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Bush tag seminar 06 mar12

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Page 1: Bush tag seminar 06 mar12
Page 2: Bush tag seminar 06 mar12

MEASURING STRATEGY QUANTIFYING RISK AND UNCERTAINTY

“When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of science.”

-  Lord Kelvin .

2 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 3: Bush tag seminar 06 mar12

TECHNOLOGY STRATEGY FROM MY PAST

Business Case Forecast economics showed $240 MM NPV. Key issues and risks were listed, but not quantified. Decision makers were concerned about reliability.

Initial Plan •  Our company had the chance to lead the medical

diagnostics industry in using new biosensor technology for diabetic glucose monitoring.

3 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 4: Bush tag seminar 06 mar12

4 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

WHY MEASURE A STRATEGY?

Medical Device Strategic Issues § New product cost of goods § Launch timing § Design / Mkt Share capture § Recall risk / QC costs § Product support costs § Channel costs

Strategy Value ($MM) 100 200 300

Downsides range from $28 – 140 MM Upsides range from $5 – 48 MM

Page 5: Bush tag seminar 06 mar12

WHAT CONCLUSIONS WERE DRAWN?

Success would require a Quality transformation of the entire operation to mitigate the risks.

Simulation of top six benefits quantified the return: § Expected value = $165 MM for expected risk mitigation § Estimated cost of TQM/Six Sigma initiative = $12 MM

How have TQM/Six Sigma initiatives done? •  Georgia Tech’s financial analysis of industry •  34% better stock price performance than benchmark firms •  43% better operating performance measured by profit growth •  Sustainable advantage has been retained over a long term

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 5

Page 6: Bush tag seminar 06 mar12

BENEFITS OF MEASURING STRATEGIES

Clarity § Resolves ambiguous and/or conflicting values § Communicates the purpose and aims of the decision

Transparency § Based on collaborative expertise and rationale § Alignment of personal & organizational agendas § Confers understanding of uncertainty, tradeoffs, complexity, risk

Transferability § Does not rely on one individual's special insight § Promotes systemic thinking and comprehension § Builds an environment for effective collaboration

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 6

Page 7: Bush tag seminar 06 mar12

WHY IS THIS IMPORTANT TODAY?

To meet the fiduciary responsibility of officers/directors § “Duty of Care” means not taking information at face value, but being fully

informed when making decisions. § To identify risks and uncertainties that could have a material impact on

the business and taking appropriate mitigation steps

Quantifying the risks for their impact on value § Avoiding the “illustion of understanding” of qualitative methods § “What gets measured gets done.” - Drucker § “You get what you inspect, not what you expect.” - Deming

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 7

Page 8: Bush tag seminar 06 mar12

WHAT HAS BEEN DIFFICULT OR FRUSTRATING FOR YOU IN YOUR STRATEGIC DECISION PROCESS?

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 8

Page 9: Bush tag seminar 06 mar12

THE PATH TO VALUE HAS LOTS OF TRAPS

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 9

Adversarial advocacy positions

Unforeseen risks or disasters dismissed Unrecognized

opportunities Lingering doubts and uncertainties

Lack of buy-in and alignment

Lack of open inquiry

Competing impressions

Misalignment among tactics and

policies

Inappropriate reliance on intuition and speculation

Analysis paralysis

Page 10: Bush tag seminar 06 mar12

MONEYBALL (AND BRAD PITT) HAVE DONE A LOT TO POPULARIZE ANALYTICS

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 10

Page 11: Bush tag seminar 06 mar12

AVAILABLE DATA OR VALUABLE INFORMATION ?

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 11

Page 12: Bush tag seminar 06 mar12

COMPETING ON ANALYTICS – THE SCIENCE OF WINNING

Tom Davenport and Jeanne Harris

An IBM-CFO study shows that analytics-driven organizations had 33% more revenue growth, 12 times the earnings (before interest, tax, depreciation, amortization) and 32 percent more return on capital invested.

According to Tom Davenport, “Companies that invest heavily in advanced analytical capabilities outperform the S&P 500 on average by 64%”.

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 12

Page 13: Bush tag seminar 06 mar12

HISTORY HAS PROVEN THESE LESSONS WELL

Earliest recorded math table on clay tablets, perhaps used to calculate triangle dimensions for construction.

