CMMI & BS - Tutorial v1.3.1

Building your Business Strategy for a Sustainable
Process Improvement Programme

CMMI® & Balanced Scorecard
Giuseppe Magnani
Business Strategy Director
SCAMPI Lead Appraiser for CMMI
SEI authorized CMMI Instructor
Agenda
 Introduction
 Strategy
 CMMI®
 Balanced Scorecard
 Integrated Approach
 Case-Study
www.businesstrategy.com
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 been
shown to have a significant impact on its business
results and trends.
 CMMI is a powerful tool to help transforming an
enterprise vision into business results.
– In this regards a measurement & analysis framework is a
prerequisite to set quantitative goals for process
performance and product/service quality.
 The many different stakeholder interpretations of the
organizational vision require an integrated CMMI
and Balanced Scorecard approach to link the
company strategy with its key processes.
ROI - Return on Investment
 Cost/Benefit Analysis
CMU/SEI-2003-SR-009
ROI
CMU/SEI-2003-SR-009
Question
 Is CMMI a business management
tool?
Tutorial’s Objective
Adopting CMMI
as a
Business Management tool
STRATEGY
Meanings
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 and
plans for achieving those goals, and
– defines the range of business the company is to
pursue, the kind of economic and human
organization it is or intends to be, and
– the nature of the economic and non-economic
contribution it intends to make to its
shareholders, employees, customers, and
communities” - Kenneth Andrews
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
W.H.
Meanings
 Corporate Vision is
– anticipating the future
– predicting further business and
corporate results
– where we want to go
–…
COMMUNICATION TOOLS
CMMI BSC EFQM
Optimizin
5 Focus on process g
improvement
Quantitatively
Managed
4 Process measured
and controlled
Defined
3 Process characterized for
the organization and is
proactive
Managed
2 Process
CMMI
characterized for
projects and is often
reactive Performed
1 Process
unpredictable, poorly
controlled and
reactive
Business
Plan
VISION, STRATEGY
The EFQM Excellence Model
Cause-Effect (T. Conti)
DIAGNOSIS
EFQM Excellence Model
PEOPLE PEOPLE
RESULTS
KEY
PROCESS KEY
POLICY & CUSTOMER
LEADERSHIP (CMM-I) PERFORMANCE
STRATEGY RESULTS
RESULTS
PARTNERSHIPS & SOCIETY

RESOURCES RESULTS
DRIVERS RESULTS
ACTION
Strategy for Process Improvement
Optimi
5 Focus on zing
process
improvement Quantitati
4 Process vely
Managed
measured
and
controlled Defin
3 Process ed
characterized for
the organization
and is proactive Manage
2 Process d
CMMI
characterized
for projects Perform
and is often
1 Process ed
reactive
unpredictable,
poorly
controlled and
reactive
IDEALsm Model
CMU/SEI-96-HB-001
Strategy for Business Improvement
Optimi
5 Focus on zing
process
4 Process vely
Managed
measured
and
controlled Defin
3 Process ed
characterized for
the organization
2 Process d
CMMI
characterized
and is often
1 Process
reactive ed
unpredictable,
poorly
controlled and
reactive
IDEALsm Model
CMU/SEI-96-HB-001
Strategy for Business
Improvement
 ROI Analysis
Strategy for Business Improvement
Optimi
5 Focus on zing
process
4 Process vely
Managed
measured
and
controlled Defin
3 Process ed
characterized for
the organization
2 Process d
CMMI
characterized
and is often
1 Process
reactive ed
unpredictable,
poorly
controlled and
reactive
IDEALsm Model
CMU/SEI-96-HB-001
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 Resolution
LEVEL 5 Technology Change Mgmt Organizational Innovation & Deployment
OPTIMIZING Process Change Management
LEVEL 4 Quantitative Process Mgmt Organizational Process Performance
MANAGED Software Quality Mgmt Quantitative Project Management
Organization Process Focus Organization Process Focus

Organization Process Definition Organization Process Definition
Training Program Organizational Training
Integrated Software Mgmt Integrated Project Management
Risk Management
Software Product Eng. Requirements Development
Technical Solution
Product Integration
Intergroup Coordination Verification
LEVEL 3 Peer Reviews Validation
DEFINED Decision Analysis and Resolution
Requirements Management Requirements Management

