White Paper: Business Excellence through Business Value Optimization

Business Value Optimization Methodology

A for-profit profit enterprise whose business performs well over time should be rewarded by the global marketplace for its excellence in the form of a high business valuation (relative to similar businesses) and a corresponding high rate of return for its shareholders. s excellence, the enterprise should consider adopting a business To attain such business value optimization methodology that maximizes the productivity and efficiency of the business as well as its growth potential via an integrated life-cycle cycle approach to planning, executing, reporting, and updating to yield the highest possible valuation/return, valuation/return as follows:

An overview of each overarching business process, its inputs and outputs, and the primary software tools used to enable and measure them are discussed in the following follo sections.
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Business Planning with Alignment & Assignment Tools

The purpose of the business planning process is to convert the enterprises corporate qualifications based on its core competencies and specialization areas into corporate aspirations as expressed by some form of measurable business success criteria. Using alignment & assignment tools (e.g., a variety of business plan generation packages), packages) the primary output is typically a comprehensive business plan that documents the companys strategy egy and tactics. Such a strategy becomes the blueprint or roadmap that defines what will make an enterprises business(es) successful in the global marketplace on an ongoing basis. It should consist of four key parts: Vision/Mission: A vision is a forward-looking looking statement describing the solution(s) the enterprise wants to deliver to its customers in the future (i.e., where the enterprise ultimately wants to be positioned; 3 3-5+ 5+ year view). A mission is a snapshot statement describing the solution(s solution(s) ) the enterprise currently delivers to its customers (i.e., what the enterprise does now, every day; its primary purpose). Goals: A goal is a general target area that an enterprise needs to commit resources to in order to accomplish its mission. Objectives: An objective is a specific performance target that an enterprise needs to focus on in order to achieve a goal. Key Performance Indicators (KPIs): A KPI is a tangible metric ($, %, #) that an enterprise needs to validate in order to meet or exce exceed an objective. Tactics, in contrast, are the action items or steps that collectively define how an enterprise will realize its strategy on a periodic basis. They should be carried out as processes (with data flows, data stores, and external entities), where the enterprise must deliver an internal (e.g., e.g., departmental departmental) solution or an external (e.g., consulting) consulting solution in response to a set of statement of work (SOW) requirements describing the mandatory, desirable, or optional functions/features at whatever level of granularity is needed. needed Given a companys future business success criteria expressed as strategy (i.e., vision/mission, goals, objectives, KPIs) and tactics (i.e. (i.e., , solution requirements), the key to a business sustaining excellence is aligning the criteria for visibility and assigning the criteria a for accountability, as follows:

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Business Execution with Project Management Tools

The purpose of the business execution process is to convert the corporate aspirations articulated in the business plan into tactical reviews about the project-based based solutions that will be delivered to both internal resources (e.g., the companys own organizational units) and external entities (e.g., partners and customers). Using project management tools (e.g., Microsoft Project) Project), the primary outputs are typically status reviews containing interim nterim performance statistics for all projects that document how the company is executing, , namely maximizing quality (with benefits) and minimizing risk (with costs), costs) before ultimately getting rolled ed up into a strategic measurement. As shown below, solutions are delivered by an enterprise to a customer via project management phases, which focus on controlling scope, and functional/technical phases, which focus on delivering the actual solution.

During a project, the he project management p phases should measure four key areas: areas Work identifies the solution subsets (i.e., products, services, and/or data) required by the customer in terms of tasks, subtask subtasks, and activities, and whose typical output is a work breakdown structur structure Schedule determines the timing of the delivery of the solution subsets in terms of completion periods of milestones and due dates of deliverables deliverables, , and whose typical output is a Gantt or PERT chart Resource allocates the project resources needed to deliver the solution in terms of team members, tools, supplies, and facilities facilities, , and whose typical output is a project p responsibility matrix Cost budgets and tracks the project financials in terms of authorized, , operational, and actual costs, and whose typical output is an earned value analysis chart The functional/technical phases hases should also measure four key areas: Analysis assesses the challenges to be solved for the customer customer, and whose typical output is the validated functional and technical requirements for the solution Engineering finds or creates the solution to the projects challenges challenges, and whose typical output are the solution subset designs and a proof-of-concept prototype ototype Implementation obtains/develops, integrates, and deploys the solution subsets for the users, and whose typical output is a compliant solution Support administers the solution subsets and educates the users, and whose typical output is the solution being used in a production environment
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Business Reporting with Performance Management Tools