Babylonian Triples ~2000 B.C. Quipu Peruvian knot record ~1000 B.C.

Believed to be numerical record keeping system used by the Incas for keeping track of commerce.

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 13

Page 14: Bush tag seminar 06 mar12

DATA ADDS VALUE BY DRIVING DECISIONS

Chinese counting boards and abacus were essential for the Emperor’s men to assess the right amount of tax to collect.

Village Lawyer by Pieter the Younger, dated 1621 with stacks of paper records for billing clients.

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 14

Page 15: Bush tag seminar 06 mar12

COMPUTING SYSTEMS (1820 – 1950) ENABLED MORE BUSINESSES THE COMPETITIVE ADVANTAGE

Charles Xavier Thomas invented a mechanical calculator for his insurance business to assure accurate pricing based on actuarial data

First used in 1928 for vital statistics tabulation by the NYC Board of Health. It was IBM’s most profitable product for the next 50 years with mainframe computing for businesses.

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 15

Page 16: Bush tag seminar 06 mar12

PROGRAMMED COMPUTERS 1950 – 1980 BEGAN DEMOCRATIZING IT TO SMALL FIRMS

Dan Bricklin received an award from Osborne Computer for creating VisiCalc, a program that made it worthwhile to buy a personal computer.

Lyons Electronic Office (LEO) was the first programmed device to evaluate costs, prices and margins of that week's baked output at Lyons London tea shop.

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 16

Page 17: Bush tag seminar 06 mar12

ENTERPRISE SYSTEMS 1990-2000 DECADE

ERP software promises to integrate internal and external management information across an entire organization. CRM software gives business the ability to create, assign and manage requests made by customers.

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 17

Page 18: Bush tag seminar 06 mar12

WEB / CLOUD IS EVOLVING – 2010 DECADE

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 18

Page 19: Bush tag seminar 06 mar12

NEXT GEN BIG DATA IS NOW IN HYPERDRIVE

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 19

Page 20: Bush tag seminar 06 mar12

CAN WE REALLY DEAL WITH EXABYTES?

Stage 1: Analytically Impaired – Lack of

analytical skill or executive interest. Stage 2: Localized Analytics –

Uncoordinated activities or silos.

Stage 3: Analytical Aspirations – Good intentions with slow progress.

Stage 4: Analytical Companies – Widely use analytics internally.

Stage 5: Analytical Competitors – Use analytics as a competitive advantage.

Competing on Analytics – The Science of Winning by Tom Davenport and Jeanne Harris

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 20

Page 21: Bush tag seminar 06 mar12

DARK SIDE OF THE STORY - MAJORITY OF INVESTMENTS FAIL TO DELIVER

Idea Justification Single

Option

Business Case Edict or

Persuasion

Ones that Work: Improvement in understanding, participant buy-in, use of creative ideas and focus on real business results. Fr

amin

g

Crea

tive

Synt

hesi

s of

Opt

ions

Dia

log

(inte

rnal

exp

erts

) or

Pilo

t

Colla

bora

tive

Part

icip

atio

n

Four Key Phases of Projects 127 cases studied in North America

(by Paul Nutt, Ph.D., Ohio State University)

Implementation Evaluation Exploration Set Direction

% S

ucce

ssfu

l Afte

r 2 Y

ears

0%

100%

50%

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 21

Page 22: Bush tag seminar 06 mar12

A QUICK EXAMPLE – AIRLINE FUEL DATA

Jet fuel costs - $2.1 billion per year Fuel Management system proposed to integrate all fuel data, improve data integrity and functionality. •  Project cost - $4.5 million

Tangible savings (could put in the budget) •  back office cost reduction and simplification of IT systems

Intangible benefits – (could not guarantee exact value) •  reporting accuracy for fuel taxes, •  inventory and fleet fuel burn per day, •  fewer errors, optimized inventories, etc.

