Evaluation of the deployed solution using evaluation techniques is a critical phase in business analysis. When a solution has been deployed, it’s crucial to assess its effectiveness to determine if it has achieved the intended business objectives. This evaluation helps justify the investment, enhance the management of current and future projects, and improve strategic decision-making.
Valuation Techniques in Business Analysis
Let’s start discussing different valuation techniques to evaluate a deployed solution in the context of business analysis:
- Cost-Benefit Analysis (CBA): This conventional technique considers the overall benefits of a solution in relation to its costs. It measures both the tangible and intangible costs and benefits. The analysis provides a straightforward way to compare alternative projects.
- Return on Investment (ROI): This technique determines the profitability of an investment or a project by calculating the ratio of net present value(PV) of benefits (return) to PV of costs(investment). A positive ROI indicates a profitable investment.
- Net Present Value (NPV): NPV is a technique that measures the cash inflows and outflows of a project. It considers the time value of money and provides a dollar amount that represents the current value of the benefits net of project costs.
- Key Performance Indicators (KPIs): These are quantifiable measures used to evaluate the success of an organization, employee, etc. in meeting objectives for performance. For example, process KPIs can measure the efficiency of business processes, while outcome KPIs can measure the effectiveness of the deployed solution.
- Balanced Scorecard: This evaluation technique measures performance from four perspectives: financial, customer, internal process, and learning & growth perspective. It provides balanced information about the organizational performance.
Example: Suppose the deployment of an inventory management solution was intended to improve stock control and reduce storage costs. The CBA would measure the cost of integrating, maintaining the new system against the financial savings achieved by the improved inventory management.
Example: In the above example, suppose the inventory management system cost $10,000 to deploy, and it saved $15,000 in storage costs within a defined period, then the ROI would be $15,000/$10,000=1.5, or a 150% return on investment.
Example: Let’s say, in a period of 5 years, we expect the profit of $15,000 each year. In this case, we could calculate the NPV at a discounting rate of, say 10% annually.
Example: In the case of our inventory management solution, KPIs might include measures like the percentage reduction in excess stock, the time taken to process inventory updates, or the precision of inventory forecasting.
Example: In our case, deploying an inventory management solution can affect customer satisfaction (customers find products they want are more often in stock), internal processes (inventory management becomes more efficient), learning and growth (staff learn to use more sophisticated inventory tools), and obviously financials (reduced storage costs).
These are just a few of the many valuation techniques that can be used to analyze the effectiveness of a deployed solution. The chosen technique or combination of techniques is largely dependent on the business case, objective of the solution, and the nature of the organization.
Conclusion
In conclusion, the evaluation of a deployed solution is crucial in the field of business analysis, bringing into perspective the anticipated benefits against the actual results. These techniques are all critical in the PMI-PBA exam and demonstrate the need for effective solution evaluation to ensure the delivered value aligns with the business case and value proposition.
Practice Test
True/False: Evaluating the deployed solution is the final step in business analysis.
- True
- False
Answer: False
Explanation: While evaluating the deployed solution is an important step, it’s not the final one. Feedback based on evaluation should be used for continuous improvement.
Multiple Select: Which among the following are valuation techniques used to evaluate a deployed solution?
- a) Return on Investment (ROI)
- b) Net Present Value (NPV)
- c) Balanced Scorecard
- d) Earnings Before Interest and Taxes (EBIT)
Answer: a, b, c
Explanation: These are all common methods of evaluation techniques used in business analysis. EBIT is more of a financial accounting term and not usually used in the evaluation of a deployed solution.
Single Select: During the evaluation, if a solution does not meet the business case and value proposition it should be__.
- a) Redeployed
- b) Revised
- c) Rejected
- d) None of the above
Answer: b. Revised
Explanation: If the solution does not meet the business case and value proposition, it should be revised and improved, not necessarily rejected or redeployed.
True/False: ROI is not a valid technique for evaluating a deployed solution.
- True
- False
Answer: False
Explanation: Return on Investment (ROI) is one of the most common techniques for evaluating a deployed solution in terms of its financial return.
Single Select: Which technique provides a wider perspective while valuating the deployed solution as it considers financial and non-financial factors?
- a) ROI
- b) NPV
- c) Balanced Scorecard
- d) EBIT
Answer: c. Balanced Scorecard
Explanation: The Balanced Scorecard technique considers both financial and non-financial attributes when evaluating a solution, providing a more comprehensive view.
True/False: The deployment solution’s alignment with the business case and its value proposition is irrelevant during its evaluation.
