Wednesday, 22 May 2013 08:06

From the Sponsor’s Desk - Focus on Value, Not Budget

Written by

davison FeatureArticle May22In my last post, we looked at how one IT organization responded to corporate pressure to deliver more, faster and at less cost by transforming its organization using high performance team principles.

In this post, we’ll see how two sponsors and their stakeholder team took a risky but potentially lucrative undertaking from inception to profitable conclusion by focusing on incremental value and delivering one step at a time.

Thanks to reader B.F. for providing the details on this case.

The Situation

This large, country-wide retail enterprise was experiencing continuing challenges ensuring that their retail locations had adequate supplies to meet the demand from clients trying to purchase products featured in their many sales flyers and catalogues. Too often, stores were caught with inadequate inventory which left customers frustrated and hurt staff productivity with frequent trips to the store room to search for the requested products.

The newly arrived VP of Marketing was tormented by the lack of control over the full promotion cycle. The inventory processes and supporting technology were slow and cumbersome, ordering, shipping and sales were hit and miss affairs and the information she needed to manage her marketing programs effectively just wasn’t available when she needed it in the form she wanted.

The Marketing VP approached the VP Distribution. He had similar concerns about the operations of the widely dispersed retail outlets. Together they started to chart out an approach that would improve overall performance. Their first priority was to address store inventory. They needed to know what was available at any given moment in terms of age, cost and quantity. They figured if they could get a handle on that information and the processes to keep it evergreen, they could achieve bottom line improvements of $4 million annually between their two organizations, from increased sales and greater store productivity.

The Goal

The Marketing and Distribution VP’s, the co-sponsors, approached the CEO and other senior managers with their plan. Because the VP Distribution had been involved in a very nasty and failed inventory project with another organization and knew the potential risks and pitfalls first hand, he wanted to keep the scope laser focused. The two VP’s pitched their project with a target cost of $6 million and a duration of 24 months with a store by store phase-in to manage risks and hone their rollout process to a razor’s edge. They didn’t know if that was enough money to deliver the solution they were looking for but the dollar target would be essential if they were going to deliver on their plan. The project was approved and funding was allocated as proposed.

The Project

The first thing the two VP’s did on receiving management committee approval was to bring the VP Warehousing into the fold. He had been somewhat supportive in the presentation but had raised a number of issues and concerns. They recognized that the warehouse operations would be a key interface to the proposed store inventory system and they needed him involved if they were going to be successful. 

Their next step was to enlist the help of the CIO. They would need technology to support their store inventory and interface to the other in place systems and the CIO’s involvement throughout the technology selection, implementation and operation effort was essential. Also, with the CIO’s assistance, they selected a contract project manager to lead the effort. He had considerable experience with point of sale, warehousing and inventory operations and systems, great references and a solid track record of success.

The project manager proceeded to pull together a comprehensive “request for proposal” (RFP) process and identified eight possible vendors for consideration. Further discussion and review with the four VP’s cut the candidates to five but the VP Distribution proposed one additional vendor be considered as well. The RFP’s went out, submissions were received from five of the six candidates, the proposals were assessed and two vendors were short-listed for the quote process. All of this happened with five weeks of the project manager’s arrival.

The PM had developed the “request for quotation” (RFQ) process while waiting for the RFP submissions and had the blessing of the four VP’s so, as soon as the decision on the short-listed vendors was reached, the vendors were notified and the RFQ was issued. The PM also convinced the four VP’s to expand their evaluation team to include the following members:

  • Three or four region directors and/or store managers to represent all those in similar roles across the country and to dialogue with store staff
  • Product managers within the Marketing VP’s group who were responsible for running product specific promotions and sales
  • The system support manager who would be responsible for maintaining and enhancing any new software and services
  • The computer operations manager who would be responsible for ensuring the performance and stability of the technology infrastructure and managing the relationship with the selected vendor.

While the short-listed vendors were completing their responses to the RFQ, the VP’s of Marketing and Distribution and the CIO proceeded to engage their managers, reviewing the project goals and objectives and ensuring each understood the critical nature of their ongoing involvement. By the time the completed RFQ’s were received, the PM had a solid, informed review team in place. The vendor review was conducted in two half day workshops plus a half day wrap-up and decision-making session. At the end of the exercise, another five weeks had elapsed but a vendor had been selected and the decision was unanimous. 

The winning vendor forecast their costs for software, services and project management support for the defined scope at slightly less than $3 million. The retailer’s internal costs were estimated to be $1.2 million, for a project total well within the $6 million target. Ongoing licensing and support costs were a very manageable $250,000 annually. A senior project manager from the winning vendor was added to the stakeholder team

One of the biggest challenges faced by the PM over the course of the project was keeping the scope constrained to the targeted retail inventory functionality. The winning vendor also had a full suite of software on offer, including components for Client Relationship Management, Vendor Management, Point of Sale, Inventory, Aggregated Inventory, Reporting, Interfacing Components, Web Site Integration, Ecommerce, Employee Management, Accounting and Order Entry. There was considerable pressure from the retail and product managers to expand the scope given the low cost forecast and some of the juicy functionality available. The PM used the MuSCoW approach to keep the stakeholders focused on the task at hand:

  • M - MUST: Describes a requirement that must be satisfied in the final solution for the solution to be considered a success.
  • S - SHOULD: Represents a high-priority item that should be included in the solution if it is possible. This is often a critical requirement but one which can be satisfied in other ways if strictly necessary.
  • C - COULD: Describes a requirement which is considered desirable but not necessary. This will be included if time and resources permit.
  • W - WOULD: Represents a requirement that stakeholders have agreed will not be implemented in a given release, but may be considered for the future.

