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Developing a Value Proposition

Philip Trapani Microsoft For Dynamics Partners

Developing a Value Proposition


Business Assessment
Business Assessment Definition & Measures of Success Current Situation

Solution Mapping
Opportunities to Improve
Technical Enablers

The Value Core


Determine & Quantify Benefits Identify & Estimate Costs

Risk Assessment
Identify Risks Develop Risk Assessment

Business Case
Financial Analysis Build/Present Value Proposition

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Solution Mapping Involves 2 key actions Identify the business activities which can be positively impacted. Identify the 'technical enablers' that support the Action items, map those enablers to Microsoft solutions that effect the improvements Verifiable outcome: Solution & Problem Definition alignment

The Value Core Involves 2 key actions Determine and quantify benefits Identify and estimate the costs Verifiable outcome: Benefits/Cost Summary

Risk Assessment Involves 2 key actions Determine potential risks and mitigation options Develop risk statement Verifiable outcome: the Risk Statement

The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Business Assessment
Business Assessment
Business Assessment Definition & Measures of Success Current Situation

Solution Mapping
Opportunities to Improve
Technical Enablers

The Value Core


Determine & Quantify Benefits Identify & Estimate Costs

Risk Assessment
Identify Risks Develop Risk Assessment

Business Case
Financial Analysis Build/Present Value Proposition

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Solution Mapping Involves 2 key actions Identify the business activities which can be positively impacted. Identify the 'technical enablers' that support the Action items, map those enablers to Microsoft solutions that effect the improvements Verifiable outcome: Solution & Problem Definition alignment

The Value Core Involves 2 key actions Determine and quantify benefits Identify and estimate the costs Verifiable outcome: Benefits/Cost Summary

Risk Assessment Involves 2 key actions Determine potential risks and mitigation options Develop risk statement Verifiable outcome: the Risk Statement

The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Identifying Stakeholders
Business Assessment
Business Assessment Definition & Measures of Success Current Situation Microsoft / Partner
Members from the ATU, STU, PTU, Services, and Licensing From Microsoft you'll meet: Solution Specialist (SSP) Technical Specialist (TSP) Note about the Microsoft/Partner Team It's important to remember that the Microsoft/Partner team relies on roles rather than individual responsibilities. Depending on skillset and availability, a Microsoft/Partner team member may be asked to serve in more than one role

Customer
Power Sponsor Business Sponsor(s) Executive Sponsor(s) Impacted Users Power Sponsor - The person who will be the ultimate decision maker. Business Sponsor - Typically the point-of-entry to the opportunity. Executive Sponsors - Upper level Business Decision Makers, who will be key influencers to the Power Sponsor, and will be interested only if you can clearly demonstrate the value of the solution in terms of concrete economic benefits. Other Stakeholders include end users or anyone else affected by the solution, and therefore are instrumental to its success or failure.

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Identifying Stakeholders
Business Assessment
Business Assessment Definition & Measures of Success Current Situation Microsoft / Partner
Members from the ATU, STU, PTU, Services, and Licensing From Microsoft you'll meet: Solution Specialist (SSP) Technical Specialist (TSP) Note about the Microsoft/Partner Team It's important to remember that the Microsoft/Partner team relies on roles rather than individual responsibilities. Depending on skillset and availability, a Microsoft/Partner team member may be asked to serve in more than one role

Customer
Power Sponsor Business Sponsor(s) Executive Sponsor(s) Impacted Users Power Sponsor - The person who will be the ultimate decision maker. Business Sponsor - Typically the point-of-entry to the opportunity. Executive Sponsors - Upper level Business Decision Makers, who will be key influencers to the Power Sponsor, and will be interested only if you can clearly demonstrate the value of the solution in terms of concrete economic benefits. Other Stakeholders include end users or anyone else affected by the solution, and therefore are instrumental to its success or failure.

