CMMI & BS - Tutorial v1.3.1

Building your Business Strategy for a SustainableProcess Improvement ProgrammeCMMI® & Balanced Scorecard

Giuseppe Magnani Business Strategy Director

SCAMPI Lead Appraiser for CMMISEI authorized CMMI Instructor

www.businesstrategy.com

Agenda Introduction Strategy CMMI®

Balanced Scorecard Integrated Approach Case-Study

INTRODUCTION

“In God we trust, all others bring data.”

W. Edwards Deming

Summary Over the past two decades, the way an organization

drives a process improvement initiative has beenshown to have a significant impact on its businessresults and trends.

CMMI is a powerful tool to help transforming anenterprise vision into business results.– In this regards a measurement & analysis framework is a

prerequisite to set quantitative goals for processperformance and product/service quality.

The many different stakeholder interpretations of theorganizational vision require an integrated CMMIand Balanced Scorecard approach to link thecompany strategy with its key processes.

ROI - Return on Investment

Cost/Benefit Analysis

CMU/SEI-2003-SR-009

Question Is CMMI a business management

Tutorial’s Objective

Adopting CMMIas a

Business Management tool

STRATEGY

Strategy– is a term that comes from the Greek

strategia, meaning "generalship"

Meanings

“Corporate Strategy is– the pattern of decisions in a company that

determines and reveals its objectives, purposes,or goals, produces the principal policies andplans for achieving those goals, and

– defines the range of business the company is topursue, the kind of economic and humanorganization it is or intends to be, and

– the nature of the economic and non-economiccontribution it intends to make to itsshareholders, employees, customers, andcommunities” - Kenneth Andrews

Meanings

Why a Strategy?

Chinese proverb:If you don’t know where you

are going, any road will do.

W. Humphrey proverb:If you don’t know where

you are, a map won’t help.STRATEGY

Corporate Vision is– anticipating the future– predicting further business and

corporate results– where we want to go– …

Meanings

COMMUNICATION TOOLS

VISION, STRATEGY

Processunpredictable, poorlycontrolled andreactive

Processcharacterized forprojects and is oftenreactive

Process characterized forthe organization and isproactive

Process measuredand controlled

Focus on processimprovement

Optimizing

QuantitativelyManaged

Defined

Performed

Managed

Optimizing

Defined

BusinessPlan

CMMI BSC EFQM

The EFQM Excellence Model

Cause-Effect (T. Conti)

RESULTSRESULTS

LEADERSHIPKEYPERFORMANCERESULTS

PEOPLE PEOPLERESULTS

POLICY & STRATEGY

CUSTOMERRESULTS

PARTNERSHIPS &RESOURCES

SOCIETYRESULTS

KEYKEYPROCESSPROCESS(CMM-I)(CMM-I)

DIAGNOSIS

ACTION

DRIVERSDRIVERS

EFQM Excellence ModelEFQM Excellence Model

IDEALsm ModelCMU/SEI-96-HB-001

Strategy for Process Improvement

Processunpredictable,poorlycontrolled andreactive

Processcharacterizedfor projectsand is oftenreactive

Processcharacterized forthe organizationand is proactive

Processmeasuredandcontrolled

Focus onprocessimprovement

Optimizing

Defined

Performed

Managed

Optimizing

Defined

Strategy for Business Improvement

Optimizing

Defined

Performed

Managed

Optimizing

Defined

Strategy for BusinessImprovement ROI Analysis

Strategy for Business Improvement

Optimizing

Defined

Performed

Managed

Optimizing

Defined

CMMI - CMM-Integration

CMM-Integration® (CMMI)

4 Disciplines– Software Engineering– System Engineering– Integrated Process and Product

Development– Supplier Sourcing

SW-CMM® v1.1 vs. CMMI®

Defect Prevention Causal Analysis and ResolutionTechnology Change Mgmt Organizational Innovation & DeploymentProcess Change Management

Quantitative Process Mgmt Organizational Process PerformanceSoftware Quality Mgmt Quantitative Project Management

Organization Process Focus Organization Process Focus Organization Process Definition Organization Process DefinitionTraining Program Organizational TrainingIntegrated Software Mgmt Integrated Project Management

Risk ManagementSoftware Product Eng. Requirements Development

Technical SolutionProduct Integration

Intergroup Coordination VerificationPeer Reviews Validation

Decision Analysis and Resolution

Requirements Management Requirements ManagementSoftware Project Planning Project PlanningSoftware Project Tracking & Oversight Project Monitoring and ControlSoftware Subcontract Mgmt Supplier Agreement ManagementSoftware Quality Assurance Product & Process Quality AssuranceSoftware Configuration Mgmt Configuration Management