Business case – not approved due to negative ROI

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 22

Page 23: Bush tag seminar 06 mar12

QUANTIFYING THE INTANGIBLES

Quantifying uncertainties: •  How big a price differential is there typically? – 0.5 to 1.5¢/gal •  How many fueling events are there per day? – 3200 to 3500 •  How many gallons per event – thousands •  How often has the lowest price been missed? – 30% to 60% Benefit range $5-25 million per year Pr

obab

ility

$5 M $25 M

What decisions could real-time data significantly improve? •  Selection of fueler with lowest spot cost. •  Tankering of fuel – where to fuel at low cost & tax airports

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 23

Page 24: Bush tag seminar 06 mar12

HOW TO MEASURE INTANGIBLES

Do we understand what we trying to measure? •  Value of making decisions with better information What does measurement really mean? •  Not a precise forecast, but quantifying what we know How can we find ways to make the measurement? •  Ask questions, find analogies or scenarios, etc.

Summarized from Douglas W. Hubbard - “How to Measure Anything: Finding the Value of Intangibles in Business”

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 24

Page 25: Bush tag seminar 06 mar12

Major oil company approved a capital spending project of $100 million for a new global ERP system. After starting with a positive NPV, the business case was tweaked to a point where it became a whopping…

Case Study – ERP System

25 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 26: Bush tag seminar 06 mar12

MUCH HAND WRINGING ENSUED…

How can we justify the $$$? What should we do?

-------

Maybe we should cut out all of that training cost and

reduce development costs.

Would this push the project NPV back into the black?

26 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 27: Bush tag seminar 06 mar12

WHAT WENT WRONG?

•  Poor problem framing

•  Irrelevant sensitivity analysis

•  Inappropriate accounting of value

27 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 28: Bush tag seminar 06 mar12

UNDERLYING BEHAVIORS AND TRADITIONS CAN OBSTRUCT THE CREATION OF VALUE

•  Rather than quantifying the “intangible” value and risk, teams allow technical arguments and cost substitution issues to become the basis for investment decisions

•  Decisions are made by negotiation or power-plays rather than focusing on expected value or fit with the strategy

•  Bad ventures frequently persist for too long, wasting time and resources that could be used on better projects.

•  The key to understanding and making informed decisions… is quantifying the value of the intangibles!

28 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 29: Bush tag seminar 06 mar12

QUANTIFYING THE UNCERTAINTIES REVEALED THE CRITICAL COST DRIVERS

simple business case value = $0

User adoption

System reliability

Data integrity

NPV $million

29 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Training

informed business case value = $80

Development Cost

Critical cost drivers

Important but not critical cost drivers

Page 30: Bush tag seminar 06 mar12

BY INVESTING MORE - THE TEAM MITIGATED THE USER ADOPTION RISK AND ASSURED THE UPSIDE VALUE OF DATA INTEGRITY AND RELIABILITY

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

1

$80

NPV $ (millions)

Cum

ulat

ive

Prob

abili

ty

Original strategy NPV range

$380

Hybrid strategy NPV range

30 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 31: Bush tag seminar 06 mar12

EACH STAGE RESOLVES KEY QUESTIONS BEFORE MAKING A FINANCIAL COMMITMENT

ü What is the real situation?

ü What is the opportunity?

ü What are our goals and objectives?

Discovery ü What are the decision

boundaries and open decisions?

ü What are the sources of uncertainty?

ü Can we develop an 80% confidence range for the uncertainties?

ü Is the information worth the time and cost of analysis?

Framing ü What are the effects

of uncertainties on solution goals?

ü What is the difference in value among the alternatives?

ü How much risk do we face with each alternative?

ü What insights can we create for contingency plans or options?

Evaluation ü Which path best

meets our objectives?

ü How much should we spend to control uncertainties?

ü What are the keys to implementation?

ü What resources will we need for implementation?

ü What contingent actions should we take?

Agreement

31 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 32: Bush tag seminar 06 mar12

Means

Contributing

Fundamental

FOCUSING ON THE OBJECTIVES IS MORE PRODUCTIVE THAN ARGUING ABOUT TACTICS

Maximize Stakeholder

Value

Capital Costs

Operational Costs

Service Execution Excellence

System Arch. HW SW System

Overhead Service

Reliability Appropriate

Tools Data

Integrity System

Complexity

32 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Discovery Phase

Page 33: Bush tag seminar 06 mar12

DECISION HIERARCHY FORCES EXPLICIT AGREEMENT ON SCOPE AND FOCUS

Policy (givens, boundaries) Decisions already made, foregone

Strategic (focus, open options) Decisions categories with sub-options to be considered now

Tactical (execution dependent) Decisions to be made later, deferred

Team Focus for Analysis

•  Generate a wide array of creative, doable alternatives that are consistent with objectives

