Implementation of Decision Analysis at Unilever Andrew Evans

What we will cover…

Introduction to Unilever and the role of the

Decision Analysis Group How have we implemented

Decision Analysis? Lessons learned on our journey

Unilever is a large, culturally diverse and complex organisation

•  171,000 employees •  Products sold in more than 190

countries •  Large degree of cultural diversity - 8

nationalities on our board of directors

“2 billion consumers worldwide use a Unilever

product on any day”

Global presence

2011 Turnover >€46 billion

Americas €15 bn Europe €12 bn Asia / Africa €19 bn

Decision Analysis Group responsibilities include…

Development & Support Portfolio Management Project Consultancy

There are two main applications of Decision Analysis within Unilever…

Portfolios

Having the right information to drive the right conversations

and behaviours when selecting portfolios with good prospects.

Projects

Giving high quality decisions even when we have to make

tough choices with limited data.

Both applications have uncertainty thinking at their core

..and we use a range of tools to ensure rigorous evaluations:

Projects Portfolios

Background information

Probability of launch

Time to market (range)

Range of TO & iTO

Project 2

Project 3

Project 5

Project 6

Project 8

Project 10

Project 1

Project 4

Project 7Project 9

0%

10%

20%

30%

40%

50%

60%

70%

0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00

EV iTO Yr3 (given launch) (€m)

Prob

. of l

aunc

h

1% of 2009 Category TO

Potential White Elephants? Oysters

PearlsBread & Butter

0

50

100

150

200

250

300

350

€mInnovation (2013+ launches)Innovation (<2013 launches)Innovation results from 2010 analysisRenovation

S ep10 J une11

2011

S ep10 J une11

2012

S ep10 J une11

2013

S ep10 J une11

2014

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2015

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2016

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2017

Category ambition(Innovation & Renovation)

0

50

100

150

200

250

300

350

€mInnovation (2013+ launches)Innovation (<2013 launches)Innovation results from 2010 analysisRenovation

S ep10 J une11

2011

S ep10 J une11

2012

S ep10 J une11

2013

S ep10 J une11

2014

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2015

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2016

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2017

Category ambition(Innovation & Renovation)

Distribution for NPV (10 years, 7% discount rate)

Mean = €6.95m

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

NPV (€m)

-10 -5 0 5 10 15 20 25

Capex Factory

Trade Terms

SCC Local

Launch Yr Vol

Market Scenario

Competitor A&P

Mean of NPV (W$m)

Monte Carlo

Decision trees

Framing & Structuring

Unilever has built a sustainable Decision Analysis capability through…

Developing best practice & tools &

techniques to ensure decision quality

Tools & Techniques

Focussed Application

Focusing efforts to build

credibility

People & Processes

Creating structure to support & build for the

long term

Lesson 1: Be clear on what you want to focus on

Supply chain inventory optimisation

Financial hedging

instruments

Project schedule

management

Strategic decision making

Proactive risk and opportunity management

Create a roadmap of key objectives and timescales… then actively monitor it!

Innovation Portfolio

Management

Decision analysis does not need to be applied to every situation!

High

Low

Low High

Common sense & rules of thumb

Analytical Tools

Facilitative Leadership

Casual

Conscious

© 2005 by Strategic Decisions Group. All rights reserved. Used by permission.

Organisational Complexity

Analytical Complexity

Full Decision Process

Rigorous

Interelated factors

Cultural and language differences

Many time zones

Different functions, perspectives and agendas

Different attitudes to risk

Many Products

Many alternatives

Multiple uncertainties

Mean of NPV (10 years) C120 vs Input Distribution Percentile

-100000

100000

300000

500000

700000

900000

0% 20% 40% 60% 80% 100%

Percentile

NPV

(10

year

s)

Cash Flow (constant money) (£) (D116 to M116)

In T

hous

ands

-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 2: Remove unhelpful complexity…

Regression Sensitivity for NPV (10 years)/C120

Std b 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

2000

00

4000

00

6000

00

8000

00

1000

000

1200

000

1400

000

1600

000

EV of NPV (10 years)

Fixed SCC

LaunchYear

Yrs Of Transponder Mkt Grow th

Variable SCC

MDC

Grow th Rate of No. of Divers

Mkt Share (£300/unit)

No. of Divers (Yr1)

% Divers Who Buy Transponders

Inpu

ts

Kurtosis

Convergence monitoring

Regression, Correlation, Advanced Sensitivity

Analysis

Person6 vs Erland vs Erf

Skewness

Chi-Sq Binning

“…percentile value of the subset median in the distribution generated for the whole simulation…”

dxebx

b 2

2

2)(

21)( σ

µ

πσ

−−

∞−∫=Θ )()()(

)(APBPBAP

ABp =

Latin Hypercube sampling

..and so remove barriers to implementing Decision Analysis by making it easier to…

User guides

Make and communicate project recommendations •  Standardised software and

processes •  Integration into other Unilever

processes

Manage portfolios •  Bespoke system developed for

Portfolio analysis •  Standardised process across the

organisation

Supported by:

Core team expertise

Library of best

practice

E-Learnings

Lesson 3: Invest time in identifying external partners and appropriate tools and techniques

Review 1Review of framing and structuring.

Review 3Discussion of analysis, agree decision and actions.

Review 2Review of key data and confirm frame is still valid.

IDENTIFYPROBLEM RECOMMEND

Evaluation Team

Decision Makers

FRAME STRUCTURE ANALYSE

Review 1Review of framing and structuring.

Review 3Discussion of analysis, agree decision and actions.

Review 2Review of key data and confirm frame is still valid.

IDENTIFYPROBLEM RECOMMEND

Evaluation Team

Decision Makers

FRAME STRUCTURE ANALYSE

The overall DMUU process is based on the Strategic Decisions Group’s ‘Dialogue Decision Process’

DecisionTools Suite was chosen as the principle analysis software due to its flexibility and ability to do Monte Carlo and decision tree analysis

Lesson 4: It’s not just about the analysis!

Focus on having the right conversations!

Lesson 5: Celebrating success is crucial, both internally and externally

Internal recognition: •  Project ‘best practice’ summaries are written

up and published onto our internal portals.

•  A series of DMUU Awards have been held to celebrate best practice and the value delivered by Decision Analysis.

External recognition: •  Project Portfolio Management (PPM)

benchmarking exercise (PPM Accelerate) confirmed close alignment with best practice.

• Decision Analysis Society Practice Award – 2008.

D A S Decision Analysis Society

And finally - Lesson 6: Evolve!

From its initial application to the present day, Decision Analysis techniques are at the forefront of making a cultural change to the way Unilever approaches and analyses strategic decisions. Organisations do not stand still and neither will the application of Decision Analysis. We are constantly looking internally and externally to identify future trends and applications. We will evolve our tools, techniques and processes to ensure Unilever is at the forefront 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