Software Project Planning Project Planning
Software Project Tracking & Oversight Project Monitoring and Control
Software Subcontract Mgmt Supplier Agreement Management
Software Quality Assurance Product & Process Quality Assurance
LEVEL 2 Software Configuration Mgmt Configuration Management
REPEATABLE
Measurement and Analysis
Staged Representation Components
Maturity Levels
Process Area 1 Process Area 2 Process Area n
GP 2.7
Specific Generic Identify & Involve
Goals Goals Relevant Stakeholders
Common Features
Commitment Ability Directing Verifying

to Perform to Perform Implementation Implementation
Specific Generic
Practices Practices GP 2.10
Review Status with
HL Management
CMMI® Staged Representation
Optimizing
5 Focus on process
improvement
Quantitatively
4 Process measured Managed
and controlled
Defined
3 Process characterized for
the organization and is
proactive
Managed
2 Process characterized
for projects and is
often reactive
Performed
1 Process unpredictable,
poorly controlled and
reactive
CMMI® Continuous Representation
5 Optimizing
4 Quantitatively Managed
3 Defined 4
3.5
2 Managed 3
2.5
1 Performed 2
1.5
CAPABILTY
0 Incomplete 1
0.5
0
RM PP M&A VE
CMMI-based Life Cycle Relationships
Mission Area Planning Budgeting Priority Requirements Definition
Requirements Development
Directives, Constraints
Decision Analysis and Resolution
Mission
Shortfalls
Contracting Activity Planning
Supplier Agreement Project
Management Planning
Concurrent
Product Control Front-End
Integrated Project
Management
Requirements
Management Technical
Activities
Integrated Teaming Solution
Configuration
Integrated Supplier
Management
Management
Risk Management Quality Assurance Product
Project Monitoring Integration
and Control Causal Analysis
and Resolution Technical Execution
Program Management
Assessment & Certification

Product
Deficiencies Product Measurement
Validation s
Verification and Analysis
Outcome & Feedback
System Product Deliveries
Organizational Process Management
Process Process Innovation and Environment Process Quantitative

Focus Definition Training for Performance
Deployment Mgmt
Integration
Process Maturation
BALANCED SCORECARD
Why BSC?
 The balanced scorecard provides a

systematic way to:
– obtain measures and indicators
reflecting the performance of an
organization
– uses an organization’s vision and
mission statements to identify and
clarify strategic goals and sub-goals
BSC Framework
BSC vs. CMMI
CMMI PA
Measurement
& Analysis
BSC Representation - sample
Nils-Goran Olve and Anna

Sostrand
VISION & INITIATIVES BUSINESS RESULTS
BUSINESS OBJECTIVES
VISION: Leadership Financials

To become the premiere provider
of Custom-Solutions in EU by: •Communicate the new shared •Revenue: Euro 7,5 BLN
vision, corporate mission, •………………..
• Becoming the EU competence organizational values and
center recognized for software performance Strategic Planning
& system engineering practices
• Review Business Plan monthly to align BSC with CMMI
•Conduct weekly charter teams
initiatives Customer / Consumer
at CMMI Level 5 • ………………
meetings
• ………….
• Establishing a long-term •…………….. • Achieve customer satisfaction ratings of
partnership with our sister- average 8.5/10 for key departments
companies in ASIA-PAC •Achieve Zero-defects for key-products
-------------------------
• ---------- delivery
2005 BUSINESS • ----------------------
• ----------
•On-time delivery and quality goals across
OBJECTIVES 95% of projects
•………..
FINANCIAL •…..
• Increase revenues of 3,5 % •……………………..
CUSTOMER
• Augment Customer
Satisfaction from 8,50 to Process Management
9,00
Human Resources
• Achieve 100% retention of •Allocate 12% of effort for process
key customers
improvement initiatives • Establish team chartering policies for
LEARNING •Develop CMMI level 5 Roadmap
• Deploy the 4-weeks •…………………………. people recognition
learning program at EMEA • 80% of staff attending the 4-weeks program
• Reduce turn-over down to • Allocate Euro 55,000.00 for process
15% improvement rewards
INTERNAL • ……….
• Achieve CMMI Level 3 by
Q3-2004
• Implement BSC at
Individual Level
BSC RATING
BSC SCORE
100%
SCORING
RATING
Perspective 1 SCORE Perspective 2 SCORE
100% 100%
CFS score CFS score CFS score CFS score
KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI
100% 100% 100% 100%
CSF: Critical Success Factors

