Step 1: Identify a Strategic Business Initiative
If we are focused on using Value Engineering to deliver meaningful and relevant value, then the How conversation must start with a focus on a business' Strategic Business Initiatives. A strategic business initiative is characterized as:
- Critical to immediate-term business success.
- Documented (either internally or publicly).
- Cross-functional (involves more than one business function).
- Owned and/or championed by a senior business executive.
- Has an actionable and measurable financial goal (that is, reduce, increase, optimize, rationalize).
- Has a defined delivery timeframe (12 to 18 months).
An organization's key business initiatives can be found in annual reports, analyst briefings, executive conference presentations, press releases, or a chat with your executives.
Moving your data center to the cloud, transitioning from Skype to Zoom, and arming your employees with tablet computers… are not strategic business initiatives. Those are technology initiatives that may or may not have defensible, financially measurable, business or operational impact.
DEAN OF BIG DATA TIP:
Examples of key business initiatives:
- Reduce inventory costs
- Reduce unplanned operational downtime
- Improve customer retention
- Improve yield
- Improve technician "first time fix" effectiveness
- Improve supply chain reliability and quality
Strategic business initiatives focus on business outcomes that have articulated financial value such as optimizing operational efficiency, reducing costs, improving revenues and profits, enhancing customer value creation, mitigating risk, and creating new revenue opportunities.
Step 1A: Identify Metrics against which to Measure Progress and Success
A critical part of understanding your strategic business initiative is to identify the metrics and Key Performance Indicators (KPIs) against which the success or progress of that business initiative will be measured.
For example, if our key business initiative is to increase "Same Store Sales" (where "Same Store Sales" is defined as the difference in revenue generated by an organization's existing outlets or stores over a certain period as compared to the similar previous period), the following metrics or KPIs might be critical in measuring the progress and success of that initiative: Average Revenue per Visit, Volume of Store Traffic, Revenue per Employee, Line Wait Time, % Abandonment, % Mobile Orders, Positive Social Media Mentions, and "Table Turns" (the time it takes to convert or "turn" a table from one customer to the next customer).
DEAN OF BIG DATA TIP:
Make sure you have a robust set of metrics and KPIs to avoid the unintended consequences that can occur due to a too narrow view on how the organization will measure the business initiative progress and success. Brainstorm multiple lead indicators that can provide early readings on the progress and success of the business initiative, and then prioritize those lead indicators (because not all measures are of equal value.