Using SimVision for Organization Development. 5. Case Studies & Exercise

Transcription

1 Using SimVision for Organization Development 5. Case Studies & Exercise

2 Contents Introduction to the Case Studies and Exercise Case Study 1: Capital Projects Improving Performance Scenario Goal of the Exercise Existing Data The Extrapolated SimVision Model Examining the Model Intervention: Deferring Two Projects Deferring the Projects Examining the Effect of Deferring the Projects Assessing the Risk of Adding a New Project Adding the New Project Assessing the Impact of the New Project Case Study 2: Landmark Healthcare Increasing ROI Scenario Goal of the Exercise Examining the Model Examining Project Goals and Performance Intervention: Staff up the Sales Team Adding an FTE to the Sales Team Assessing the Impact of the New Headcount Intervention: Engineer the Sales Organization for Success Reengineering the Sales Organization Assessing the Impact of Reengineering the Sales Organization Case Study 3: Landmark Healthcare Business Case Analysis Scenario Goal of the Exercise Examining the Model Growth Strategy 1: Partnership Examining the Partnership Project Model Assessing the Impact of the Partnership Growth Strategy 2: Partnership + Merger Examining the Partnership + Merger Model Assessing the Impact of the Partnership + Merger Strategy Growth Strategy 3: Acquisition Examining the Acquisition Model Assessing the Impact of the Acquisition Exercise: Pharma Corp Biotech Plant Scenario Examining the Model Goal of the Exercise What To Do Acceptable Interventions Unacceptable Interventions Helpful Hints Pharma Corp Project Worksheet

3 Introduction to the Case Studies and Exercise In this final class, you work on three case studies where you examine real-world models and create suggested alternative scenarios to meet program objectives. You then complete an exercise where you have to come up with a scenario that will meet the objectives, staying within a set of given parameters. Case Study 1: Capital Projects Improving Performance Scenario The client, Capital Projects, is a division of an international integrated circuit manufacturer that develops embedded software, such as drivers and utilities, for integrated circuits. Even though the company designs and sells hardware, over half their R&D expenditures are for the software that runs the chips. The software development group has a history of missed deadlines. Delays in product releases have cost the company millions of dollars in lost revenue. Hardware product managers the software group s customers are frustrated because their products are chronically late to market and miss revenue and ROI objectives. Goal of the Exercise The goal of the SimVision application is to improve the software group s on-time performance and increase the division s revenues; also to assess the impact of adding a new project. Existing Data The manager s planning tool a simple spreadsheet does not inform his decisions, it simply tracks manpower requested and assigned, and where resources fall short. As a result, neither he nor his customers can predict whether staffing decisions help or harm the Division overall. BIOS Doberman REQUESTED ASSIGNED DELTA Todd Martin Marc Steve Frank John Contractor #1 Contractor #2 Airdale REQUESTED ASSIGNED DELTA Todd 0.25 Martin Marc Steve Frank John Contractor #1 Contractor #2 customer requests resources Husky REQUESTED ASSIGNED DELTA Todd Martin Marc Steve Frank John Contractor #1 Contractor #2 5-3

4 The Extrapolated SimVision Model You have derived a SimVision model from this spreadsheet with a portfolio of seven projects that looks something like this: all projects draw from one resource pool typical project 5-4

5 The simulated baseline predicts more delays and revenue shortfalls. The Poodle project, for example, is predicted to finish four months later than planned: The delays in product releases also lead to lost revenue: Cost Revenue Next, you will drill down into the root causes of the delays and suggest some changes to help increase revenue and bring products out in a more timely manner. First, let s examine the model in more detail. Examining the Model 1. Open the model SimVision Course Models\Capital Projects.vpm. 2. Run a simulation of the Baseline case. 5-5

6 3. Take a look at the project durations on the Program Gantt chart. The last two projects, Malinois and Husky, are on the critical path. 4. Look at backlog across the entire portfolio by examining the program s Person Backlog chart. Two key engineering groups are seriously backlogged: The Core Divers by more than 180 days at one point in December 2006, and the BIOS Engineers by up to 150 days. 5. Look at resource demand by viewing the Program Resource chart and selecting Demand from the Utilization list above the chart. 5-6

