sven roden keynote for palisade conf 09

7/28/2019 Sven Roden Keynote for Palisade Conf 09

1/27

DecisionMaking

UnderUncertainty

Think Clearly Act Decisively Feel Confident

Think clearly, actdecisively and feel

confident Unilevers story

Sven Roden


2/27

In any large dynamic organisation, complexity

impacts decision making

Organisational Analytical


3/27

Outline of presentationIntroduction to Unilever

and the Decision

Analysis Group

What is Decision

Making UnderUncertainty?

Lessons learned fromour journey


4/27

Unilever is a large, culturally diverse and complex

organisation

174,000 employees in 150counties with a large degree

of cultural diversity


5/27

The Decision Analysis Group is part of Finance

Excellence and our responsibilities include

Development Learning Consultancy


6/27

What is Decision Making Under

Uncertainty (DMUU)?

DMUU is a disciplined,methodical / structuredapproach to decision

making, withprobabilistic analysis atthe heart of its logical

reasoning.


7/27

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.


8/27

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


9/27

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




IDENTIFYPROBLEM

RECOMMEND

Evaluation Team

Decision Makers


Appropriateframe

Compellingalternatives

Reliableinformation

Criteria &trade-offs

Logicalreasoning

Commitmentto action


10/27

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.


11/27

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


12/27

The vision for DMUU

is for high quality decision making to become the norm.

Adopted enterprisewide

Fully integrated with

ways of working

Changes theculture


13/27

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


14/27

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


15/27

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!


16/27

Lesson 2: Spend the time to identify external

partners and appropriate tools and techniques




IDENTIFYPROBLEM RECOMMEND

Evaluation Team

Decision Makers





IDENTIFYPROBLEM RECOMMEND

Evaluation Team

Decision Makers


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


17/27

Our Palisade partnership extends to more

than software supplyTraining

Help desk support

Licensing of software

Future developmentof software

Maintenance and

roll-out of updates


18/27

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


19/27

This nodal structure is scalable, adaptable andprovides rapid response to business needs

DecisionAnalysisGroup

AdvancedPractitioner

Financeprofessionals



AdvancedPractitionerFinance

professionals


AdvancedPractitioner

Finance

professionals


Global Communityof Practice

Local Community

of Practices


20/27

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


21/27

Decision-Makers

To embed DMUU we have developed an

integrated learning programmeMaking strategic

decisionschoosing the right path

Making strategicdecisions

choosing the right path


running the path


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


22/27

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.


23/27

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


24/27

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


25/27

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


26/27

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.


27/27

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

sven roden keynote for palisade conf 09

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