- True
- False
Answer: False
Explanation: The alignment of the deployed solution with the business case and its value proposition is a critical factor during its evaluation.
Multiple Select: What aspects should be considered when evaluating a deployed solution?
- a) Cost
- b) Efficiency
- c) Business objectives alignment
- d) Project timeline
Answer: a, b, c
Explanation: Cost, efficiency, and alignment with business objectives are crucial aspects to consider during the evaluation. Project timeline is more relevant during project management phase.
True/False: Value proposition of the solution is not considered during the deployment evaluation.
- True
- False
Answer: False
Explanation: The value proposition of the solution is a key aspect to verify when evaluating the deployment.
Single Select: The main goal of evaluating the deployed solution is to
- a) justify the cost
- b) assess its effectiveness against the business case
- c) identify defects
- d) redesign the solution
Answer: b. assess its effectiveness against the business case
Explanation: The primary purpose of the evaluation is to measure how well the solution meets the outlined business case.
True/False: Evaluation of a deployed solution should be a one-time process.
- True
- False
Answer: False
Explanation: Evaluation should be an ongoing process, aiming to continuously improve the solution based on feedback and experience.
Interview Questions
What is the primary objective of evaluating a deployed solution using valuation techniques in the context of PMI-PBA?
The main aim is to determine how well the deployed solution meets the business case and value proposition, thus providing an assessment of the solution’s effectiveness and value.
What are some common valuation techniques used to evaluate a deployed solution?
Common valuation techniques include Cost-Benefit Analysis (CBA), Return on Investment (ROI), Payback Period, and Net Present Value (NPV).
What is the role of Cost-Benefit Analysis in evaluating the solution?
In Cost-Benefit Analysis, the costs involved in the solution’s deployment are compared with the benefits gained. This helps in identifying if the benefits outweigh the costs, and thus, if the solution is effective and adds value.
How does Return on Investment (ROI) help in evaluating a deployed solution?
ROI provides a measurement of the profitability of a solution. A higher ROI indicates more significant gains from an investment relative to its cost, demonstrating the solution’s value.
Can the Payback Period valuation technique be influential in evaluating a deployed solution?
Yes, the Payback Period valuation technique helps to determine how long it will take for the organization to recover its initial investment. This is critical in assessing the risk and efficacy of the solution that has been deployed.
What does Net Present Value (NPV) measure in the context of evaluating a business solution?
NPV calculates the present value of inflows and outflows over a project’s lifecycle, indicating the expected profitability of a solution in today’s dollars.
In the context of PMI-PBA, how important is it to relate deployed solutions to the business case?
Directly correlating deployed solutions to the business case is very important, as it helps to clarify if implements are effectively meeting the business needs and delivering expected value.
What occurs if a deployed solution does not align with the business case or value proposition?
If a deployed solution does not align with the business case or value proposition, it may not deliver the intended value or benefits, leading to unsuccessful or less-than-optimal projects and potential financial loss.
What actions should a business analyst take if a deployed solution fail to meet the business case and value proposition?
A business analyst should engage all relevant stakeholders, reassess the status of the project, identify drawbacks and formulate a corrective action plan to align the solution with the business case and value proposition.
How often should valuation techniques be used to evaluate a solution after deployment?
Valuation techniques should be used regularly and consistently after the deployment of a solution, to ensure ongoing alignment with the business case and value proposition over time.
Can a solution that initially meets the business case and value proposition fail in later evaluations?
Yes, factors like changes in the business environment, shifting customer needs, or the emergence of superior solutions can cause a solution to fall short in later evaluations, even if it initially met the business case and value proposition.
Is stakeholder feedback an integral part of the evaluation process?
Yes, gathering and assessing stakeholder feedback is a critical aspect of the evaluation process. It can provide valuable insights regarding the solution’s effectiveness and alignment with the business case.
Please explain the term ‘Value Proposition’ in the context of a PMI-PBA exam.
In the context of a PMI-PBA exam, ‘Value Proposition’ refers to the unique value a project or solution brings to the organization or stakeholders. It accounts for the business benefits, the costs, and the risks associated with the solution.
How do valuation techniques align with the principles of business analysis in the context of PMI-PBA?
Valuation techniques align with the principles of business analysis by providing quantitative measures to evaluate how well a solution meets business needs, supports the business strategy, and delivers value to stakeholders.
What is a ‘Business Case’ in the context of PMI-PBA?
A ‘Business Case’ in the context of PMI-PBA is a well-structured document that outlines the rationale for initiating a project or task. It presents the expected benefits, costs, risks, and provides alternatives, helping stakeholders in decision making.
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