7 You can see that the program is very front-loaded, with heavy resource demand in the early phase as hardware product managers demand early starts in the hope of avoiding past schedule slips. So to summarize, the problems you have identified in the model are: Projects running up to four months over planned schedule. Revenues lost due to delayed projects. Severe backlog for two engineering teams. Front loading of resource demand. Intervention: Deferring Two Projects Although it s counterintuitive, the software group can achieve remarkably better business performance by deferring the start of two projects. You can see the effect in broad brush strokes in the revenue stream when the Husky and Malinois projects are deferred by six and two months, respectively. 5-7

8 Revenue begins to be generated much earlier and increases at a much faster rate. Let s make the changes in the model and examine the results in detail. Deferring the Projects 1. Create a new case based on the Baseline by clicking New Case on the Model menu. 2. Name the new case Deferred Projects. 3. On the Program page of the new case, select the Successor link linking the program s Start milestone and the Husky project. 4. In the Properties pane, change the Lag property to 6 months. 5. Change the Lag property of the Malinois project s Successor link to 2 months. 6. Move the projects and add text and red lines as shown, using the Line and Text tools on the Annotations toolbar. 5-8

9 7. Run a simulation on the Deferred Projects case. Examining the Effect of Deferring the Projects You now examine the effects of deferring the two projects, comparing the project end dates for the Baseline and Deferred Project cases, and looking at person backlog for both cases. 1. On the Program Gantt chart, observe where the project end dates are predicted for the Deferred Projects case. 2. From the Compare list at the top of the Chart Window (where it says None by default), select Baseline to compare the two cases. SimVision simulates the Baseline case, and displays the project durations for that case in hatched bars. Every project in the portfolio is accelerated, even the two whose starts were deferred. 3. Look at the Program Person Backlog chart and compare the Deferred Projects case with the Baseline case. 4. Select Top 2 from the Filter list above the chart (where it says Top 5 by default). You can see that the Core Drivers and BIOS Engineers backlog has been cut by 50-60% in the Deferred Projects case. 5-9

10 5. Look at the Program Finances chart and compare the two cases. You can see that some products reach the market and start to generate revenue much sooner once the two projects are deferred in mid-april 2007 rather than mid-august. Revenue After 5-10

11 Assessing the Risk of Adding a New Project The client wants to see the predicted impact of adding a new project that would start three months after the bulk of the projects. To assess this risk, you first add the new project in a new case of the model, then run a simulation and assess the impact. Adding the New Project 1. Create a new case of the model and name it Samoyed Opportunity. 2. On the program page, right-click the Airdale project, copy it, and paste it to a new project that you rename Samoyed. 3. Add Project Successor links from the Start milestone and to the Finish milestone. 4. Right-click the new project and click Properties to give it a solid blue foreground color. 5. Add the New Opportunity text and 3 months text and the line to indicate the lag in the start of the project. 6. Set the lag on the project s Successor link to 3 months. 7. If you wish, you can rename all the tasks and positions on the project s page from Airdale to Samoyed. 8. Run a simulation. Assessing the Impact of the New Project Take a look at the impact on the entire portfolio first. The program s Gantt chart shows project durations before and after the project was added. (Compare the new case to the Deferred Projects case.) 5-11

12 After Before All the projects suffer delays when the new project is added. Now have a look at the financial impact on the portfolio. The program s Finance chart shows how sharply revenues fall. Before After 5-12

13 Disruption caused by pursuing the new opportunity negates its revenue potential, and reduces the entire portfolio s ROI. You can drill down to the individual projects and see the lost revenues and increased duration and risks at a more granular level. For example, take a look at the Project Summary Statistics chart for the Malinois project and make the comparison with the Deferred Projects case. Increased duration Lost revenue 5-13

14 Case Study 2: Landmark Healthcare Increasing ROI Scenario The client is a health care benefits reimbursement company. Their primary areas of responsibility are provider network contracting, product development, marketing and sales, and benefits and claims administration. They want to develop some new products and services. However, their revenue growth and ROI are falling far short of targets and they must increase their profits before they can focus on new products. Goal of the Exercise The purpose of the SimVision modeling is to examine the product development project for ROI and risk, and suggest any improvements in the organization that would lead to greater profits and reduced risk. During the modeling exercise, you will: Examine the current scenario for ROI and risk. Take a look at the project goals regarding schedule, cost, revenue, and risk. Suggest a change in headcount to increase profits and reduce backlog. Allocate resources to maximize likely return on investment. Examining the Model 1. Open the model SimVision Course Models\LMHC Product Development.vpm. There s just a Baseline case with a single project: planned start date 6/13/ Take a look at the project page. The project shows three phases to the product development drive, with the Sales team by far the busiest of the six responsible teams. 5-14

