24 July, 2010

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Developing the Change Management Value Proposition

2 24-Jul-10© Canvas4 Pty Ltd 2008

The reality is not good.

Only 30% of change initiatives

succeed, according to McKinsey’s study of 3,199

executives in July 2008.

Through 2002, less than 25% of

application projects will deliver

hard, monetary benefits that

exceed the cost of the

implementation Gartner

2004 study found the success

rate of change overall was

only 39%. McKinsey Quarterly

2008 global study of 1,500

change practitioners worldwide found that only

41% of projects were considered successful. IBM

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…Change Management shifts the odds.

2009 Benchmarking study found with effective change management 95% of change goals were met and 71% of change delivered on time. With poor change management those figures are both 16%. Prosci

The 2008 global study of 1,500 change practitioners worldwide also found that using a structured Change Management approach and employing professional change managers increased success rates. IBM

2004 study of 40 organisations

found success rate of change

overall was only 39%. A

strong positive correlation

between effective change

management practices and

benefit realisation was also

found McKinsey Quarterly

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Mind the Gap

� The gap between the expectation of change and the organisations history of managing it is growing.

IBM Making Change Work Study 2008

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Inability to close the gap hurts the bottom line

Unmanaged Change

Time

Pro

du

cti

vit

yManagedChange

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Share of Successful Projects

IBM Making Change Work Study 2008

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The soft stuff is hard

IBM Making Change Work Study 2008

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What Makes Change Successful?

Project success hinges largely on people

IBM Making Change Work Study 2008

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What’s the secret

IBM Making Change Work Study 2008

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The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

11 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

12 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

13 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

14 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

15 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

16 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

17 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

18 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$900kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$400kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

19 24-Jul-10© Canvas4 Pty Ltd 2008

The value proposition

$ 11.435M$ 5.445M$600kROI Year 3 = Year 2 + C

$ 7.435M$ 3.445M$300kROI Year 2 = Year 1 + C

$3.435M$ 1.445M$-100kROI Year 1 (C-F)

$565k$555k$500kF = Total Project cost (D+E)

$ 65k (13%)$ 55k (11%)0 E = Change Management Cost

$ 500k$ 500k$ 500kD = Project Cost

$4M$2M$400kC = Likely return (AxB)

80%40%8%B = Probability of success

$5M$5M$5MA = Value of Anticipated Benefits (annual)

Superior CMAverage CMPoor CMElement

20 24-Jul-10© Canvas4 Pty Ltd 2008

Sample

ROI

-$2,000,000

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

Poor CM Average CM Superior CM

Change Management Input

$ B

us

ine

ss

Be

ne

fit

Year 1

Year 2

Year 3

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A tool to assess change risk

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A tool to assess change risk

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How Big is your Change Challenge?

Change Risk Estimator

0

1

2

3

4Clarity of Outcomes

Scope

Stakeholder Engagement

Benefits

Critical Processes

Cultural fit

Management Capability

Leadership Focus

Risk Factor

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A Framework for Action

A systematic approach to change significantly enhances project success…

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Summary

� The evidence is both bad (project outcomes) and good (CM makes a difference)

� The business value case is compelling in $$ terms

� The Change Management Value Proposition needs to be built with the client to build awareness and understanding:

� Articulate the likely $ impacts (The Value Proposition)

� Assist the client to understand the change complexity and risks –e.g.Canvas4 CM Risk Estimator

� Share a structured approach to de-mystify change management