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Defining Customer Success


Business Assessment
Business Assessment Definition & Measures of Success Current Situation
Petra Valetinussen VP Customer Care Elida Flores Varela Mgr, Cust. Service

Stakeholder

Critical Success Factors

Key Performance Indicators

Current

Desired

Strategies

Key Actions

Lukas Reinhardt CFO

Increase annual Annual Sales ($) sales Improve net profits Enhance tech. infra. to support all business initiatives efficiently Increase customer retention Net Profits (%)

$2b

$3b (5 yrs) 12%

Open new markets Improve customer retention Upgrade technology to new products or releases

New sales rep for SE territory Upgrade CCR environment

8%

Adriana Conti VP Operations

Services (new) TCO / User TCO / PC

.5 $970 $1,250

2 $500 $1,000

Evaluate / compare newer CRM platforms

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Customer Retention (%)

72%

93%

Improve access to information

Consolidate Cust. Info for CSRs Consolidate Cust. Info for CSRs

Improve CCR effectiveness

Grade Scale A-F

Improve reponsiveness

Impact Statement
At this stage, it is crucial that the Account Team is able to articulate the high-level benefits of the proposed solution(s) in terms of its ability to impact their CSFs and desired KPI states to achieve the customer's strategic goals. The Impact Statement should re-state the 'desired state' objectives for the customer's KPI metrics and address implementing their chosen strategies for achieving them by executing on the prioritized action items. The Impact Statement should clearly communicate the prospects for capitalizing on the opportunities to improve on the KPIs and realizing the bottom line benefits that contribute to achieving the stakeholder's Critical Success Factors.

Providing your Customer Care Reps with a consolidated view of all customer information will improve customer satisfaction, helping you to achieve your target of improving customer retention by n%. If done right, this can be achieved while reducing average call time, thus lowering your cost per call. Employee morale will improve, which ultimately affects employee productivity and job satisfaction, and potentially reducing attrition among customer reps and lowering your recruiting and training costs

Solution Mapping
Business Assessment
Business Assessment Definition & Measures of Success Current Situation

Solution Mapping
Opportunities to Improve
Technical Enablers

The Value Core


Determine & Quantify Benefits Identify & Estimate Costs

Risk Assessment
Identify Risks Develop Risk Assessment

Business Case
Financial Analysis Build/Present Value Proposition

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Solution Mapping Involves 2 key actions Identify the business activities which can be positively impacted. Identify the 'technical enablers' that support the Action items, map those enablers to Microsoft solutions that effect the improvements Verifiable outcome: Solution & Problem Definition alignment

The Value Core Involves 2 key actions Determine and quantify benefits Identify and estimate the costs Verifiable outcome: Benefits/Cost Summary

Risk Assessment Involves 2 key actions Determine potential risks and mitigation options Develop risk statement Verifiable outcome: the Risk Statement

The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Solution Mapping
Identifying Technical Enablers
Solution Mapping
Opportunities to Improve Technical Enablers
Solution Mapping Involves 2 key actions Identify the business activities which can be positively impacted. Identify the 'technical enablers' that support the Action items, map those enablers to Microsoft solutions that effect the improvements Verifiable outcome: Solution & Problem Definition alignment

Stakeholder

Critical Success Factors


Improve net profits

Key Performance Indicators


Net Profits (%)

Current

Desired

Strategies

Key Actions
Upgrade CCR environment

Opportunity to Improve
Provide more consolidated information to Cust Serv Reps

Technical Enablers
Information aggregation, normalization, and presentation from multiple back-end data sources Built-in integration between internal and external systems

CFO

8%

12%

Improve customer retention

Adriana Conti VP Operations

Enhance Services (new) tech. infra. to TCO / User support all TCO / PC business initiatives efficiently Customer Retention (%)

0.5 $970 $1,250

2 $500 $1,000

Upgrade technology to new products or releases

Evaluate / Collapse multiple compare newer data systems into CRM platforms one for easy quick access

Petra Increase Valetinussen customer VP Customer Care retention

72%

93%

Improve access Consolidate to information Cust. Info for CSRs Improve reponsiveness Consolidate Cust. Info for CSRs

