© 2009 IBM Corporation

Power to the test leader: Behind every persuasive argument is a solid business case

TBQAA Chapter MeetingMay 15, 2012Debra Sheldon, IBM Corp

2 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Discussion Points

The opportunity space

Business case as a tool

Using business case logic to re-frame the impact of a defect

More complex business case templates & when to use them

Related terms and concepts better left to finance/accounting

Putting it to good use

3 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Basic economics drive what ultimately gets addressed during a test cycle

Upfront work has been invested in test planning and execution– Defects are uncovered and documented– Tester Prioritization occurs

• Severity • Impact

– Development prioritization occurs• Test prioritization is utilized• Cost to address is factored

Examining the defect and the quality summary– Defects details do not typically contain cost of not resolving– Quality summary reports lack business impact of the

quality• Sponsor is unaware of real impact • Cost of poor quality to the end user goes unquantified

4 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Inability to persuade leads to marginalization

“Plug-in runs slow on Apple OS”

“This software is a piece of stuff”

The story ends

Sponsors …… how did this happen

Testers………….. that’s what I was trying to tell you

These guys sure do complain a lot

5 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Queue the Business Case

Provides a compelling story to the business as to why the problem needs to be solved

Articulates the problem/opportunity in terms of dollar value

Translates a pain point or emotional situation into a business proposition

Provides actionable information

6 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Using business case logic in defect prioritization

Objective is to quantify the problem and provide actionable information

Building the argument• Quantify the number of likely occurrences• Factor wait time, rework• Assign a dollar cost of each occurrence• Provide high/low estimates • Document any assumptions

Store with within the defect

Be prepared to defend, not argue the proposition

Pick a few

7 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Using business case approach in the defect prioritization process

This impacts all 25,000 estimated users who are residents of California and will result in at least 1 call/on line submittal to customer support per each user. This scenario will cost over $32,000 in support.

Works for some defects more than others– Usability

• User error enablers• Repetitive user input

– Behavior that results in a support call– Subjective business rules that, over time translate into real dollar

loss– Rarely occurring critical defect

8 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Upgrade to a more formal approach as needed

Longer decision timeframe • Software purchase• Education• Process change

Considers the life cycle impact

Use more finance related concepts

Use very basic cost/benefit logic

Hard benefits• Results in a departmental increase or decrease in budget• Tangibles – apparent and accepted by the decision maker• Visible on the P&L sheet

Soft benefits• Cost avoidance• Productivity

Building requires documenting methodology and using a template

9 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Building a more detailed business case

Document

Your methodology

10 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

A basic business case template

Enter Cost of Capital: 0% YearENTER DATA IN GOLD CELLS 0 1 2 3 4 5 6Investment Equipment Real Estate Consultant Software Total Investment -$ -$ -$ -$ -$ -$ -$

Revenue Enhancement Revenue Increase (Hard Benefit) Revenue Loss Avoidance (Soft Benefit) Total Revenue Impact - Hard and Soft Benefits -$ -$ -$ -$ -$ -$

Expense Reduction (Hard Costs) Labor Overhead (Include Inventory Carrying Cost) Purchased Materials or Services Total Expense Reduction - Hard Savings Only -$ -$ -$ -$ -$ -$ Expense Avoidance (Soft Savings) Total Expense Impact - Hard and Soft Savings -$ -$ -$ -$ -$ -$

Net Cash Flow - Hard and Soft Benefits and Savings -$ -$ -$ -$ -$ -$ -$

Net Cash Flow - Hard Savings Only -$ -$ -$ -$ -$ -$ -$

Net Present Value - Hard and Soft Benefits and Savings -$

Net Present Value - Hard Benefits and Savings Only -$

Business Return Template

11 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Detailed financial concepts belong to the finance & accounting domains

IRR – rate of return on the investmentNPV - value of the investment when compared to the

alternativeCost of Capital – rate of return that could be earned by putting

funds into another investment

Feel confident about the acumen by knowing when to punt on more complex business case topics - They pay people to do this stuff

Complex business case templates

12 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

Putting it to use

For simple scenarios, provide enough quantitative detail to enable translation of the need into a business decision

Use business case logic de-emotionalize the situation

Creating a more formal business case will add clout to your funding need and outline how this decision will benefit the lead to return on investment

Make it your business

13 Behind every persuasive argument is a solid business case, Debra Sheldon, IBM Corp., May 15, 2012

References and Recommended Reading

ISixSigma : http://www.isixsigma.com/implementation/financial-analysis/hard-and-soft-savings-what-counts-can-be-counted/

Financial Management, Theory and Practice. Eugene F Brigham and Michael C Ehrhardt