The Investment Management Standard

Information Session

…. doing the things that matter most

This session will cover…

History of its evolutionThe need for a different approach

Key concepts

How it is usedShaping new investments (the budget process)

Wider uses

It’s impactRole in better government

Getting startedUsing an Accredited Facilitator

How to become an accredited facilitator

Seeking new insightsYour observations / wisdom

History of it’s evolution…

The need for a different approach

We don’t define benefits and we never track benefits

Millions spent on unnecessary business casesWe poorly define the

need for an investment

Inability to prioritise competing investments

….something wasn’t working (2004)

Disconnect between good policy and its implementation

Little consideration of genuine strategic options

“Solutions looking for problems”

The importance of getting it right early

UK Government Review of Gateway Reviews

© UK Government 2006

Getting back to basics

“16 Questions”questions that any decision-maker should have considered before making a decision to fund an

investment

16Questions …Investment Decision-makers’ Checklist

OK

WE

AK

NO

TH

ING

?

ST

RO

NG

The Business Case format has now been aligned to the 16Questions

….decision-making analysis and advice is based on the 16Questions

The budget process of the Victorian Government

16 QuestionsInvestment

Management Standard

Business Case

policy merit

robustness

Quality of proposals

Quality of analysis and

advice

Investment Analysis & Advice

The difference between PROJECT Management and INVESTMENT Management

INVESTMENT management

Is the logic for the planned investment clear?

Is there a sound case to proceed?

Were the expected benefits achieved?

PROJECTmanagement

Will the project complete within budget?

Will it deliver to its planned schedule?

Were the expected products delivered?

“Key concepts”

The INVESTMENT MANAGEMENT standard

‘…. is a collection of simple, commonsense ideas and practices

that help organisation to direct resources to deliver the best

outcomes.’

Definition of INVESTMENT

‘The commitment of the resources of an organisation with the expectation

of receiving a benefit’

The practices are founded on three principles:

1. The best way to aggregate knowledge is through informed discussion with the people who best understand the subject matter.

2. The logic of any investment must be communicated using simple concepts and language on single-page documents (eg. Investment Logic Map)

3. Every investment must be able to describe how it is contributing to the benefits the organisation is seeking.

…its all about the ‘informed discussion’

Informed Requires the participation of the Investor and those people who are most informed on the topic.

Decision-making They are structured to address a sequence of decisions that are central to the potential investment.

Plain English The story of the investment is told in simple concepts and language in a way that can be understood by the layman. Word limits require that direct language is used. The investment story is depicted on a single page in the form of an Investment Logic Map.

Evidence based Each statement of the story must be able to be supported by evidence.

2-hour limit Discussions do not exceed two-hours in duration. This has been found to be short enough to obtain the time commitment of senior people, and long enough to extract an agreed investment story.

Concluding the discussion

The 48 hours following is used to conclude the discussion. During this period the first version of the investment story is circulated and any outstanding matters are electronically discussed and resolved.

Facilitated The Facilitator is responsible for:Extracting and telling the investment story in a way that will maximise its value to the

organisation and is expressed in plain language and conceptsObtaining the agreement of all participants to the investment storyEnsuring that each statement can be supported by evidence.

Investment Logic Map - “simple concepts and language”A single-page depiction of the logic that underpins an investment. It provides the core focus of an investment and is modified to reflect changes to the logic throughout its lifecycle.

There are three variations:

Initiative (for single investments)

Program (for a program of new

investment)

Organisation(for an entire organisation)

Benefits Framework

Enterprise

Organisation

Investment

Reduce crime

Friendly, confident and safe communities

Reduce time to obtain forensic

matches

“What outcomes is the enterprise is seeking?”

“How will the organisation contribute to the enterprise outcomes?” (BENEFITS)

“How will this investment help the organisation meet it’s objectives?” (KPI)

How it is used…

The 7 practises

Investment Management can be used to…

Shape a new investment

Prioritise investment proposals

Monitor and measure the delivery of benefits

Evaluate a program of investment

Develop new policy

Improve an organisation’s focus and effectiveness

Monitor an organisation’s outcomes

Applied at the “Shaping new investments”, the first goal of the Investment Management Standard is to extract the information decision-makers need to decide whether a potential investment should

proceed to business case, be funded or stoped (answering the 16Questions).

The ‘informed discussions’ (4 workshops) ….structured to extract the critical information that tell ‘the investment story’ that

is the foundation of a business case

Define the problem/s that

need to be addressed

Validate the problem is real

Specify the benefits that will

result from addressing the

problem

PROBLEM Definition

Identify the KPIs, measures and

targets that any investment will need to deliver

Specify how the delivery of the benefits will be measured and

reported

BENEFIT Definition

Explore the interventions that might be

taken to address the problem and

deliver the benefits

Identify and evaluate a mix

of strategic responses

STRATEGIC RESPONSE

Consistent with the strategic

response, define the preferred

solution (changes and

assets)

Quantify the preferred solution

SOLUTION Definition

23

FOUR documents are produced through the workshops of the Standard. These become key content in any subsequent business

case.