Eliminate multi Single signon screen, multi login and consistent for cust data information views Eliminate need to enter repetitive data during calls Web services pull and integrate information from multiple data stores Single signon and information views across multiple platforms and geographies

Elida Flores Varela Improve CCR Grade Scale Mgr, Cust. Service effectiveness A - F

Silvio Varela Carrillo Senior CCR

Improve Customer Satisfaction

Grade Scale A-F

Improve reponsiveness

Consolidate Cust. Info for CSRs

Provide one login to access all customer information

The Value Core


Business Assessment
Business Assessment Definition & Measures of Success Current Situation

Solution Mapping
Opportunities to Improve
Technical Enablers

The Value Core


Determine & Quantify Benefits Identify & Estimate Costs

Risk Assessment
Identify Risks Develop Risk Assessment

Business Case
Financial Analysis Build/Present Value Proposition

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Solution Mapping Involves 2 key actions Identify the business activities which can be positively impacted. Identify the 'technical enablers' that support the Action items, map those enablers to Microsoft solutions that effect the improvements Verifiable outcome: Solution & Problem Definition alignment

The Value Core Involves 2 key actions Determine and quantify benefits Identify and estimate the costs Verifiable outcome: Benefits/Cost Summary

Risk Assessment Involves 2 key actions Determine potential risks and mitigation options Develop risk statement Verifiable outcome: the Risk Statement

The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

The Value Core


The Value Core
Determine & Quantify Benefits Identify & Estimate Costs
Cost Reduction Cost Avoidance Revenue Generation Revenue Protection Total Benefits (in millions) $0,0 Value to Business Business Function Business Process Value to IT Application Development IT Operations Cost Reduction Cost Avoidance Revenue Generation Revenue Protection

Total Benefits (in millions)

Value Core Defined


The Value Core is where the numbers from your Business Assessment and subsequent solution components (quantified costs and benefits) start to accumulate. Continuing with customer collaboration, you determine and quantify the benefits impact of Microsoft's proposed solution. Supporting evidence is researched and referenced to support your calculations. A benefit matrix is developed that categorizes both quantitative and qualitative benefits. All costs are estimated as well: hardware, software and labor.

Value Core
Cost Examples
Element Software
Hardware Planning Time Pilot Program Development Time App Testing/Integration Installation Time Employee Downtime Training

Calculation Licenses x cost of license


Hardware components x cost IT hours x cost per hour Cost of labor, hardware, software Partner cost + IT hours x cost per hour IT hours x cost per hour IT hours x cost per hour Install time x cost per hour Training class expense + employee downtime

Risk Assessment
Business Assessment
Business Assessment Definition & Measures of Success Current Situation

Solution Mapping
Opportunities to Improve
Technical Enablers

The Value Core


Determine & Quantify Benefits Identify & Estimate Costs

Risk Assessment
Identify Risks Develop Risk Assessment

Business Case
Financial Analysis Build/Present Value Proposition

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Solution Mapping Involves 2 key actions Identify the business activities which can be positively impacted. Identify the 'technical enablers' that support the Action items, map those enablers to Microsoft solutions that effect the improvements Verifiable outcome: Solution & Problem Definition alignment

The Value Core Involves 2 key actions Determine and quantify benefits Identify and estimate the costs Verifiable outcome: Benefits/Cost Summary

Risk Assessment Involves 2 key actions Determine potential risks and mitigation options Develop risk statement Verifiable outcome: the Risk Statement

The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Internal Risk Assessment


Risk Assessment
Identify Risks Develop Risk Assessment
Risk Assessment Involves 2 key actions Determine potential risks and mitigation options Develop risk statement Verifiable outcome: the Risk Statement

Stakeholder Stefan Orlowicz Adriana Conti Adriana Conti Lukas Reinhardt Elida Flores Varela Mary Thompson

Role Dir. Operation VP Operations VP Operations CFO CCR Mgr VP Cust. Service

Area Impacted Operations Operations Infrastructure Budget Rep Training Adoption

Potential Risk Deployment Risks Training Costs Technology Risk Cost Over-runs User Downtime Productivity

Risk Assessment We need to understand how customer defines risk Microsoft/Partner should develop and review draft with customer.