15 3. Run a simulation. 4. Take a look at the program s Finances chart. Revenue growth and ROI fall far short of targets. 5-15

16 5. Now check backlog for the various teams. Because the program is not staffed (that is, there are no persons identified for the aggregate teams), the program s Person Backlog chart is blank. Instead, check the project s Position Backlog chart. 6. The Sales team is seriously backlogged with over 50 days of backlog during some phases of the project. This indicates the team is under-staffed, and your first intervention should focus on staffing up the team. Examining Project Goals and Performance SimVision s Executive Dashboard allows you to examine project goals and whether the project is predicted to meet these goals. Access the Executive Dashboard by clicking its icon on the Results toolbar: The Case Filter dialog box appears, in which you can choose which cases to view and whether to simulate cases for which there isn t yet simulation data. Since the model only has one case so far, click OK in this dialog box. The Executive Dashboard appears. 5-16

17 Notice how none of the goals have been met in this case except quality risk, which shows up as green because the highest quality risk identified during the project is slightly lower than the goal. Otherwise: Completion date: The project is predicted to run almost a year over schedule. Revenue: The project is predicted to pull in only about 70% of target revenues. Cost: The project runs slightly over target costs. Peak Backlog on Critical Path: The number of days of peak backlog for positions whose tasks are on the critical path is nearly twice the target. Intervention: Staff up the Sales Team Typically, Management would react by approving a headcount increase after the problem becomes acute. To see how this strategy compares with a more proactive approach, you ll now model the additional headcount on the Sales team. Adding an FTE to the Sales Team 1. Create a new case and call it Add Headcount. 2. On the project page of the new case, select the Sales position. 3. In the Properties pane, change the FTE value of this position from 3 to Run a simulation. Assessing the Impact of the New Headcount 1. Check the Sales team backlog now. 2. The extra resources have allowed the sales team to function better and backlog is greatly reduced, even though it is still significant. 3. Now look at the program s Finance chart, comparing the new case to the baseline to see how the improved sales have affected revenue. 5-17

18 After Before 4. Revenues are definitely increased. 5. Look at the Executive Dashboard to see if the new headcount helps the project to meet its goals. There s still a lot of red. The only area where the extra headcount has helped is in reducing the Sales team s backlog so that the peak backlog no longer exceeds the 30- day goal. The risk in this reactive approach lies in how long it takes management to identify the problem and act by adding the manpower. We can use SimVision to anticipate the bottleneck and proactively intervene before the team falters. The next intervention models the more proactive solution. Intervention: Engineer the Sales Organization for Success The suggested business strategy in this scenario, rather than throwing headcount at the problem, will be to: Recruit an industry expert with a big Rolodex and strong leadership skills. Hire her before the sales process gets bogged down. 5-18

19 Focus her on opening new accounts, directing the sales program, and mentoring junior staff. In SimVision, the process for executing this reengineering of the sales organization is: Add a Sales Manager position in a team leader role who reports directly to the Project Leader and supervises the sales team. Reassign strategic sales responsibilities to this managerial position. Reengineering the Sales Organization 1. Create a new case and call it Engineer the Org. 2. On the Project page, add a new position as shown, with Supervisor links from the Project Leader to the new Sales Manager and from the Sales Manager to the Sales team. Note: Meeting Participant and Successor links are turned off in the model for clarity. You can do this by clicking Layers on the View menu. 3. Select the new Sales Manager position and give it the following properties: Role=SL (subteam leader) Application Experience=High (modeling the Rolodex!) FTE=1 Salary=75 4. Turn Meeting Participant and Successor links back on in the Layers dialog box. 5. Reassign strategic sales responsibilities by moving the following tasks Primary Assignment links from the Sales position to the Sales Manager position: Design Carve Out Sales Strategy Design New Sales Strategies Design PT Sales Strategy and Pro 6. Run a simulation. Assessing the Impact of Reengineering the Sales Organization 1. Look at the program s Finance chart and compare the proactive to the reactive approach. 5-19

20 proactively engineering the organization simply adding headcount after trouble starts costs are about the same in both scenarios 2. Take a look at all three cases in the Executive Dashboard to measure the impact of the reengineering approach against program goals. Now all goals have been met. Revenue is up $120,000, costs have been reduced by $40,000, and the project finishes on time and with acceptable risk. 5-20

