Article

Rapid prototyping helps Verizon's corporate performance management system succeed

Hannah Smalltree, News Writer

When the big boss calls and asks your team to deploy a corporate performance management (CPM) system in eight weeks instead of the planned three months -- what do you say?

If you're working for MCI during the 2003 period when it was overshadowed by fraud, bankruptcy and financial problems, you say "Sure!" according to Leslie Mote, a director for the expense and profitability analysis group, formerly part of MCI but now part of Verizon Business, a division of New York-based Verizon Communications Inc. Using

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rapid prototyping techniques, Mote's team was able to deliver a finance CPM system, for activity-based costing, by the accelerated deadline. It was a major boon for the beleaguered telecom, helping it to quickly submit required external financial reports and develop the management strategies that kept it afloat until its eventual merger with Verizon in January 2006. Many CPM projects can benefit from rapid prototyping, according to Gary Cokins, product manager with Cary, N.C.-based SAS Institute and author of several CPM-related books.

We have a phrase that goes, 'It's better to be approximately correct than precisely inaccurate.'
Gary Cokins
product manager with Cary, N.C.-based SAS Instituteand author of several CPM-related books

"Part of the hesitancy to get started [with CPM projects] is that people think that it will be a mudslide of data, it will take two years, triple the size of the department and add more processes," Cokins said.

There's a reason people think that -- it's often true. Past CPM-related endeavors have indeed gone this way, he said, producing "monstrously oversized" business models that paradoxically ended up hindering deployment and adoption of systems. Over the last six years, CPM experts have embraced rapid prototyping, a technique originally used by the automobile industry for designing cars quickly. The term historically referred to physical prototyping activities -- for example, experimenting with ideas for new car models by carving up bars of soap rather than starting with a lengthy design specification process.

Now, techniques like rapid prototyping, or the similar discipline of rapid development, are frequently used in the technology field to get projects off the ground faster. In CPM system rapid prototyping, Cokins explained, a small group of employees quickly develops a high-level business model, prototypes the system and populates it with real company data -- in a matter of weeks. There's much less detail in the system than there would be after a multi-year project, but that's okay, he said.

"We have a phrase that goes, 'It's better to be approximately correct than precisely inaccurate,' " Cokins said.

Even the initial results from rapidly prototyped CPM systems can be very helpful, he added. With only high-level details, a CPM system can uncover problem areas, and after executives and stakeholders see the initial results, they often understand the purpose of the system better and can better help fill in the details.

Rapid prototyping saves the day -- twice

The MCI-now-Verizon team wasn't originally planning a rapid prototype approach, Mote said. Before the request to speed up the project, the finance team had been evaluating CPM systems -- in particular, those that support activity-based costing. That's a CPM technique that helps organizations better understand the profitability of specific products and services. In a company with an expensive shared resource like a telecom network, activity-based costing helps show how much of that shared resource each product or service uses. The project was moving along, and Mote's team had settled on SAS's Activity Based Management system. They had a three-month project plan -- before the call came.

The CPM project caught the attention of MCI executives when they realized it would enable them to report network costs by business segment, which in turn would help them submit more accurate financial statements to the government, Mote explained. It would also help the management team home in on profitable, or unprofitable, sales channels -- suddenly more critical than ever for the ailing company. The executives asked for the new system in eight weeks, and Mote's team swung into action.

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Using rapid prototyping techniques, the team "locked themselves into a room," and developed a basic business model in one week, Mote said. They also narrowed the scope of the project to deliver just the specific financial information that the executives needed for external financial reporting.

"The key is to focus on what you want to do," Mote said. "We had to involve the entire company, but we went to them with a very distinct set of questions."

Executive support was critical, Mote said. The team probably wouldn't have gotten as much quick cooperation from the rest of the organization without that support from the top, she said. The team spent four weeks interviewing different business segments, importing general ledger data, and running all the information through the business model. It took another two weeks to produce the required financial reports and meet the deadline. But the project had another benefit. They had started to build organizational buy-in for CPM, which was critical because the project marked the beginning of a shift to more data-driven corporate management.

Since the system went live, it's been further enhanced and more details have been filled in. But it's a good thing the team kept their rapid prototype project plans around. When MCI merged with Verizon Business in January 2006, Mote's department got another request.

"We actually did another rapid deployment, where we pulled in all the Verizon Business costs, ran it through our model and did our quick interviews [with Verizon departments]" Mote said. "It was almost exactly the same project plan."


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