
which requires a more differentiated talent
strategy
Objectives
Project Objectives and Scope
• Analysis of the current and the future
desired state of various functions
• Value metrics for each function in order to
clearly demonstrate the value that the India
center generates
• Dollar contribution of India center to the
global parent
Scope
• Organization diagnostic (current and
future state)
• Strategic bold plays and
recommendations
• Value metrics and dashboard
• Valuation analysis to derive dollar
contribution
Functions in scope: Global Shared Services,
Marketing, Finance, Product Development,
Platforms (SOC/NOC), CIO/IT, HR, Customer
Care, L&D, and Emerging Customers Group
(ECG) in India Center.
Value Delivered / Estimated Benefits
1
Definition of a redefined target state for each function and a well-formulated
growth strategy
2
Improvement opportunities has been identified, prioritized with a high-level cost-
benefit analysis
3
Articulation of the impact of client India centre on and the dollar value
contribution to the global parent
4
Set of strategic bold plays have been identified and detailed out ― to be
executed in next three years and has been received well by the global
stakeholders
5
Acceleration of five bold plays ― development of expertise in product
development for IoT, consolidation of L&D org, defining organization
level agreements (OLAs), improvements in employee performance
management, and better engagement with Alumni.

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