Strategic Information Initiatives

Week 2Corporate Investment Decisions

2

Agenda

• Kinds of initiatives• The decision gauntlet• Example internal decision processes• Example budget cycle• Perspectives on spending decisions

3

Corporate Initiatives

(examples)• General business planning• Mergers and Acquisitions (M&A)• Internal policies and procedures• Organization restructuring• New products or services• Competitive analysis• Business turnaround• Systems selection / implementation• Enterprise data model

(info?)• Metrics• Finance• Metrics• Metrics• Forecasts• Markets• Models• Research• Data analysis

The Decision Gauntlet

• Internal project proposal process• Budget cycle• Funding source• Competing priorities• Competing investments• Staffing constraints• Strategic alignment• Executive sponsorship• Internal politics

4

Internal Decision Process

[example from large insurance company]

• Project Oversight Committee

• Project proposal forms and guidelines– Cost benefit analysis– ROI analysis

• Quarterly submission deadlines

• Preliminary review process

• Ongoing status report requirements5

Budget Cycle

[example from software company]

• Annual budget approval for major spending

• Quarterly budget reviews and updates

• Strategic priority override process

• Funding limits by source– R&D (tax deductable)– Operations (expenses)– Capital (expenditures)

6

7

Types of Spending Decisions

• Operations– funded by operating budget– routine decision making

• Investment– “special budget” category

• e.g.: capital, executive, planning or marketing

– optional / compete with other investments

8

Criteria for Investment Decision

• ROI• Payback• Risk levels• Tie in w/ strategy• TCO / TBO• Value added• Intangibles• Internal politics• Research (due diligence,

SWOT)

• Who is accountable / sponsor

• Training stuff....• KPIs / timeframes• Implementation plan• Long/short term

relevance• Competition (market)• Alternatives• Budget / financial plan

9

Portfolio Approach to Investments

• Investment categories– Product, service, brand development, internal

operations, partnering

• Range of benefit time-frames– Short-term, mid-term, long-term

• Range of risk levels– Low, moderate, high

• ROI (return on investment)– High, medium, low

Investment Proposal Pipeline

10

Preliminary ideas

Pre-proposal investigations

Approved/pending proposals

Approved/funded proposals

Projects in process

Projects completed

11

Evaluation & Selection

• Investment proposal pipeline

• Portfolio balancing

• Funding pool

• Funding allocation

• Option rankings

• Funding selection cut-off points

• Recurring portfolio reviews

• Incremental funding, go/no-go decisions