    The stakeholders agreed on the following Must and Should components to include in the project:

  • Retail inventory and aggregated inventory to provide the product managers with a local and overall view of stock on hand
  • Reporting to provide the Marketing and Distribution VP’s and their staff with the timely and comprehensive view of sales activity and inventory across the country.
  • The Interfaces component was also selected to support automation of the bridges to other critical in-place systems including point of sale, warehousing and the current reporting systems.

The project ramped up, added the necessary internal and vendor staff and proceeded to develop the target solution for initial piloting in one volunteer store.

The Results 

The project delivered the first implementation to the selected pilot store 19 weeks after the vendor decision. Training for store staff was conducted in parallel with the technical and systems work so they were ready to go right from the start. A full store inventory was also done and compared to the existing inventory totals. The finding: the existing inventory numbers were so out of whack as to be next to useless. From that point on, a full inventory, performed by a contracted organization, became part of the rollout process. 

There were a few glitches in the pilot implementation:

  • The bridge between the point of sale system and the new inventory component experienced some performance issues that were solved by tuning.
  • The initial reporting offerings didn’t satisfy the store managers or the product managers and needed some additional work to address the needs. The ad hoc query component, which was initially rated a Would and excluded from the initial release, was added to the scope to provide additional analytical and tracking capability, at an incremental cost of $450,000.
  • The old manual processes used to ensure synchronization between the sales campaigns, requisitioning, vendor management, warehousing and distribution failed frequently and automating and streamlining work was added to the project scope. The additional cost: $330,000.

The rollout exercise became a cookie cutter operation and store implementations proceeded across the country with military precision. The entire rollout was done in 20 weeks from the successful completion of the first pilot store. Total elapsed time from project inception: 55 weeks. Total cost: slightly less than $5.5 million including the contracted inventory work. Value delivered: an estimated $6.2 million annually.

Of course, the co-sponsors didn’t stop there. They saw immediate opportunities for the client relationship management function and integration with their web site to grow their client base and increase same client sales. While the cross country rollout was in its early stages, the co-sponsors pitched and received management committee approval and additional funding for this additional capability. One of the key arguments they used for proceeding immediately – the team that delivered this highly successful project was already in place and ready to go. It was a clincher!

How These Great Leaders Achieved Success

There were four factors that made this a successful venture:

  1. The Right Decision-Makers

    The success of this project was founded on the initial actions of the Marketing VP. She knew she needed help and engaged the VP’s of Distribution as a co-sponsor. That participation in the project helped seal the deal with the CEO and the other executives. They brought in the Warehousing VP and the CIO. They acquired the contract PM recommended by the CIO. They brought in the managers who would ultimately have to make the solution work to assess the short-listed vendors. That positioning and involvement gave the managers the information they needed and generated the commitment required for their subsequent leadership role. Finally, they added a senior manager from the selected vendor. It was a fully formed, committed stakeholder group.

  2. A Skilled Project Manager

    The PM was selected based on his domain knowledge and experience, solid references and track record. He knew how to manage scope consistent with the co-sponsors wishes. He knew how to parallel work to reduce schedule impact. He was familiar with RFP/RFQ practices which ensured timely, effective, comprehensive vendor evaluations and an appropriate decision.

  3. Disciplined Scope Control

    The fact that the scope of the project started with a very compact focus and stayed largely consistent throughout the project is a testament to the co-sponsors’ initial vision and ongoing discipline. It wasn’t the complete solution but it was enough to deliver the value they had identified. They allowed additions only when the need was apparent to protect their targeted value.

  4. Relentless Focus on Value

    You will notice that there was no mention of business cases, budgets or project estimates in this case. Estimates were done by the retailer’s and vendor’s PM’s but only to help guide the work and to ensure delivery within their mandates. What drove the co-sponsors’ pitch? Value! How much can I increase sales? How much can I improve productivity? Reduce costs? When they pitched to the CEO and senior executives, they presented a case based on value. They tempered their case with a limit, the $6 million that would shape and constrain their search for a solution. And it was that limit that turned out to be the significant factor in their vendor selection.

If you find yourself in a similar situation, put these points on your checklist of things to do so you and your stakeholder group mates can be a Great Leaders too. And remember, look at Project Pre-Check’s three building blocks right up front so you don’t overlook a key success factor. 

In the interim, if you have a project experience, either good or bad, past or present, that you’d like to have examined through the Project Pre-Check lens and published in this blog, send me the details and we’ll present it for others to learn from and comment on.

Thanks

Don't forget to leave your comments below.

Read 5863 times
Drew Davison

Drew Davison is the owner and principal consultant at Davison Consulting and a former system development executive. He is the developer of Project Pre-Check, an innovative framework for launching projects and guiding successful project delivery, the author of Project Pre-Check - The Stakeholder Practice for Successful Business and Technology Change and Project Pre-Check FastPath - The Project Manager’s Guide to Stakeholder Management. He works with organizations that are undergoing major business and technology change to implement the empowered stakeholder groups critical to project success. Drew can be reached at drew.davison@projectprecheck.com

© ProjectTimes.com 2017

macgregor logo white web