•  Create alternatives as a coherent set of actions, usually one option from each decision category

•  Alternatives should represent strategically different themes versus the full combination of all options

•  Sets the stage to consider opportunity costs thoroughly

33 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Framing Phase

Page 34: Bush tag seminar 06 mar12

CLARIFYING UNCERTAINTIES AND LOGIC HELPS FRAME THE EVALUATION MODEL

•  Captures the essence of the problem and facilitates the dialog between the team members

•  Becomes a well defined model of the situation, containing all the necessary and relevant information needed to assess the situation

•  Used as a means to communicate the shared knowledge of the team to the organization

34 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Framing Phase

Page 35: Bush tag seminar 06 mar12

QUANTIFYING 80% CONFIDENCE INTERVALS HELPS AVOID ASSUMPTION “BLIND SPOTS”

We recognize assumptions are really uncertainties

$ NPV

Prob

abili

ty

$0

We observe results as distributions

Simulation Engine!

Uncertainty

Uncertainty

Uncertainty

Uncertainty

Uncertainty

Objective

35 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Evaluation Phase

Page 36: Bush tag seminar 06 mar12

HOW EASY DO YOU THINK IT IS TO ASSESS A 10/50/90 RANGE OF POTENTIAL OUTCOMES?

.10! .50! .90!

80% confidence interval

p10 - 90% confident the outcome will be higher than this p90 - 90% confident the outcome will be lower than this p50 - equal likelihood the outcome could be higher or lower than this

36 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 37: Bush tag seminar 06 mar12

EXERCISE - WHAT IS YOUR 80% CONFIDENCE INTERVAL FOR THESE UNCERTAINTIES?

p10 p50 p90 1.  The number of revenue passengers

enplaned on U.S. airlines in 2007?

2.  The year that the the world’s first pure food and drink law got passed?

3.  The year Attila the Hun died?

4.  Annual U.S. egg production in 2008? 5.  Elevation of the highest point in Texas?

37 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 38: Bush tag seminar 06 mar12

38 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

We are trained to provide “the answer”. Uncertainty makes us restless, whereas we are comfortable

and content with the appearance of certainty Planning is much easier if we suppress uncertainty Suppressing uncertainty is dangerous in business! § we are surprised and unprepared to deal with the situation

Explicit treatment of uncertainty in planning: §  improves communication of difficult issues, reducing surprises § encourages contingency planning § creates insight into potential upside potential

CULTURAL PRESSURE FOR CERTAINTY

Page 39: Bush tag seminar 06 mar12

THE RIGHT EXPERT CAN EXPLORE CAUSES OF UNCERTAINTY AND AVOID SURPRISES

Traditional Analysis (Forecaster) § Make assumptions to get to a forecast § Focus on what has to go right for success,

often blinding us to what could go wrong

Uncertainty Analysis (Desired Expert) § Explore the factors that create extreme

outcomes or contribute to uncertainty § Understand what could go wrong and what

the upside and downside may be § Develop a range of possible outcomes

39 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 40: Bush tag seminar 06 mar12

1.40 1.60 1.80 2.00 2.20 2.40 2.60

Product price, $/gal

p50 value $2/Gal What will be the

average price of gasoline over the next 5 years?

-10% +10%

40 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

P50 ± 10% ANCHORS ON THE ESTIMATE CREATING AN ILLUSION OF THE UNCERTAINTY

Page 41: Bush tag seminar 06 mar12

Product price, $/gal

Initial p50 value

$2/gal

-10% +10%

Range p10 p50 p90

Anchored 1.80 2.00 2.20

Calibrated 1.00 2.40 3.15

Ranged p50 value $2.40/gal

Range -58% +31%

0.50 1.00 1.50 2.00 2.50 3.00 3.50

41 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

AN 80% CONFIDENCE RANGE EXPLORES A MUCH MORE ROBUST VIEW OF REALITY

Page 42: Bush tag seminar 06 mar12

MONTE CARLO SIMULATION REVEALS THE VARIATION IN VALUE CAUSED BY UNCERTAINTY

•  Demonstrates the aggregate effect of all the uncertainties by both their impact & prevalence

•  Shows the probability of important intervals and the opportunity for optimization

