Software
is only part of the solution…
Sven Roden
Decision Analysis Group
Unilever Finance Academy
sven.roden@unilever.com
Outline of the presentation
Introduction to
Unilever and the
Finance Academy
What is Decision
Making Under
Uncertainty?
Lessons learned
from our journey
Unilever… one of the world’s leading suppliers of
fast moving consumer goods across Foods and
Home and Personal Care categories
€ 40 billion turnover, 179000 employees with
a portfolio focused on 400 brands
150 million times a day, in 150 countries,
people use our products at key moments of
their day
The Unilever Finance Academy’s mission is to…
• Help finance professionals to create value by being influential business partners
• Equip them with world class capabilities in business and finance
• Enable Unilever Finance to deliver consistently outstanding performance and
become an employer of choice
Strategy Development/
Coordination
External Scan/
Benchmarking
Consultancy
Learning/
Career Development
Best Practice
Development/Sharing
Changing the way we approach decisions…
You have been presented with an opportunity and you must choose
whether to invest or not. To help you make your decision you have been
given two independent analyses of the opportunity…
Probability
density
Single point
analysis
Which gives you the best
information for your
decision?
Probabilistic
analysis
-20
0
20
NPV ($m)
40
60
Spending time discussing what to do in case the unexpected
happens is far more valuable than convincing yourself that the
number you have is the right one
What is Decision Making Under
Uncertainty (DMUU)?
A disciplined,
methodical /
structured approach
to decision making,
with probabilistic
analysis at the heart
of its logical
reasoning.
Different approaches are needed to solve
different types of problems
Organisational Complexity
Many parties in conflict due to
individual and organisational
differences
•
•
•
•
High
Values, desires, & motivation
Perspectives
Personalities
Power bases
Low
Facilitative
leadership
Complete
DMUU toolbox
Decide
Now
Analysis
techniques
Low
High
Analytical Complexity
•
•
•
•
Uncertainty
Many interrelated factors
Many alternatives
Multiple decision criteria
© 1996 by Strategic Decisions Group. All rights reserved. Used by permission.
DMUU addresses the fundamental aspects
required for making high quality decisions
Facilitative leadership
•
•
•
•
Clarifying the problem
Creating alternatives
Structuring information
Improving communication
Analysis
•
•
•
•
Quantifying uncertainties
Testing assumptions
Evaluating alternatives
Identifying sources of value
Insight and commitment to action
Creating
Creating aa culture
culture where
where we
we have
have the
the debate,
debate, make
make aa
decision
decision and
and move
move on
on as
as aa team,
team, even
even when
when we
we have
have to
to
make
make tough
tough choices
choices with
with limited
limited information.
information.
The DMUU process builds in review meetings
to ensure decision quality
Decision Makers
Review 1
Review of framing
and structuring.
IDENTIFY
PROBLEM
FRAME
Review 2
Review of key data
and confirm frame is
still valid.
STRUCTURE
Review 3
Discussion of
analysis, agree
decision and actions.
ANALYSE
Evaluation Team
RECOMMEND
The probabilistic component of DMUU is
routinely used in two ways…
Making
Makingstrategic
strategic
decisions
decisions
“choosing
“choosingthe
theright
rightpath”
path”
Proactively
Proactivelymanaging
managing
risks
risksand
andopportunities
opportunities
“running
“runningthe
thepath”
path”
Our vision is…
Application:
• DMUU is used regularly on significant decisions that have a
high degree of uncertainty and / or organisational complexity.
• Probabilistic business cases have become the norm.
Proactively
Proactively managing
managing
risks
risks and
and opportunities
opportunities
“running
“running the
the path”
path”
Making
Making strategic
strategic
decisions
decisions
“choosing
“choosing the
the right
right path”
path”
Proactively
Proactivelymanaging
managing
risks
risksand
andopportunities
opportunities
“running
the
“running thepath”
path”
Making
Makingstrategic
strategic
decisions
decisions
“choosing
the
“choosing theright
rightpath”
path”
Decision-Makers
Value of Decision Quality
DMUU Practitioners
@RISK LiveWeb
Practitioners Workshop
Advanced Practitioners Programme
Project Leaders and Evaluation Teams
Global Project Leaders
Integrated training programme:
• All targeted Finance Managers have been trained on
the use of DMUU tools.
• All Decision Makers demand to see the use of DMUU
on complex decisions.
• All Business Partners have a basic awareness of
DMUU and want it to be used to help evaluate their
various decisions.
Ways of working:
• The DMUU approach is aligned with our innovation stagegate process and project management toolkit.
• We have a standard toolkit which has been rolled out across
all of Unilever.
3
2
2
IDENTIFY
PROBLEM
FRAME
STRUCTURE
ANALYSE
RECOMMEND
The journey so far…
DMUU is now a standard part of our
innovation stage-gate process and
probabilistic business case are now
required for all large projects
To date we have trained >250 finance
managers in the use of DMUU and
Palisade’s DecisionTools Suite software
It is used on a wide range of
projects and is now being
applied to other applications
Internal global communities of
practice have been set up
We have set up an internal
consultancy function to provide
expertise
Lesson 1: Be clear on what you want to focus on
and be realistic about timescales and resources
Supply chain inventory
optimisation
Financial
hedging
instruments
Portfolio
optimisation
Strategic
decision
making
Proactive risk and
opportunity
management
Create a roadmap of key objectives and timescales…
then actively monitor it!
