Download - Sven Roden Keynote for Palisade Conf 09
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DecisionMaking
UnderUncertainty
Think Clearly Act Decisively Feel Confident
Think clearly, actdecisively and feel
confident Unilevers story
Sven Roden
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In any large dynamic organisation, complexity
impacts decision making
Organisational Analytical
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Outline of presentationIntroduction to Unilever
and the Decision
Analysis Group
What is Decision
Making UnderUncertainty?
Lessons learned fromour journey
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Unilever is a large, culturally diverse and complex
organisation
174,000 employees in 150counties with a large degree
of cultural diversity
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The Decision Analysis Group is part of Finance
Excellence and our responsibilities include
Development Learning Consultancy
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What is Decision Making Under
Uncertainty (DMUU)?
DMUU is a disciplined,methodical / structuredapproach to decision
making, withprobabilistic analysis atthe heart of its logical
reasoning.
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Why do we need DMUU?
Faster decision making would increase Unilevers agility in the marketplace.
Most of our important decisions involve many stakeholders who often
have differing perspectives. Ultimately, we need to think and act as acoherent team.
Our important decisions are often complex in nature, have a highdegree of uncertainty and can become sources of internal tension due
to differences in priorities and objectives. Our focus tends to be internal rather than the external and leads to
important opportunities and threats being overlooked.
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Making strategic
decisionschoosing the right path
Making strategicdecisions
choosing the right path
Proactively managing
risks and opportunitiesrunning the path
Proactively managingrisks and opportunities
running the path
DMUU is routinely used in two ways
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Strategic decisions require a process that
addresses all the elements of decision quality
Review 1Review of framingand structuring.
Review 3Discussion ofanalysis, agreedecision and actions.
Review 2Review of key dataand confirm frame isstill valid.
IDENTIFYPROBLEM
RECOMMEND
Evaluation Team
Decision Makers
FRAME STRUCTURE ANALYSE
Review 1Review of framingand structuring.
Review 3Discussion ofanalysis, agreedecision and actions.
Review 2Review of key dataand confirm frame isstill valid.
IDENTIFYPROBLEM
RECOMMEND
Evaluation Team
Decision Makers
FRAME STRUCTURE ANALYSE
Appropriateframe
Compellingalternatives
Reliableinformation
Criteria &trade-offs
Logicalreasoning
Commitmentto action
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DMUU is being actively applied across Unilever,
in areas such as Innovation, Mergers & Acquisitions, Supply Chain, Safety,
Regulatory and other complex one-off decisions.
All these applications have common features: there aremultiple compelling alternatives; there are significant
contradictions / disagreements on how to proceed; andstakes are high.
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In 1999, DMUU was used to move pro.activ through
the Novel Foods regulatory process in Europe
Prior to the analysis, key decision makers were indisagreement and considering several alternative options(including cancelling the project outright) whereas, theapplication of DMUU won senior management commitmentto a single course of action that drove the pro.activ producton the market. This analysis resulted in major product
launches in all major European countries within 9 months,with global sales in excess of 160 million per annum.
Becel / Flora pro.activ is the worlds best-sellingcholesterol lowering food brand
An estimated 13 million households currently benefitfrom Becel / Flora pro.activ products
Becel / Flora pro.activ has been approved by regulatorsand endorsed by health care professionals worldwide
Sales of pro.activ have grown by over 25% in each of thelast three years
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The vision for DMUU
is for high quality decision making to become the norm.
Adopted enterprisewide
Fully integrated with
ways of working
Changes theculture
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Building a sustainable Decision Analysis capability
requires
People
Developing bestpractice &
providing training
Tools Process
Designing toaddress
weaknesses in the
organisationsculture
Applications
Focusedefforts to build
credibility
Organisational
Structure
Createdstructure to
support & build
for the longterm
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The journey so far
DMUU is now a standard part of ourinnovation stage-gate process andprobabilistic business case are nowrequired for all large projects
To date we have trained >400 financemanagers in the use of DMUU andPalisades DecisionTools Suitesoftware
It is used on a wide range of projectsand is now being applied to otherapplications
Internal global communities ofpractice have been set up
We have set up an internalconsultancy function to provide
expertise
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Lesson 1: Be clear on what you want to focus on and
be realistic about timescales and resourcesSupply chain
inventory optimisation
Financialhedging
instruments
Portfoliooptimisation
Strategicdecision making
Proactive riskand opportunity
management
Create a roadmap of key objectives and timescales
then actively monitor it!
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Lesson 2: Spend the time to identify external
partners and appropriate tools and techniques
Review 1Review of framingand structuring.
Review 3Discussion ofanalysis, agreedecision and actions.
Review 2Review of key dataand confirm frame isstill valid.
IDENTIFYPROBLEM RECOMMEND
Evaluation Team
Decision Makers
FRAME STRUCTURE ANALYSE
Review 1Review of framingand structuring.
Review 3Discussion ofanalysis, agreedecision and actions.
Review 2Review of key dataand confirm frame isstill valid.
