However, they also have their limitations:

1. most marketers are still not comfortable with NPV or Economic Profit calculations, however sophisticated the organisations they work for, and at an individual programme level they are unlikely to complete the data either painstakingly or accurately, on the month by month basis required by those models
2. while it may make more sense financially to focus on profits and cash flow, the reality of the stock market is that companies still need to prioritise topline growth, which is becoming harder and harder to generate for well-established companies
3. withdrawing an existing programme can have severe commercial implications, so the effects of dis-investment must also be calculated
4. not all objectives are purely financial. You may wish to build your position in the market with a loss-leader, or complete a product / service portfolio for a critical customer
5. resources can be constrained. NPV analysis assumes that you can always hire additional resources if the NPV is positive. While this may be true for some resources, it is definitely untrue for others. Scarce resources can take months to identify, recruit, select and train

So, we have developed a tool that allows you to take into account alternative or cumulative financial measures both short term (next year) and mid-term (over the next three years).

It also allows you to balance off soft strategic objectives against the harder financial ones.

It tracks resource requirements, and allows you to cap programmes where they are constrained.

It allows you to develop alternative scenarios at 100%, 80% and 50% confidence. At 100%, you profile programme outcomes at a level where you can guarantee to deliver the results. At 50%, you profile the same programmes to achieve more optimistic targets which you might or might not achieve, to indicate the maximum “stretch” in the opportunity.

It flags up where dis-investing in a programme could be damaging.

Finally, it allows you to check the totality of projected programmes outcomes of a business against current sales. Projects tend to suffer from the so-called “hockey-stick” effect. Our performance may be somewhat challenged at the moment, but just around the corner a miracle will occur.

It is critical that the profiles and the analysed results be discussed with the Input and Review Teams throughout the process.

In more detail ….

The purpose of this tool is to calculate an overall value rating for all your business opportunities.

To use this tool, you will need to allocate each opportunity to one of two classifications of opportunity:

• Foundational opportunities – critical to the effective running of the business, and an essential source of support for several other opportunities. These opportunities should be defined according to the minimum level of resource required
• Rateable opportunities – these are opportunities where resources can be reduced, maintained or increased, according to their calculated cost-benefits

Every opportunity has to be defined large enough for you to be able to allocate to it discrete resources, and significant enough to be considered as part of a prioritisation exercise.

When you use this tool, you ask each business to profile each of its ratebable opportunities at three levels:

1. The guaranteed level, which you are 100% certain of delivering
2. The forecast level, which you are 80% certain of delivering
3. The all-out level, which you are 50% certain of delivering

All levels assume normal trading circumstances, excluding unforeseen wars, economic depressions, or sudden market entrants.

Step 1

• Define the entirety of your opportunities into opportunities / programmes

• Allocate those programmes to either Foundational Opportunities or Rateable Opportunities
• The Foundational Opportunities should be scoped as narrowly as possible

Step 2

• Complete the "Current" sheet to profile your current results
• This is designed as a reality check on the totality of projections you make for future opportunities

Step 3

• For each Foundational Opportunity, complete the profile within the "Found-in" sheet
• After each profile, copy it from the "Found-Out" sheet, and paste it into the "Cumulative progs" sheet using "Paste Special/Values"
• You should probably not allow more than five foundational opportunities to be profiled by each business as they necessarily distort the prioritisation process

Step 4

• For each Rateable Opportunity, complete the profile within the "Rate-in" sheet
• After each profile, copy it from the "Rate-Out" sheet, and paste it into the "Cumulative progs" sheet using "Paste Special/Values"

Step 5

• When all opportunities have been profiled, analyse them within the "Cumulative progs" sheet
• You can change the weightings at the top of the sheet to explore different permutations of objectives
• After you have given each opportunity a weighted score, total them by business in rank order to see where the constrained resources run out
• Consider transferring constrained resources from other businesses with less attractive opportunities
• Separate out the opportunities at the 100%, 80% and 50% levels, discount the outcomes, and see if this alters the rank order of your opportunities

Steps 6

• Review each input with a team, to include the author of each input
• Ensure that you are comfortable with the data being submitted for each opportunity at each level

Step 7

• Develop a final rank order for the opportunities, and compare the projected results with current sales
• Review the results with the Management Review Team, and discuss the resourcing implications

• Belgium tel: +32 (0)2 747 0945
• France tel: +33 (0)1 76 63 74 09
• UK tel: +44 (0)208 099 7385

or by e-mail at enquiries@mudvalley.co.uk.

© 2007, Mud Valley ™ brand marketing community.

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