Measurement and Analysis

LEVEL 5OPTIMIZING

LEVEL 4MANAGED

LEVEL 3DEFINED

LEVEL 2REPEATABLE

Staged Representation Components

Commitmentto Perform

Maturity Levels

GenericPractices

GenericGoals

Process Area 2

Common Features

Process Area 1 Process Area n

Abilityto Perform

DirectingImplementation

VerifyingImplementation

SpecificGoals

SpecificPractices

GP 2.7 Identify & Involve Relevant Stakeholders

GP 2.10 Review Status with HL Management

CMMI® Staged Representation

Process unpredictable,poorly controlled andreactive

Process characterizedfor projects and isoften reactive

Process characterized forthe organization and isproactive

Process measuredand controlled

Focus on processimprovement

Optimizing

Defined

Performed

Managed

Optimizing

Defined

CMMI® Continuous Representation

5 Optimizing4 Quantitatively Managed3 Defined2 Managed1 Performed0 Incomplete

RM PP M&A VE

CAPABILTY

Decision Analysis and Resolution Requirements Development

System Product Deliveries

Project Planning

Supplier Agreement Management

Product Control

Products

Outcome & FeedbackProduct

Verification ValidationMeasurementand Analysis

Deficiencies

Directives, Constraints

Contracting Activity Planning

Requirements DefinitionBudgeting Priority

Assessment & Certification

Integrated ProjectManagement

Project Monitoringand Control

Risk Management

TechnicalSolution

ProductIntegration

RequirementsManagement

ConfigurationManagement

Quality Assurance

Program ManagementTechnical Execution

ProcessFocus

ProcessDefinition Training Quantitative

MgmtProcess

PerformanceInnovation and

Deployment

Process Maturation

Organizational Process Management

Mission Area Planning

ConcurrentFront-EndActivities

Causal Analysisand Resolution

CMMI-based Life Cycle Relationships

MissionShortfalls

Integrated SupplierManagement

Integrated Teaming

Environmentfor

Integration

BALANCED SCORECARD

Why BSC?

The balanced scorecard provides asystematic way to:– obtain measures and indicators

reflecting the performance of anorganization

– uses an organization’s vision andmission statements to identify andclarify strategic goals and sub-goals

BSC Framework

BSC vs. CMMI

CMMI PAMeasurement & Analysis

BSC Representation - sample

Nils-Goran Olve and AnnaSostrand

VISION &BUSINESS OBJECTIVES

VISION:To become the premiere providerof Custom-Solutions in EU by:

•Becoming the EU competencecenter recognized for software& system engineering practicesat CMMI Level 5

•Establishing a long-termpartnership with our sister-companies in ASIA-PAC

INITIATIVES BUSINESS RESULTS

2005 BUSINESSOBJECTIVESFINANCIAL

•Increase revenues of 3,5 %

CUSTOMER•Augment CustomerSatisfaction from 8,50 to9,00

•Achieve 100% retention ofkey customers

LEARNING• Deploy the 4-weekslearning program at EMEA

• Reduce turn-over down to15%

INTERNAL• Achieve CMMI Level 3 byQ3-2004

• Implement BSC atIndividual Level

Customer / Consumer

• Achieve customer satisfaction ratings ofaverage 8.5/10 for key departments

•Achieve Zero-defects for key-productsdelivery

•On-time delivery and quality goals across95% of projects

•………..•…..•……………………..

Financials•Revenue: Euro 7,5 BLN•………………..

Human Resources

• Establish team chartering policies forpeople recognition

• 80% of staff attending the 4-weeks program• Allocate Euro 55,000.00 for process

improvement rewards• ……….

Strategic Planning• Review Business Plan monthly to align BSC with CMMI

initiatives• ………………• ………….

Leadership

•Communicate the new sharedvision, corporate mission,organizational values andperformance

•Conduct weekly charter teamsmeetings

•……………..

Process Management

•Allocate 12% of effort for processimprovement initiatives

•Develop CMMI level 5 Roadmap•………………………….

-------------------------• ----------• ----------------------• ----------

BSC RATING

KPI KPI KPI

Perspective 1

KPI KPI KPI

Perspective 2

KPI KPI KPI

100% 100%

score score score score

SCORE SCORE

RATING SCORING

100% 100%

CSF: Critical Success FactorsKPI: Key Performance Indicators

Developing Enterprise-wide Measures

CMU/SEI-2003-TN-024

BSC Reporting

BSCInternalAssess.Report

QualityAssurance

Report

InternalSurvey

Management & Operational Reporting

BSC Definition

A strategic, measurement-basedmanagement system, proposed by RobertKaplan and David Norton, which providesa method of aligning business activities tothe strategy, and monitoring performanceof strategic goals over time.

A balanced scorecard is a format forcommunication about activities consistingof four perspectives,– each of which should include a small number

of important metrics.