Investment Logic Map

Benefit Management Plan

Strategic Options Analysis

Investment Concept Brief

PROBLEM Definition BENEFIT Definition STRATEGIC RESPONSE SOLUTION Definition

24

The number of discussions required and the documents produced will be determined by the

nature of the investment

Very large or complex investments may require four discussions that would produce all five documents as

input to a business case.

Small investments can address the questions to the level required in a single discussion that would only

produce an Investment Logic Map.

….but they all follow the same ‘line of enquiry’

“How can you develop a Benefit Management Plan when you don’t even know what the solution will be?”

A clear understanding of the measures that must be met in successfully responding to the problem is essential to identifying the types of interventions that will be needed.

Without these targets, interventions might be selected that can reduce childhood obesity but to a degree that is ineffective in addressing the problem.

About the order of the workshops…

26

The ‘informed discussions’

Define the problem/s that

need to be addressed

Validate the problem is real

Specify the benefits that will

result from addressing the

problem

PROBLEM Definition

Discussion-1

PROBLEM Definition

The start of the

investment story (an ILM)

Discussion-1

PROBLEM Definition

The start of the

investment story (an ILM)

The ‘informed discussions’

Define the problem/s that

need to be addressed

Validate the problem is real

Specify the benefits that will

result from addressing the

problem

PROBLEM Definition

Identify the KPIs, measures and

targets that any investment will need to deliver

Specify how the delivery of the benefits will be measured and

reported

BENEFIT Definition

Discussion-2

BENEFIT Definition

A Benefit Map is produced…

KPIs must be:

MeaningfulAttributableMeasurable

…and the first version of the

Benefit Management

Plan

The ‘informed discussions’ (workshops)

Define the problem/s that

need to be addressed

Validate the problem is real

Specify the benefits that will

result from addressing the

problem

PROBLEM Definition

Identify the KPIs, measures and

targets that any investment will need to deliver

Specify how the delivery of the benefits will be measured and

reported

BENEFIT Definition

Explore the interventions that might be

taken to address the problem and

deliver the benefits

Identify and evaluate a mix

of strategic responses

STRATEGIC RESPONSE

Firstly, what is a Strategic Intervention (here we go again!)?

….it is anything that can pass the following three tests

Test 2 Does it allow for more than one project option?

Test 1 Will it deliver the expected KPIs (their target measures)?

Test 3 Does it seem to be a valid response to the problem/s?

Let’s clarify between Strategic Interventions, Options and Response

1. A Strategic intervention is a high level individual strategic actions

2. Strategic Options are a mix of Strategic Interventions

3. Strategic Response is your preferred Strategic Option

STEP 1 - Identify potential strategic interventionsAn intervention MUST1. Deliver to some of the identified KPIs, and2. Allow for more than 1 possible solution3. Seem to be a good response to the problem

36

Rapidly increasing rates of diabetes in

children will overwhelm the health

system long term

From Problem to Benefits and Strategic Response

37

From Problem to Benefits and Strategic Response

Increasing road freight in residential streets is causing declining health in people who

live near the port

38

STEP 2 - Select Strategic Options

How can the interventions be grouped to providea range of clever strategic options?

39

Option 1

Use education & technology to

overcome service shortfalls

Option 2

Maximise services provided from existing

facility

Option 3

Deliver additional justice services using

off-site capacity

Option 4

Deliver full range of justice services at new

court complex

Option 5

Cease service provision at Noojee and close

existing complex

Option 6

Close Noojee court and reconfigure to provide

justice services

BENEFITS Percentage of full benefit to be delivered

30% 50% 66% 100% 38% 80%

Ability of each option to deliver a benefit (scored 0-5)

Effectiveness of justice system (50%)

1 2 3 5 2 4 Cost savings (30%) 2 3 4 5 1 4 Safety of participants

(20%)2 3 3 5 3 4

COST NPV of TEI re. base

case (Range)

$2m – 5m $100m - $120m $50m – 75m $300m – 350m $1m – 2m $100m – 120m

TIME From funding date to

delivery of benefits (Range)

24 – 36 months 36 – 48 months 12 – 36 months 36 – 48 months 6 – 12 months 18 – 24 months

RISK (Criticality/Likelihood)

High, Medium or

Low

Education is ineffective M/H

Defendants and witnesses won’t attend court elsewhere M/M

Heritage of court building will restrict its modification H/M

A suitable nearby site is not available H/M

A disbursed court will undermine court effectiveness M/M

A suitable site is not available M/M

Substantial mis-trials due to witness non-attendance M/H

Lack of capacity to handle cases in neighbouring courts H/M

Lack of capacity to handle cases in neighbouring courts H/M

DIS-BENEFITSNegative impacts that are likely to occur as a direct

consequence of implementing this option.