21 Case Study 3: Landmark Healthcare Business Case Analysis Scenario Landmark Healthcare capitalized on their improved sales revenues and met their goal to enter new geographic and product markets by developing DSMs and some other high-value services such as health coaching. However, this venture failed to meet revenue targets. They are now planning an aggressive and risky growth strategy that involves seeking joint ventures and alliances, and they want a robust and compelling business case to attract new investors. There are three hypothetical strategies on the table: a partnership, a merger, and an acquisition. The strategies are incremental, as follows: Partnership: Negotiate a nonspecific partnership that produces an incremental revenue. This scenario is easy to structure, negotiate, and integrate, but there is some question as to whether revenues will hit targets. Merger: Negotiate a merger with a Low Back DSM company in addition to the partnership. This option is more difficult to structure, negotiate, and integrate and requires a cash investment upon closing the deal. The resulting new revenue stream would become part of the LB-DSM project. Acquisition: Attempt to acquire another firm in addition to the merger and the partnership deals already complete. This deal proceeds through structuring and negotiation, but ultimately fails and incurs a break-up fee. Goal of the Exercise The goal of the SimVision exercise is to compare the costs, risks, and benefits of the three execution strategies for Landmark s strategic growth program. Examining the Model Open the model \CS3 LMHC Growth Strategies and click the Add DSM tab below the model pane. When Landmark began to develop DSMs and services, the SimVision model reflected this with a new project: Landmark upped their revenue goals with their entry into new markets, but the DSMs project failed to reach revenue targets, as the Executive Dashboard shows: 5-21

22 new revenue goal of $2.5m DSM project fails to meet revenue goal and runs over targeted costs Click the tab for the Add Partnership case. On the program page of this case, you can see that the growth strategies project has been added: In the following sections, you examine the modeling of each of the three growth strategies in detail and assess the costs, risks, and benefits of each in turn. Growth Strategy 1: Partnership The partnership is the easiest option with the lowest risk. The question here is whether revenue targets will be met. Examining the Partnership Project Model First, examine the model of this strategy within the project. 5-22

23 Examine the following: The tasks each team is responsible for. The rework and communications dependencies modeled. The role of the Partner. Now look at how the other two strategies are initially modeled: Examine the following: How tasks are ordered and assigned The dependencies modeled The time span. 5-23

24 Assessing the Impact of the Partnership Run a simulation of the Add Partnership case. Let s look at the revenue stream for the entire program once the partnership scenario is modeled: revenues struggle to exceed costs If you look at how the partnership strategy matches the program goals in the Executive Dashboard, you can see that revenue falls about $1,5m short of targets: target is $4,000,000 revenue is only $2,454,000 You can see this graphically on the Program Performance tab of the Dashboard: 5-24

25 shortfall in revenue All other program goals are met, and revenues have increased by about $300,000 since the DSM project, but it s clear that the partnership alone is not a viable strategy for the company to thrive. Growth Strategy 2: Partnership + Merger Remember that the merger option is more difficult to structure, negotiate, and integrate and requires a cash investment on deal closure. You will see this investment as a spike in costs. The question here is whether the risk pays off. Examining the Partnership + Merger Model Take a look at the Partner + L-B Merger case. On the Mergers, Acquisitions, Partnerships project tab, you ll see that the merger s cash investment is now modeled as a milestone with a fixed cost attached. 5-25

26 The milestone for the merger deal is followed by a year-long task to integrate the merger, after which the merger should begin to produce revenue. Notice that the Ready for Revenue 2 milestone has a 4-month lag attached. Assessing the Impact of the Partnership + Merger Strategy Run a simulation on the Partner + L-B Merger case and take a look at program finances in comparison to the partner-only strategy. revenues much greater than partnership case alone investment starts to pay off cash investment in merger partner only integration period After a period of adjustment for the new partners following the merger, the spike in costs representing the cash investment is absorbed and the increase in revenues for the program is dramatic. Take a look at the Executive Dashboard to see whether program revenue goals have been met by the Partnership + Merger strategy. all program goals have been met 5-26