BSC Life-Cycle

Deploying Initial BSC Deploying Dept./Proj./Indiv. BSC Measuring & Analyzing Diagnosis Action (initiatives) Planning & Monitoring Re-conciliation … Reviewing Initial BSC

BSC Life-Cycle

Deploying Initial BSC– Prepare Actors– Running Executive Workshops– Set Top-level BSC– Roll-out TL-BSC– Determine which organizational level

should be covered by BSC• Up to individuals…

Goal Questions

CMU/SEI-2003-TN-024

How to illustrate BSCStrategy map – E-business Venture

How to illustrate BSCStrategy map – University

BSC Life-Cycle

Deploying Dept./Proj. BSC– Prepare Actors– Running Local Workshops– Set Local BSC– Roll-out L-BSC– BSC Bottom-up Review and Conciliation

BSC Life-Cycle

Measuring & Analyzing– Collect Measures– Analyze Measures– Store Data & Results– Communicate Results– BSC Bottom-up Review and Re-

Conciliation

BSC Rating

KPI KPI KPI

Perspective 1

KPI KPI KPI

Perspective 2

KPI KPI KPI

100% 100%

SCORING

RATING SCORING

100% 100%

CMMI-BSC INTEGRATED APPROACH-1MEASUREMENT & ANALYSIS

M&A Purpose The purpose of Measurement and

Analysis is to:– develop and sustain a measurement

capability that is used to supportmanagement information needs

CMMI - M&A PA The Measurement and Analysis Process

Area involves the following– Specifying the objectives of measurement and analysis

such that they are aligned with identified informationneeds and objectives

– Specifying the measures, data collection and storagemechanisms, analysis techniques, and reporting andfeedback mechanisms

– Implementing the collection, storage, analysis, andreporting of the data

– Providing objective results that can be used in makinginformed decisions, and taking appropriate correctiveactions

Align Measurement &Analysis Activities

Establish MeasurementObjectives

Specify Measurement

Specify Data

Collection / Storageprocedures

Specify Analysisprocedures

Provide Measurement Results

CollectMeasurement Data

AnalyzeMeasurement Data

Store Data &Results

CommunicateResults

BSC Life-Cycle

Diagnosis– During CMMI Assessment– During TQM Assessment– Ad-hoc BSC Assessment

• Independent vs. Internal Assessment Team

BSC Life-Cycle

Action Planning & Monitoring– Analyze/Review

• Strategic Aims• Critical Success Factors• KPI Target and Actual

– Define/Review Actions– Re-conciliation

… Break

BALANCED SCORECARDNew trends

BALANCED SCORECARD 2001

Denise Lindsey Wells

CMMI-BSC INTEGRATED APPROACH-2

CMMI Enablers for BSC

Project Planning– SP 2.6-1 Plan Stakeholder Involvement

Project Monitoring & Control– SP 1.5-1 Monitor Stakeholder

Involvement Integrated Project Management

– SG2 Coordinate & Collaborate withrelevant Stakeholder

CMMI Enablers for BSCcont …

Integrated Project Management forIPPD– SG3 Use the project’s shared vision

context

Quantitative Understanding

KPI KPI KPI

Perspective 1

KPI KPI KPI

Perspective 2

KPI KPI KPI

100% 100%

score score

RATING SCORING

100% 100%

ORGANIZATIONAL PROCESS PERFORMANCEQUANTITATIVE PROJECT MANAGEMENT

CMMI Enablers for BSCcont …

Organizational Process Performance– SP 1.3-1 Establish Quality and Process-

Performance Objectives• Based on organization’s business

objectives

Quantitative Understanding

Senior Management

OPPProgress toward

achieving businessobjectives

Quality and process performance objectives,

measures, baselines, models

Cost and benefitdata from pilotedimprovements

Quality and processperformance objectives,

measures, baselines, models

Process performanceand capability data

Basic Set of Process Managementprocess areas

Ability to developand deploy processand supporting assets

OrganizationImprovements

Common measures

Project Management,Support, and Engineering

process areas

Decision Analysis and Resolution Requirements Development

System Product Deliveries

Project Planning

Supplier Agreement Management

Product Control

Products

Outcome & FeedbackProduct

Verification ValidationMeasurementand Analysis

Deficiencies

Directives, Constraints

Contracting Activity Planning

Requirements DefinitionBudgeting Priority

Assessment & Certification

Integrated ProjectManagement

Project Monitoringand Control

Risk Management

TechnicalSolution

ProductIntegration

RequirementsManagement

ConfigurationManagement

Quality Assurance

Program ManagementTechnical Execution

ProcessFocus

ProcessDefinition Training Quantitative

MgmtProcess

PerformanceInnovation and

Deployment

Process Maturation

Organizational Process Management

Mission Area Planning

ConcurrentFront-EndActivities

Causal Analysisand Resolution

CMMI-based Life Cycle Relationships

MissionShortfalls

Integrated SupplierManagement

Integrated Teaming

Environmentfor

Integration

ICT BSC

CMMI – Business Tool

Cause-Effect (T. Conti)