The purpose of the business reporting process is to convert the measurements associated with the internal/external solutions into a strategic company-wide wide scorecard that rolls up and organizes the results of all the tactical projects. Using performance management tools (e.g., a variety of Balanced Scorecard Scorecard-like packages), , the primary output is typically in the form of an annual report whose final results summarize how well the company has executed its tactics over a period of time (e.g., one year; divided into quarters) and demonstrated business success at the vi vision, sion, mission, goals, objective, and KPI strategic level. With performance management tools, the KPI metrics from the business plan may be continuously monitored and updated at regularly regularly-scheduled scheduled intervals (e.g., quarterly for departments, monthly for individuals) and performance accountability may be reviewed at all levels of the enterprise as a trend over time or as a s snapshot at any time. ime. Using such software, , executives are assured that they are focusing on mission mission-critical, critical, valuevalue added business areas without distraction. Typically, a decision n support module may generate dashboards s that give executives (and other select managers) visual, ual, drill-down drill access to scorecard performance status. These leaders can then view organizational performance levels through multiple views of real real-time time graphical displays so that they can make timely business decisions based on actionable intelligence. At times, if an enterprise is considering merger and acquisition (M&A) options (either sell-side or buy-side), the internal resources and external entity interfaces (as defined by an enterprise business model model) may be used to create two types of scorecards (as shown below) for due diligence ratings that help justify business valuations: (1) Owner/Operator (Internal) Scorecarduses resources/interfaces as strategic goals (buckets of capability) for running the business (2) Investor/Financier (External) Scorecarduses resources/interfaces as appraisal categories (buckets of net worth) for positioning or leveraging the business

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Business Updating with Growth Positioning & Leveraging Tools

The purpose of the business updating process is to convert the company-wide scorecard via a feedback loop into a revised baseline for the next iteration of the business plan. Using growth positioning & leveraging tools (e.g., a variety of new enterprise M&A packages), the end result will be a reflection on how well the company makes adjustments to its strategy and tactics to continuously improve its business performance over time to remain sustainable. An M&A transaction between a buyer and a seller may be driven by a variety of business reasons, including: Increasing Return-On-Investment (ROI)/Shareholder Value Expanding Market Share Through Sector/Industry Leadership Extending Geographic Coverage Regionally or Internationally Improving Core Competencies with Established Solution Offerings Creating New Specialization Areas for Differentiation A variety of popular commercial-off-the-shelf (COTS) software packages (e.g., office suites, accounting/general ledger) are used by buyers, sellers, combined entities, and intermediaries anywhere or everywhere along an M&A transaction life cycle, including steps for transaction analysis, market research, qualification, due diligence, valuation, structuring, negotiations, closing; and even post-deal transition and integration. These categories of software packages are based on process-driven M&A tools that are content independent. This means that such tools (collectively) provide deal teams with the ability to track the ongoing status of defined M&A processes and centrally store the input/output data of these processes (e.g., documents for the buyer about the seller) without knowing or caring qualitatively what the data actually means. In short, this type of software provides a breadth of general-purpose (i.e., horizontal market) solutions to the deal team. What the M&A software market is starving for today are comprehensive data-driven tools that are content dependent. Such tools would provide deal teams with the ability to create and analyze the input/output documents themselves to better reflect, for example, the true health of a seller and its preparedness to be integrated into a buyer. This type of software would offer the deal team, early in the M&A transaction life cycle (i.e., prevaluation), the crucial depth of industry-specific (i.e., vertical market) solutions that can optimize visibility and help ensure long-term integration success after the M&A transaction. Another way of viewing this new type of buyer and seller software tools is in terms of enterprise growth stages. Growth may take many forms, such as an increase in revenue, profit, market share, employee headcount, or geographic locations, but, in general, it is a positive indicator that trends with an enterprise as it increases shareholder value while progressing from startup to emerging to established to leader status, as follows:

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We see by this graphic that an enterprise should continuously be positioning (or repositioning) itself as it grows, and it could potentially use the growth growth-positioning positioning seller software tools anywhere along the growth curve. However, an enterprise must typically be well established stablished before it has enough resources and influence to begin taking advantage of its growth by merging with or acquiring other enterprises (and using the growth-leveraging leveraging buyer software tools to assist it). In conclusion, as shown below, continuous improvement and growth via positioning ositioning (and optionally, leveraging) involves transitioning from an enterprises current status/value in the global marketplace (based on its qualifications) to its target future status/value (based on its aspirations) as reflected by its business plan strategy and tactics while being managed throughout out the business value optimization life cycle.

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