KPI: Key Performance Indicators
Developing Enterprise-wide Measures
CMU/SEI-2003-TN-024
BSC Reporting
BSC
Internal
Internal
Assess.
Survey
Report
Quality
Assurance
Report
Management & Operational Reporting
BSC Definition
 A strategic, measurement-based
management system, proposed by Robert
Kaplan and David Norton, which provides
a method of aligning business activities to
the strategy, and monitoring performance
of strategic goals over time.
 A balanced scorecard is a format for
communication about activities consisting
of 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 BSC
Strategy map – E-business Venture

Sostrand
How to illustrate BSC
Strategy map – University

Sostrand
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
BSC SCORING
100%
RATING SCORING
Perspective 1 Perspective 2 score
100% 100%
100% 100% 100% 100%
CMMI
CMMI-BSC INTEGRATED APPROACH-1
MEASUREMENT & ANALYSIS
M&A Purpose
 The purpose of Measurement and
Analysis is to:
– develop and sustain a measurement
capability that is used to support
management 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 information
needs and objectives
– Specifying the measures, data collection and storage
mechanisms, analysis techniques, and reporting and
feedback mechanisms
– Implementing the collection, storage, analysis, and
reporting of the data
– Providing objective results that can be used in making
informed decisions, and taking appropriate corrective
actions
Align Measurement &
Analysis Activities
 Establish Measurement
Objectives
 Specify Measurement
 Specify Data
 Collection / Storage
procedures
 Specify Analysis
procedures
Provide Measurement Results
 Collect
Measurement Data
 Analyze
Measurement Data
 Store Data &

Results
 Communicate
Results
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 SCORECARD
New 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 with
relevant Stakeholder
cont …
 Integrated Project Management for

IPPD
– SG3 Use the project’s shared vision
context
Quantitative Understanding
BSC score
100%
SCORING
RATING
Perspective 1 score Perspective 2 score
100% 100%
100% 100% 100% 100%
ORGANIZATIONAL PROCESS PERFORMANCE

QUANTITATIVE PROJECT MANAGEMENT
cont …
 Organizational Process Performance

– SP 1.3-1 Establish Quality and Process-
Performance Objectives
• Based on organization’s business
objectives
Quantitative Understanding
Cost and benefit
Improvements data from piloted

Organization
OID
improvements
Quality and process

performance objectives,
measures, baselines, models Quality and process Project Management,
performance objectives, Support, and Engineering
measures, baselines, models process areas
Senior OPP
Management Progress toward
achieving business
objectives
Common
measures Process performance
and capability data
Ability to develop
and deploy process Basic Set of Process Management
and supporting assets process areas
CMMI-based Life Cycle Relationships
Mission Area Planning Budgeting Priority Requirements Definition
Requirements Development
Directives, Constraints
Decision Analysis and Resolution
Mission
Shortfalls
Contracting Activity Planning
Supplier Agreement Project
Management Planning
Concurrent
Product Control Front-End
Integrated Project
Management
Requirements
Management Technical
Activities
Integrated Teaming Solution
Configuration
Integrated Supplier
Management
Management
Risk Management Quality Assurance Product
Project Monitoring Integration
and Control Causal Analysis
and Resolution Technical Execution
Program Management
Assessment & Certification

Product
Deficiencies Product Measurement
Validation s
Verification and Analysis
Outcome & Feedback
System Product Deliveries
Organizational Process Management
Process Process Innovation and Environment Process Quantitative

Focus Definition Training for Performance
Deployment Mgmt
Integration
Process Maturation
ICT BSC
CMMI – Business Tool
CMMI
Cause-Effect (T. Conti)
DIAGNOSIS
EFQM Excellence Model
PEOPLE PEOPLE
RESULTS
KEY
PROCESS KEY
POLICY & CUSTOMER
LEADERSHIP (CMM-I) PERFORMANCE
STRATEGY RESULTS
RESULTS
PARTNERSHIPS & SOCIETY

RESOURCES RESULTS
DRIVERS RESULTS
ACTION
BSC – ICT Dept
MISSION
“To be the most reliable partner for added-value ITC solutions”
PERSPECTIVE INTERNAL FINANCIAL CUSTOMER LEARNING
STRATEGIC AVAILABILITY OF EFFICIENT USE ENSURE RELIABLE CONTINUOUS

OBJECTIVES ADEQUATE OF ICT -RESOURCES SERVICES PROCESS
ICT PROCESS ACCORDING IMPROVEMENT TO
& TECHNOLOGY TO BUSINESS BETTER SATISFY
REQUIREMENTS IMPLICIT &
EXPLICIT
CUSTOMER NEEDS
CRITICAL 1 - ENSUREKEY- ...... ...... ......