RESULTSRESULTS

LEADERSHIPKEYPERFORMANCERESULTS

PEOPLE PEOPLERESULTS

POLICY & STRATEGY

CUSTOMERRESULTS

PARTNERSHIPS &RESOURCES

SOCIETYRESULTS

KEYKEYPROCESSPROCESS(CMM-I)(CMM-I)

DIAGNOSIS

ACTION

DRIVERSDRIVERS

EFQM Excellence ModelEFQM Excellence Model

M-L1M-L2M-L3

M-C1M-F1M-I1M-I2

METRICS

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1 - ENSURE KEY-COMPETENCIESFOR NEW SERVICEPORTFOLIODEVELOPMENT2 - PROVISION OF A NEWTECH INFRASTRUCTURE3 - ENSURE CONTINUOUSSERVICE PROVISION

CRITICALFACTORS OF

SUCCESS

CONTINUOUSPROCESSIMPROVEMENT TOBETTER SATISFYIMPLICIT &EXPLICITCUSTOMER NEEDS

ENSURE RELIABLESERVICESACCORDINGTO BUSINESSREQUIREMENTS

EFFICIENT USEOF ICT -RESOURCES

AVAILABILITY OFADEQUATEICT PROCESS& TECHNOLOGY

STRATEGICOBJECTIVES

LEARNINGCUSTOMERFINANCIALINTERNALPERSPECTIVE

MISSION“To be the most reliable partner for added-value ITC solutions”

BSC – ICT Dept

Flexible ICTOrganization:- Focus on TTM andProduct & ServiceQuality- Focus on core-competences

OBJECTIVE PROCESSES

ICT Governance

RelationshipManagement

KPI CATEGORY KPI

Capability management- Resources & Capacity Planning - Training Planning - -

Quality management - PPQA Performance - NC Close/Open

- Process compliance

ESP management

Strategic Planning - Plans completeness and accuracyi

Architecture management- % Planned/Implemented Evolutionary Architectural Innovations

Security management - Security Auditing level of compliance

Operational Planning - Early availability of Area Planning

Requirement Management - Requirement Volatitlity - % Accepted Business CRs

Effective Execution - Project Schedule Estimate Accuracy

Feasibility Effectiveness - % FS Complete / Business Plan Requests

- No. % 1st approval from customers

INTERNAL PERSPECTIVE

CASE-STUDY

Business Case

Build-up top-level BSC

Identify CSF through CMMI PAs

Lesson Learned

Company The Building Solution Center Europe

(BSCE) (Maintal – Germany) is aHoneywell company and the mainengineering facility for the H&BC S&S– (Home & Building Control, Solutions & Services) business

and responsible for system design, softwareand solution development and systemintegration.

The BSCE employs around 80 people(Year 2000)

Issues (Year 1995)

Many of the BSCE software releaseswere still late

Quality of delivery rather low Maintenance effort high Customers more or less dissatisfied.

Improvement & AssessmentRoadmap

Dec. 96CBA IPILevel 2Assessment

Jul 96MiniAssessment

Oct. 98CBA IPILevel 3Assessment

Oct 97MiniAssessment

Jul 98MiniAssessment

Mar 98SelfAssessment

Mar 97SelfAssessment

1995: kick-off of Process Improvement Program andMeasurement of Cost of Quality

Cost of software quality

Cost of Non Quality

Cost of Value

Cost of verification

Cost ofprevention

External costof defects

Internal costof defects

retestingreworkdefects management

customer supportproblems investigationupdatesdefects notification

quality assuranceinspectionsprocess definition/improv.metrics collection/analysis

testingproduct quality auditssoftware product qualification

Cost Management (Cost Breakdown Structure)

The Improvement approach has ledBSCE on an average over the past 4years to25 – 30 % Revenue Increase10 – 12 % Productivity Improvement20 – 25 % Reduction in Cost of Quality30 – 35 % Software Quality ImprovementZero critical defects on field installationsOn time delivery of all Software ProductsExcellent feedback from customer audits

Business Results (Year 1999)

Lesson Learned (I)

“Process Improvement Pays Back”

1995 1996 1997 1998

Target Defects/KSLOC

Defects per Number of Line of Codes

Lesson Learned (II)

BSCE Cost of Software Quality

1995 1996 1997

Prevention

Testing

Rework

Cost of Software Quality

Implementation Sample

Top-level BSC–

CMMI PAs Scenario–

THANKS!

Acknowledgements: We would like to thank Fernando Mandelli (ITALY) for his comments and contributions

Building your Business Strategy for a SustainableProcess Improvement ProgrammeCMMI® & Balanced Scorecard

CMMI & BS - Tutorial v1.3.1

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