David Matheson - SmartOrg, Inc.

Decision Advisor v7.1 - Terry Chinn

In our years supplying software to the value management community, we often find users in, roughly, two different camps.  In one camp, there are those who want to create a business case to evaluate a business opportunity for upper management.  In the other camp are the artisans, the analysts, the purists who want to know more about the intricacies of the key drivers to maximize the value of an opportunity.

Our recent release of Decision Advisor v7.1 has some key new features that each type of user may find interesting.  For this first 'nuts and bolts' level of analysis, you use components of the value map to describe the characteristics unique to the business opportunity.  From there, the software creates an Excel spreadsheet that displays the cash flows, revenue, cost, etc. and ultimately the NPV of the opportunity. The software will then perform a sensitivity analysis producing a tornado chart to show you the variables that most affect value. Finally, you can create "S-curves" showing the risk and potential return of your opportunity.

To some, this is the right amount of analysis. Some refinement of numbers and they are good to go.

For the other camp, we have added some features with a simple graphical user interface to answer questions like "What's it worth to spend more money on marketing?" or "If we could improve X, would we do anything different?" To answer these questions we have enhanced the software to gain insight into these questions. From the value map, you create an Influence diagram that is a fully specified probabilistic model.  From there you can use Value of Perfect Information and Control, Sensitivity to a Probability, and the Decision Tree to determine how you can maximize the value of your opportunity.  These analyses will give you insight into how value changes as a variable changes within its range of uncertainty.

At SmartOrg, one of our challenges is to provide valuable, easy to use software tools to enable business professional to evaluate complex business prospects and provide transparency into the "black box" nature of many business models. Decision Advisor v7.1 is the big step in this direction.

A Rose by Any Other Name - Don Creswell

With apologies to Bill Shakespeare (a rose by another other name) and to Gertrude Stein (a rose is a rose is a rose), I address the dual and  confusing terms Product Management and Portfolio Management (PPM). There must be a better way to differentiate management of day-to-day activities involved in PPM as opposed to higher level management activities devoted to forecasting and managing economic value produced by new and revised products, R&D projects and other business opportunities. It is obvious that successful companies must accomplish both but it is most difficult to reorient the thinking of people who are rewarded for producing results measured in terms of days, weeks and months, units of output, etc., towards thinking about the economic value that can (should) be derived from investments in research, development and other activities. I submit that we might change terminology to more clearly reflect this dual management roles. Let PPM stand for getting products/projects "out the door" on time, within budget;, meeting quality standards, and so on. What some term "operational" activities. Then, add one little letter - a "V" - to PPM, producing PPVM or Product Portfolio Value Management; making decisions based on optimizing economic return.

PPVM answers questions like, "what things SHOULD we be working on to give us the highest possible economic return for our investment of human and capital resources." Then, manage operations based on traditional metrics (accounting measures, cost, etc.) and in parallel manage economic value based on NPV that reflects the impact of risk and uncertainty. Track both measures in parallel as time unfolds, making sure that the "value meter" continues to rise. PPVM should be on the radar of all managers, not just those "upstairs."  All important stakeholders - managers and doers - should understand where the value comes from in each of their projects (products), the key value drivers, and where to place their efforts to make value creation as deep a mind set as meeting daily/weekly/monthly milestones.