•  Shows if one decision dominates another

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

1

Cum

ulat

ive

Prob

abili

ty

Low High Value Metric

A B C

42 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 43: Bush tag seminar 06 mar12

SENSITIVITY ANALYSIS - WHAT REALLY MATTERS AND WHAT TO STOP ANALYZING

Value Measure of Primary Objective

Critical Value

Drivers

Minor Value

Drivers

0

Effect of Uncertaintyi on Value Measure

43 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 44: Bush tag seminar 06 mar12

ASKING “WHAT IF” QUESTIONS CAN CREATE TREMENDOUS VALUE IN A DECISION

Value of Information What if we had better information? What would it tell us? How much should we pay for it? Value of Control What if we more had leverage over critical uncertainties? What might we do? How much should we pay for it?

44 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 45: Bush tag seminar 06 mar12

“WHAT IF” WE COULD REDUCE THE RISK WHILE CAPTURING THE UPSIDE?

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

1

Cum

ulat

ive

Prob

abili

ty

A B

Hybrid

Hybrid Strategy

�  Limits downside to A

�  Captures potential of B

45 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Low High Value Metric

Page 46: Bush tag seminar 06 mar12

Policy

Strategic

Tactical

What decisions & creative strategies to consider?

Cost Revenue

NPV

What outcomes are we targeting?

Discovery and Framing

Do we understand the situation and our strategic question?

DECISION ANALYSIS PROCESS FLOW

46 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

How to gain insights from the uncertainty to maximize value?

Strategy, NPV, M$

$100 $150 $200 $250 $300 $350 $400 $450 $500 $550 $600

Uncertainty One

LowHigh

Base Value: $360

Uncertainty Two

Uncertainty Three

Uncertainty Four

Uncertainty Five

Uncertainty Six

Uncertainty Seven

Uncertainty Eight

Uncertainty Nine

Uncertainty Ten

Strategy, NPV, M$

$100 $150 $200 $250 $300 $350 $400 $450 $500 $550 $600

Uncertainty One

LowHigh

Base Value: $360

Uncertainty Two

Uncertainty Three

Uncertainty Four

Uncertainty Five

Uncertainty Six

Uncertainty Seven

Uncertainty Eight

Uncertainty Nine

Uncertainty Ten

$ How to realize the value through effective

implementation? What are the ranges of uncertainty and risk?

Quantifying Insights

Page 47: Bush tag seminar 06 mar12

AUDITS HAVE SHOWN MAJOR BENEFITS OF DA OVER TRADITIONAL METHODS

Opportunity Identification

Alternatives Evaluation

Transformation Roadmap

Implementation and Change

Measurement & Optimization

Value promised in the business case

Audited results: 80% do not achieve their business case number

Eco

nom

ic V

alue

Value of focusing on the right problem

Value of framing & quantifying alternatives

Value realization from alignment and effective execution

ROI increases from measurement and continuous improvement

47 USED BY PERMISSION OF CHEVRON CORPORATION

Page 48: Bush tag seminar 06 mar12

IT FEELS LIKE MORE TIME UPFRONT, BUT A BETTER DECISION IS IMPLEMENTED SOONER

Traditional Decision Making

Def

initi

on

Solution Development

Recycle

Decision Making

time

Re-visit Decision

Quantitative Decision Analysis

Definition Create Options

Dec

isio

n M

akin

g Save time & energy, create confidence.

48 © 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED

Page 49: Bush tag seminar 06 mar12

QUESTIONS?

Gerald A. Bush, Ph.D. Tel: (678) 641-6254 Email: [email protected]

Robert D. Brown III Tel: (678) 947-5997 Email: [email protected]

© 2012 COPYRIGHT ROBERT D. BROWN III AND GERALD A. BUSH - ALL RIGHTS RESERVED 49

Page 50: Bush tag seminar 06 mar12

SELECTED READINGS

“Value Focused Thinking: A Path to Creative Decision-making” by Ralph L. Keeney “How to Measure Anything: Finding the Value of Intangibles in Business” by Doug Hubbard “Smart Choices: A Practical Guide to Making Better Decisions” by John Hammond, Ralph Keeney and Howard Raiffa “Why Can't You Just Give Me The Number? by Patrick E. Leach “Decision Traps” by Edward Russo and Paul Shoemaker “Against the Gods: The Remarkable Story of Risk” by Peter L. Bernstein


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