None have been identified Substantial disruption will occur during the construction period

Substantial disruption will occur during the construction period

The old heritage courthouse will be a continued financial burden on government

Closure of the existing court complex will impact the local economy and may threaten the viability of Noojee

Transfer of hearings may impact on the community

Ranking 1 3 2

STEP 3 - Evaluate Strategic Options

40

Option 1

Use education & technology to

overcome service shortfalls

Option 2

Maximise services provided from existing

facility

Option 3

Deliver additional justice services using

off-site capacity

Option 4

Deliver full range of justice services at new

court complex

Option 5

Cease service provision at Noojee and close

existing complex

Option 6

Close Noojee court and reconfigure to provide

justice services

BENEFITS Percentage of full benefit to be delivered

30% 50% 66% 100% 38% 80%

Ability of each option to deliver a benefit (scored 0-5)

Effectiveness of justice system (50%)

1 2 3 5 2 4 Cost savings (30%) 2 3 4 5 1 4 Safety of participants

(20%)2 3 3 5 3 4

COST NPV of TEI re. base

case (Range)

$2m – 5m $100m - $120m $50m – 75m $300m – 350m $1m – 2m $100m – 120m

TIME From funding date to

delivery of benefits (Range)

24 – 36 months 36 – 48 months 12 – 36 months 36 – 48 months 6 – 12 months 18 – 24 months

RISK (Criticality/Likelihood)

High, Medium or

Low

Education is ineffective M/H

Defendants and witnesses won’t attend court elsewhere M/M

Heritage of court building will restrict its modification H/M

A suitable nearby site is not available H/M

A disbursed court will undermine court effectiveness M/M

A suitable site is not available M/M

Substantial mis-trials due to witness non-attendance M/H

Lack of capacity to handle cases in neighbouring courts H/M

Lack of capacity to handle cases in neighbouring courts H/M

DIS-BENEFITSNegative impacts that are likely to occur as a direct

consequence of implementing this option.

None have been identified Substantial disruption will occur during the construction period

Substantial disruption will occur during the construction period

The old heritage courthouse will be a continued financial burden on government

Closure of the existing court complex will impact the local economy and may threaten the viability of Noojee

Transfer of hearings may impact on the community

Ranking 1 3 2

STEP 3 - Evaluate Strategic Options

OVERALL ASSESSMENT Option 3 is the preferred option. This option would deliver most of the benefits sought but at significantly less cost than the Option 4 which would deliver the full benefits. The viability of Option 3 is dependent upon the availability of a suitable site and the extent of the dis-benefit (disruption during a long construction period). Option 6 provides local access to alternative dispute resolution and therapeutic services utilising the existing asset. This provides a substantial proportion of the benefits sought.

RECOMMENDATION That Option 3 proceed to a full study to validate that the assumptions made in this document are valid. Option 4 and 6 should also proceed to further analysis in the case that the assumptions made in relation to Option 3 change significantly during further study.

41

…and the investment

story continues

The ‘informed discussions’ (workshops)

Define the problem/s that

need to be addressed

Validate the problem is real

Specify the benefits that will

result from addressing the

problem

PROBLEM Definition

Identify the KPIs, measures and

targets that any investment will need to deliver

Specify how the delivery of the benefits will be measured and

reported

BENEFIT Definition

Explore the interventions that might be

taken to address the problem and

deliver the benefits

Identify and evaluate a mix

of strategic responses

STRATEGIC RESPONSE

Identify project options that

could implement the

strategic response

Decide and scope the one

considered most suitable

SOLUTION Definition

…and the investment

story is complete

An Investment Concept Brief is developed based on the

preferred solution

Functions supported…

Shape a new investment

Prioritise investment proposals

Monitor and measure the delivery of benefits

Evaluate a program of investment

Develop new policy

Improve an organisation’s focus and effectiveness

Monitor an organisation’s outcomes

ITS IMPACT

Changes the way people think about investments (moved from funding to investing)

Provides a line-of-sight between good policy and its implementation

Brings everybody on the same page

Focuses on what really matters

Makes investments accountable for the benefits they are expected to deliver

This all results in better government….and substantial cost savings

What impact is it having?

GETTING STARTEDhow people and organisations can

adopt it

Contact Details / Useful websitesInvestment Management Teamp (03) 9651 1830 e InvestmentManagement@dtf.vic.gov.au

Investment Management Websitewww.dtf.vic.gov.au/investmentmanagement

Investment Lifecycle Guidelines Websitewww.lifecycleguidance.dtf.vic.gov.au

Gateway Review Process Websitewww.gatewayreview.dtf.vic.gov.au

Investment Management website (www.dtf.vic.gov.au/investmentmanagement)

The PracticesUnderstand how the practices can support the needs of your organisation Support in adopting the practicesObtain information and training that will enable you to apply the practices within your organisationTheory behind the Investment Management StandardAcquire a deeper understanding of the history and theory that underpins the standardSupport for facilitatorsObtain information on how to become accredited and practice as an accredited facilitator

SEEKING NEW INSIGHTS

your observations and wisdom

….enabling us to make a real difference

16Questions …Investment Decision-makers’ Checklist (draft version 5)

The ‘PLUS’ questions that assess the deliverability of major investments