Rate all the identified risks on the basis of: 1.Their probability of occurrence; and 2.Their potential impact This will identify all the risks/categories that exceed the minimum acceptable exposure threshold. Then we can develop costs estimates connected with these risks; this is necessary to create and potentially execute the mitigation plans

Sample Risk Statement: Ongoing support for Dynamics CRM by the customer is problematic, because the customer does not have expertise within their current IT environment that can handle this today. Training and additional Premier Support may be needed.

Business Case
Business Assessment
Business Assessment Definition & Measures of Success Current Situation

Solution Mapping
Opportunities to Improve
Technical Enablers

The Value Core


Determine & Quantify Benefits Identify & Estimate Costs

Risk Assessment
Identify Risks Develop Risk Assessment

Business Case
Financial Analysis Build/Present Value Proposition

Business Assessment Involves 3 key actions Identify the true Stakeholders Define how the customer measures success using Critical Success Factors(CSFs) and Key Performance Indicators(KPIs) Analyze the current state and desired outcomes of business processes or activities in order to identify 'Key Actions' which drive the level of success Verifiable outcome: the Business Assessment Matrix

Solution Mapping Involves 2 key actions Identify the business activities which can be positively impacted. Identify the 'technical enablers' that support the Action items, map those enablers to Microsoft solutions that effect the improvements Verifiable outcome: Solution & Problem Definition alignment

The Value Core Involves 2 key actions Determine and quantify benefits Identify and estimate the costs Verifiable outcome: Benefits/Cost Summary

Risk Assessment Involves 2 key actions Determine potential risks and mitigation options Develop risk statement Verifiable outcome: the Risk Statement

The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Business Case Financial Metrics


Business Case
Financial Analysis Build/Present Value Proposition
The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Present Value of Money

New Present Value


Section

Internal Rate of Return

Return on Investment

Payback Period

Executive Summary Project Scope Value Proposition Conclusions and Recommendations (Deployment Plan)

Business Assessment Summary

Solution Description
Benefit Summary Cost Summary Risk Summary Financial Analysis

Business Case
Present Value of Money
Business Case
Financial Analysis Build/Present Value Proposition
The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Present Value of Money

Underlying all of the financial measures is a concept called the Present Value of Money. In essence, "present value of money" simply means that over time, the value of money depreciates, or it decreases. And it decreases on a specific factor, which is called the discount rate. The discount rate is the pace at which the value of money depreciates year over year over the period of analysis of the investment or the financials. If we look at the example here, a hundred dollars today in present terms, or in present-day money value, over seven years, will depreciate at a ten percent discount rate, such that in seven years, that one hundred dollars is really only worth fifty-one dollars. Now the reason financial people use Present Value of Money to reflect their financial analyses, and include them in business cases, is that they want to determine based on the schedule of the cash flows of the investment, what kind of value money has in today's terms, or in present-day timeframes.

Business Case
Net Present Value
Business Case
Financial Analysis Build/Present Value Proposition
The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

New Present Value


The Present Value of an investments future cash flow minus the initial investment If NPV > 0, then the project should be pursued If NPV < 0, then the project should be avoided

Investment

Cash Flow Year 1

Cash Flow Year 2

Cash Flow Year 3

Cash Flows
Discount Factor Present Value NPV

($1,000,000)

$850,000

$850,000

$850,000

(1.1) O =1

(1.1) 1 =1.1

(1.1) 2 =1.21

(1.1) 3 =1.33

1.1x1.1x1.1= 1.33

($1,000,000)

$772,727

$702,479

$639,098

$1,110,000
In the second year, you take the 1.1 to the second power, or 1.1 times 1.1, which equals 1.21. You divide the 1.21 into the second period cash flow of eight hundred fifty thousand dollars,