IDENTIFYPROBLEM RECOMMEND
Evaluation Team
Decision Makers
FRAME STRUCTURE ANALYSE
The overall DMUU process is
based on the StrategicDecisions Groups DialogueDecision Process
DecisionTools Suite was chosen
as the principle analysissoftware due to its flexibility andability to do Monte Carlo anddecision tree analysis
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Our Palisade partnership extends to more
than software supplyTraining
Help desk support
Licensing of software
Future developmentof software
Maintenance and
roll-out of updates
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Lesson 3: Think about the organisational structure
you need to deliver a sustainable capabilitySenior Decision
Makers
Project Leaders &Project Teams
Selected
applicationsApplication Area
Directcustomer
requiringwork
(dec
isionclarity
andcomplexity)
Across whole
organisation
Unile
vers
vision
Up skill entirepopulation
Creating a specialist
in-houseconsultancy
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This nodal structure is scalable, adaptable andprovides rapid response to business needs
DecisionAnalysisGroup
AdvancedPractitioner
Financeprofessionals
Financeprofessionals
Financeprofessionals
AdvancedPractitionerFinance
professionals
Financeprofessionals
AdvancedPractitioner
Finance
professionals
Financeprofessionals
Global Communityof Practice
Local Community
of Practices
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Lesson 4: Skill development is more than training
Transferto others
Transferto job
PracticeAcquire
E-learning courses Ad hoc support
Practitioners residential courses:
4-day Practitioners Workshop
3-week Advanced Practitioner Programme
On-the-job learning with an experienced /
advanced practitioner(s)
Build experience
with own projects
Participate in local
CoPs
Consult library of
best practiceexamples & user
guides
Use core team for
consultancy
Pro-active
involvement in the
the global CoP
Mentor novices
Help teach
courses
Develop best
practice guides
Helpdesk
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Decision-Makers
To embed DMUU we have developed an
integrated learning programmeMaking strategic
decisionschoosing the right path
Making strategicdecisions
choosing the right path
Proactively managingrisks and opportunities
running the path
Proactively managingrisks and opportunities
running the path
Value of Decision Quality
@RISK LiveWeb Practitioners Workshop
Advanced Practitioners Programme
Project Leaders and Evaluation Teams
DMUU Practitioners
Value of Decision Quality for Project Leaders
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e-Learning is a new addition to our training
programmeInitial pilot is for softwaretraining and combinestheory with videos on how
to use the software.
This format provides training topeople who find it difficult to travelto classroom based courses andis also a useful refresher forcourse participants.
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Mean of NPV (10 years) C120 vsInput Distribution Percentile
-100000
100000
300000
500000
700000
900000
0% 20% 40% 60% 80% 100%
Percentile
NPV(10years)
Cash Flow (constant money) () (D116 to M116)
InThousands
-62.50
-125.00
0.00
62.50
125.00
187.50
250.00
D116 E116 F116 G116 H116 I116 J116 K116 L116 M116Cell:
=Mean,+1/-1SD =95%,5%
Lesson 5: Reduce complexity for novices
and continue to support them
Regression Sensitivity for NPV (10 years)/C120
Stdb Coefficients
FixedSCC/ @RISK/F61-.037
VariSCC/@RISK/F65-.077
LaunchYear/@RISK/F58-.079
YrsOfGrowth/@RISK/F55-.092
MDC/@RISK/F69-.101
GrowthNoDivers / @RISK/F47 .124
MktShare / @RISK/F33 .316
NoDivers / @RISK/F43 .437
PercentBuy / @RISK/F51 .821
-1 -0.75 -0.5 -0.25 0 0.25 0.5 0.75 1
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
EV of NPV (10 years)
Fixed SCC
LaunchYear
Yrs Of Transponder Mkt Growth
Variable SCC
MDC
Growth Rate of No. of Divers
Mkt Share (300/unit)
No. of Divers (Yr1)
% Divers Who Buy Transponders
Inputs
Kurtosis
Convergencemonitoring
Regression,
Correlation, AdvancedSensitivity Analysis
Person6 vs Erland vs Erf
Skewness
Chi-Sq
BinningDiscrete [Integral Domain]
percentile value of thesubset median in thedistribution generated forthe whole simulation
dxeb
xb 2
2
2
)(
2
1)(
= )()()(
)(AP
BPBAPABp =
Latin Hypercube sampling
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To help novices move up the learning curve,we have made it easier to
All supported by
User guides for whole DMUU toolkit Library of best practice examples E-briefings Community of Practice Network of Advanced Practitioners Expertise from core team
Build models Standardised model input /
calculation sheets Subjective data collection
protocols Recommendations on
distributions and inputparameters
Use of influence diagrams andother tools to structure models
Macros for specialist jobs
Analyse and communicate output Recommendations on most
appropriate analysis techniques Recommendations on how to
present distributions Macros to create consistent
graphics Integration into other Unilever
processes
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Lesson 6: Monitor progress and actively engage
Decision Makers in the embedding processThe progress of DMUU is being closelymonitored by Unilevers Finance LeadershipTeam. A Road Map is being used to check
progress in each part of the business, includinglooking at:
Application usage (both in terms of buildingprobabilistic business cases and helping to
evaluate complex decisions)
Skills development
Building appropriate support infrastructure
(including Advanced Practitioners mentoringcolleagues and communities of practice)
Raising awareness with Business Partners
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Lesson 7: Celebrating success is crucial
last year we held our first internal DMUU Awards.The Awards recognised the great DMUUwork being undertaken in Unilever andwas also used to strengthen and build
the DMUU community.
There were three types of awards:
DMUU Embedding Award: for thegreatest progress in embedding DMUU
practices within Unilever.
DMUU Project Award: for the best useof the DMUU toolset and its impact onthe decision making process.
Special Award for Pushing theBoundaries: for extending the use ofDMUU to new application areas or newtechniques.
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Lesson 8: Evolve!
From its initial application in 1999 to thepresent day, Decision Analysis
techniques are at the forefront of makinga cultural change to the way Unileverapproaches and analyses strategicdecisions.
Organisations do not stand still andneither should the application of DMUU.We are constantly looking internally andexternally to identify future trends and
applications, and evolve our tools andmodels to ensure Unilever is at theforefront of applying Decision Analysis.
Organisations do not stand still be prepared for the future.
Keep looking internally and externally to
identify future trends and applications