27 The green status of the Partner + L-B Merger case indicates that all program goals have been met. Revenue is nearly $900k over target and costs remain just within the limits. Viewed graphically, you can see how revenue grew with this strategy: revenues are 120% of target Growth Strategy 3: Acquisition The third growth strategy under consideration is an acquisition. In this scenario, the acquisition proceeds through structuring and negotiations, but ultimately fails, incurring a break up fee of $500,000. The failed acquisition is an obvious setback but, as we ll see in the simulation data, not a fatal one for the company. The goal of this modeling is to compare revenues following the damage of the failed acquisition to those from the partnership + merger strategy. Examining the Acquisition Model Let s look at how the acquisition is modeled. The Complete 3 milestone has been renamed Failed 3, with an associated fixed cost of $500,000 representing the break up fee. 5-27

28 Now run a simulation and see how whether the penalty incurred by the failed acquisition prevents revenues from meeting their target. Assessing the Impact of the Acquisition On the Program Finance chart, compare the Failed Acquisition case to the Partner + L-B Merger case. break up fee The failed acquisition is an obvious setback to the program s financial performance. However, notice that revenues are almost identical to the Partner + Merger strategy s. If you look at program performance for the Failed Acquisition case, you ll see that only the Cost goal has not been met. 5-28

29 only cost goal is red Depicted graphically, the three strategies compare as follows: Partnership alone strategy falls well short on revenue Partnership + Merger strategy meets all goals Failed Acquisition strategy s costs are too high 5-29

30 Exercise: Pharma Corp Biotech Plant In this self-paced exercise, you work with a model supplied with the class, with the goal of reducing the project schedule to match a required end date. Scenario You have been brought in as a consultant to Pharma Corp, the owner of a fast-track Biotech plant project. This plant will produce a blockbuster new arthritis drug that just cleared its Phase III FDA approval. Competitors are rushing similar drugs to market and the remaining time on Pharma s patent is fast expiring, so time is of the essence. To meet Pharma s aggressive marketing goals, the plant must be ready to excavate and break ground by the first week in December. Examining the Model Launch SimVision and click File > Open Workspace. Open the model SimVision Course Models\PharmaCorp.vpm. The project model shows the pre-construction tasks for this plant, culminating in the milestone Ready to Excavate. You will use SimVision to simulate this baseline case and generate the initial predictions about schedule and quality risks for the planned work process and organization. Goal of the Exercise Your goal is to find a way to redesign the organization so that the team can complete the Design Build Biotech Project pre-construction tasks, and be ready to excavate by the end of the first week in December. What To Do 1. Run a simulation of the Baseline case. Use the worksheet on page 33 to record the schedule and quality predictions for this case. 2. Employ any of the acceptable interventions listed next to try and accelerate the project. Remember to use a new case for each intervention. Use the worksheet to record the change that you make in each case and the results of that change. While shortening the project duration, you need to ensure that you also maintain acceptable quality risk, i.e., no task may have a communication, project or functional risk index above 0.5. Remember to use the online help (accessible through the SimVision Help menu) if necessary as you try to optimize this model. 3. Generate a printout of your simulation results using SimVision s Executive Dashboard. 4. Answer the following questions about your experience: Which interventions were the most successful? Which charts did you use most often and why? Which tasks or positions in the model were responsible for the majority of the duration or quality risk? Acceptable Interventions Add a total of up to 3 FTE s in increments of not less than 0.5 FTE to any combination of positions. Increase the skill level (from low to medium, or medium to high) for any one skill for any one position. 5-30

31 Change levels of Centralization, Formalization, or Matrix Strength (access these by clicking in the project model view background, and then unlock and modify the values for these organizational properties shown in the Properties pane.) Reassign tasks to different positions or change the allocation percentage with which a position is allocated to a task (by changing the Allocation property of the Primary Assignment link). Unacceptable Interventions Shortening task duration. Deleting a task or any rework or coordination links. Adding a new skill to a position. Changing error rates. Changing task precedence. Helpful Hints 1. Make only one change in each case and record a brief name of what you did in the New Case dialog box. 2. Each time you try an intervention, create a new case, otherwise you will have no trace of earlier interventions. 3. For each case, record the changes that you made, the reasons you made those changes, and their effect on the predicted performance of the project, on the attached worksheet. 4. Remember the quality constraint: No task may have any communication, project or functional risk above

32 Pharma Corp Project Worksheet Use this worksheet to record the changes you make in each case and what the effects of these changes were. Case Name Changes End Date Quality Risks Other Effects Baseline n/a n/a 5-32