Initial Investment of $1,000,000 Generates $850,000 Cash Flow Annually Discount Factor of 10% Present Value = Initial Investment minus cash flows or $772,727 + $702,479 + $639,098 $1,000,000 = $1,110,000 NPV

Business Case
Internal Rate of Return
Business Case
Financial Analysis Build/Present Value Proposition
The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Internal Rate of Return


Cash Flows
The Internal Rate of Return measures the relative profitability of a project. It is designed as to be whatever discount is required to be applied to cash flows such that NPV = 0 Customers use the IRR to determine the relative profitability of the investment. In general, a higher IRR indicates a better investment

Investment ($1,000,000)

Cash Flow Year 1 $850,000

Cash Flow Year 2 $850,000

Cash Flow Year 3 $850,000

Discount Factor Present Value NPV IRR

(1.67) O =1

(1.67) 1 =1.67

(1.67) 2 =2.7889

(1.67) 3 =4.657463 $182,503

($1,000,000)

$508,982

$304,780

$0 67%

IRR: The Discount Rate which makes NPV = 0

In the above example, if you recall, the initial investment was a million dollars. Over the next three years, we are going to see eight hundred and fifty thousand dollars a year in future cash flows. To determine the internal rate of return, we have to figure out what discount rate we need to apply to these future cash flows such that when we sum total the discounted future cash flows we get an answer, or a net present value of zero. So in this case, with a million dollar initial investment, eight hundred and fifty thousand dollars of cash flows for the subsequent three years, we have to discount by sixty-seven percent those future cash flows such that when we take a sum total of those discounted future cash flows and we subtract or minus the initial investment of a million dollars, calculate the net present value for this investment we get an answer of zero.

Business Case
Return on Investment
Business Case
Financial Analysis Build/Present Value Proposition
The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Return on Investment
Return on Investment is the projects discounted profitability expressed as a percentage of the initial investment

Investment

Cash Flow Year 1

Cash Flow Year 2

Cash Flow Year 3

Cash Flows
Discount Factor Present Value NPV

($1,000,000)

$850,000

$850,000

$850,000

(1.1) O =1

(1.1) 1 =1.1

(1.1) 2 =1.21

(1.1) 3 =1.33

($1,000,000)

$772,727

$702,479

$639,098

$1,110,000

ROI = $1,100,000/$1,000,000 = 111%

Business Case
Payback Period
Business Case
Financial Analysis Build/Present Value Proposition
The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Payback Period
Payback Period Customers use Payback Period calculations to determine when an investment becomes cash flow positive or breaks even to pay for itself. Traditional methods of calculation payback period does not take into account future discounted cash flows. Including discounted cash flows provides a more conservative payback period calculation

Investment

Cash Flow Year 1

Cash Flow Year 2

Cash Flow Year 3

Cash Flows
Discount Factor Present Value NPV

($1,000,000)

$850,000

$850,000

$850,000

(1.1) O =1

(1.1) 1 =1.1

(1.1) 2 =1.21

(1.1) 3 =1.33

($1,000,000)

$772,727

$702,479

$639,098

$1,110,000

Payback Period = $1,000,000 / ($772, 727 + $702,479 + $639,098) / 36 MOS = 17 MOS

Business Case
Delivering the Report
Business Case
Financial Analysis Build/Present Value Proposition
The Business Case Involves 2 key actions Perform the financial analysis Build and present the Business Value Proposition Verifiable outcome: the detailed Value Proposition and Solution Proposal

Section Executive Summary Project Scope Value Proposition Conclusions and Recommendations (Deployment Plan)

Team Member Responsible Sales Manager Sales Manager (Sales Manager)

Technical Sales Mgr

Business Assessment Summary Solution Description Benefit Summary Cost Summary Risk Summary Financial Analysis

Sales Manager Sales & Technical Mgrs Sales & Technical Mgrs Sales Manager Sales Manager Sales Manager