Clarification Workshop

HubbardDecision Research

The Applied Information Economics Company

Review

WorkshopProcessOverview

Working Concepts

Clarification Workshop



Review


Working Concepts

Clarify Cost/Benefit Model

• Purpose: Develop a comprehensive spreadsheet-based model of the costs, benefits and risks of the proposed system investment

• Approach: Use clarification methods to develop a specific cost/benefit formula

3. ConductMeasurements

3. ConductMeasurements

4. Conduct VIA

4. Conduct VIA

5. Conduct Risk & Return

Analysis

5. Conduct Risk & Return

Analysis6. Make

Recommendations

6. MakeRecommendations

1. Classify &Plan

1. Classify &Plan

2. Clarify Intangibles &

CBA

2. Clarify Intangibles &

CBA



Review


Working Concepts

Risk/Return Analysis Intangibles“Customer Satisfaction”“Strategic Alignment”“Flexibility”“Technology Risk”“Information Quality”etc......

MeasurablesErrors in Decision XChange to Strategic Measure MProductivity in Activity YCycle Time of Process ZChance of cancelation of ProjectEtc...

5% 10% 15%

10% 20% 30%

$2 mill $4 mill $6 mill

Measurements

$

$$$

$$

Value of Info.

Calculate Risk/Return Position"expected" ROI

50% 100% 150% 200% 250%-50% 0%

Probabilityof a negative ROI

Probability of a positive ROI

Organization's investment

limit

Acceptable region of investment

Return

Risk



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Working Concepts

Schedule Highlights



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Working Concepts

Workshop Schedule

• Workshop 1 –

• Workshop 2 -

• Workshop 3 -

• Workshop 4 -

• Workshop 5 –

• We will also rely on additional interviews and assignments outside of workshops to complete the objectives



Review


Working Concepts

Workshop 1 Objectives• Confirm investment objectives and approach

• Scope the decision model– Identify parts of the investment are fixed vs. optional

– Confirm the list of independent investments

– Confirm the acceptance criteria for investments (annual review, etc.)

• Identify key benefits, costs and risks

• Repeat for each investment in portfolio



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Working Concepts

Workshop 2-3 Objectives

• Clarify the Intangibles & identify key variables– Benefits– Costs– Risks

• Develop spreadsheet models



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Working Concepts

The Object of Measurement

• Objects are the costs, benefits and risks that impact the return (i.e. cash flow) for the investment analysis

• If an object seems like an immeasurable “intangible” it may just be ill-defined

?



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Working Concepts

The “Intangible” Possible Meanings After Clarification

“Employee Empowerment”

“Information Availability”

“Strategic Alignment”

• Less management overhead• Certain decisions are more accurate and faster

• Time and cost of searching is reduced• Certain costly errors are less frequent

• Stated organizational objectives (which should be measurable) are more likely to be met

Clarifying Intangibles

• Tools like “The Clarification Chain” are used to identify unit-of-measure variables hidden beneath the “intangible” label

• I offer a challenge that given any intangible, I can clarify it and identify a method of measurement within 15 minutes (I’ve never lost)



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Working Concepts

• Measurement requires unambiguous definitions

• Ambiguity and uncertainty are not the same• Ambiguity is an unclear definition• Uncertainty still exists after ambiguity is

removed• Narrowing the possible values of a quantity is

a reduction in uncertainty

Ambiguity vs. Uncertainty



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Working Concepts

The Clarification Chain

AIE assumes that if a benefit or cost is defined unambiguously, then it is measurable.

• If it is “Better” it is different in some relevant way...

• If it is relevantly different then it is observable...

• If it is observable it is observable in some amount...

• If we can detect in some amount then it is measurable.



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Working Concepts

• Imagine that you are a scientist capable of making clones of entire companies and that you have a cloned pair of your organization

• Change one of the organizations so that one has the stated “intangible” and the other does not

• Ask what would you actually observe that would be different between the two organizations

The Clarification “Thought Experiment”



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Working Concepts

Overview for Clarification• Remember that one of the

reasons things may seem to be immeasurable is that we do not understand the object of measurement

• Use unambiguous definitions (ambiguous benefits always seem to be “Intangible”)

• Use the Clarification Chain and Thought Experiment

• The output of the clarification step should be to agree on a specific spreadsheet model



Review


Working Concepts

Model Concept

Documents

Clarification Workshop