Lesson 2: Spend the time to identify external
partners and appropriate tools and techniques
Decision Makers
Review 1
Review of framing
and structuring.
IDENTIFY
PROBLEM
FRAME
Review 2
Review of key data
and confirm frame is
still valid.
STRUCTURE
Review 3
Discussion of
analysis, agree
decision and actions.
ANALYSE
RECOMMEND
Evaluation Team
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
Our Palisade partnership extends to more
than software supply
Training
Help desk support
Licensing of software
Maintenance and
roll-out of updates
Future development
of software
Lesson 3: Think about what it takes to embed and
deliver sustained change in an organisation
Embedding
People
Tools
Process
Applications
Design to address
weaknesses in
organisation’s culture
Provide training &
ongoing support
Focus efforts to
build credibility
Organisational
Structure
Make changes to
support & build
for the long term
@RISK
Decision Makers
Review 1
Review of framing
and structuring.
0
20
40
60
80
100
NPV (€m)
120
140
160
180
IDENTIFY
PROBLEM
FRAME
Review 2
Review of key data
and confirm frame is
still valid.
STRUCTURE
Review 3
Discussion of
analysis, agree
decision and actions.
ANALYSE
RECOMMEND
Evaluation Team
Develop roll-out plan and monitor the degree and
quality of uptake
Lesson 4: Learning is more than training
Acquire
E-learning courses
Practice
Ad hoc support
Transfer
to job
Build experience
with own projects
Residential courses
On-the-job learning with an experienced /
advanced practitioner(s)
Participate in local
CoPs
Consult library of
best practice
examples & user
guides
Use core team for
consultancy
Transfer
to others
Pro-active
involvement in the
the global CoP
Develop best
practice guides
Mentor novices
Help teach
courses
To embed DMUU we have developed an
integrated learning programme
Proactively
Proactivelymanaging
managing
risks
risksand
andopportunities
opportunities
“running
“runningthe
thepath”
path”
Making
Makingstrategic
strategic
decisions
decisions
“choosing
“choosingthe
theright
rightpath”
path”
Decision-Makers
Value of Decision Quality
DMUU Practitioners
@RISK LiveWeb
Practitioners Workshop
Advanced Practitioners Programme
Project Leaders and Evaluation Teams
Global Project Leaders
Lesson 5: Reduce complexity for novices
and continue to support them
1
Θ(b) = ∫
e
−∞
σ 2π
b
−( x−μ )2
2σ
2
p ( B A) =
dx
Cash Flow (constant money) (£) (D116 to M116)
250.00
P( A B) P( B)
P ( A)
187.50
Latin Hypercube sampling
Regression,
Correlation, Advanced
Sensitivity Analysis
% Divers Who Buy Transponders
In Thousands
125.00
Person6 vs Erland vs Erf
62.50
0.00
-62.50
Cell:
No. of Divers (Yr1)
-125.00
D116
E116
F116
G116
H116
I116
J116
K116
=Mean,+1/-1SD
L116
M116
=95%,5%
Mkt Share (£300/unit)
Inputs
Grow th Rate of No. of Divers
MDC
Regression Sensitivity for NPV (10 years)/C120
Variable SCC
Convergence
monitoring
Yrs Of Transponder Mkt Grow th
PercentBuy / @RISK/F51
.821
LaunchYear
GrowthNoDivers / @RISK/F47
1600000
1400000
1200000
800000
1000000
.316
600000
0
MktShare / @RISK/F33
400000
Fixed SCC
.437
200000
NoDivers / @RISK/F43
EV of NPV (10 years)
.124
-.101
MDC / @RISK/F69
Skewness
YrsOfGrowth
/ @RISK/F55
Mean of NPV (10 years)
C120
vs Input Distribution Percentile
-.092
-.079
LaunchYear / @RISK/F58
900000
-1
-0.75
-0.5
-0.25
VariSCC / @RISK/F65
-.037
700000
NPV (10 years)
-.077
0
FixedSCC / @RISK/F61
0.25
0.5
0.75
1
500000
Std b Coefficients
300000
100000
-100000
0%
20%
40%
60%
80%
100%
Percentile
Kurtosis
Discrete [Integral Domain]
“…percentile value of the
subset median in the
distribution generated for
the whole simulation…”
Chi-Sq
Binning
To help novices move up the learning
curve, we have made it easier to…
Build models
• Standardised model input sheets
• Subjective data collection
protocols
• Recommendations on distributions
and input parameters
• Use of influence diagrams and
other 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
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
Lesson 6: Evolve!
Organisations do not stand still – be prepared for the future.
Keep looking internally and externally to
identify future trends and applications
Software is only part of the solution…
From our journey so far, our experience has been that creating
sustainable change is more than arming people with software,
providing basic training and expecting them to get on with it.
It takes planning, sustained effort and support.
However, the rewards are worth it!