FACTORS OF ... ... ...
COMPETENCIES
SUCCESS .................... .................... ....................
FOR NEW SERVICE
PORTFOLIO
DEVELOPMENT
2 - PROVISION OF A NEW
TECH INFRASTRUCTURE
3 - ENSURE CONTINUOUS
SERVICE PROVISION
METRICS M-I1 M-F1 M-C1 M-L1
M-I2 M-L2
M-L3
INTERNAL PERSPECTIVE
OBJECTIVE PROCESSES KPI CATEGORY KPI
- Resources & Capacity Planning

- Training Planning
Capability management -
-
- PPQA Performance
Quality management - NC Close/Open
- Process compliance
ESP management
ICT Governance score
- Plans completeness and accuracyi
Strategic Planning
- % Planned/Implemented Evolutionary
Flexible ICT Architecture management Architectural Innovations
Organization:
- Focus on TTM and
- Security Auditing level of compliance
Product & Service Security management
Quality
- Focus on core-
- Early availability of Area Planning
competences Operational Planning
- Requirement Volatitlity
Requirement Management - % Accepted Business CRs
Relationship score
- Project Schedule Estimate Accuracy
Effective Execution
Management - % FS Complete / Business Plan
Feasibility Effectiveness Requests
- No. % 1st approval from customers
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 a
Honeywell company and the main
engineering facility for the H&BC S&S
business
– (Home & Building Control, Solutions & Services)
and responsible for system design, software
and solution development and system
integration.
 The BSCE employs around 80 people
(Year 2000)
Issues (Year 1995)
 Many of the BSCE software releases

were still late
 Quality of delivery rather low
 Maintenance effort high
 Customers more or less dissatisfied.
Improvement & Assessment
Roadmap
1995: kick-off of Process Improvement Program and
Measurement of Cost of Quality
Jul 96 Oct 97 Jul 98

Mini Mini Mini
Assessment Assessment Assessment
Dec. 96 Mar 97 Mar 98 Oct. 98

CBA IPI Self Self CBA IPI
Level 2 Assessment Assessment Level 3
Assessment Assessment
Cost Management (Cost Breakdown Structure)
retesting
Internal cost rework
of defects defects management
Cost of
Non Quality customer support
External cost problems investigation
updates
of defects defects notification
Cost of software
quality
quality assurance
Cost of inspections
prevention process definition/improv.
metrics collection/analysis
Cost of
Value testing
product quality audits
Cost of software product qualification
verification
Business Results (Year 1999)
 The Improvement approach has led

BSCE on an average over the past 4
years to
 25 – 30 % Revenue Increase
 10 – 12 % Productivity Improvement
 20 – 25 % Reduction in Cost of Quality
 30 – 35 % Software Quality Improvement
 Zero critical defects on field installations
 On time delivery of all Software Products
 Excellent feedback from customer audits
Lesson Learned (I)
 “Process Improvement Pays Back”
2,5 2,4
1,5
1,2
0,5 0,4
0,2
0
1995 1996 1997 1998
Target Defects/KSLOC
Defects per Number of Line of Codes
Lesson Learned (II)
BSCE Cost of Software Quality
60.0
Percent of Development Costs
50.0
40.0 Prevention
Testing
30.0 Rework
Total
20.0
10.0
0.0
1995 1996 1997
Cost of Software Quality
Implementation Sample
 Top-level BSC
–
 CMMI PAs Scenario

–
THANKS!
Giuseppe Magnani
Acknowledgements: We would like to thank Fernando Mandelli
(ITALY) for his comments and contributions
Building your Business Strategy for a Sustainable
Process Improvement Programme
CMMI® & Balanced Scorecard
Giuseppe Magnani

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Building your Business Strategy for a Sustainable

Process Improvement Programme

PARTNERSHIPS & SOCIETY

Organization Process Focus Organization Process Focus

Requirements Management Requirements Management

Process Area 1 Process Area 2 Process Area n

Commitment Ability Directing Verifying

Assessment & Certification

Process Process Innovation and Environment Process Quantitative

 The balanced scorecard provides a

Nils-Goran Olve and Anna

VISION: Leadership Financials

Perspective 1 SCORE Perspective 2 SCORE

CFS score CFS score CFS score CFS score

100% 100% 100% 100%

CSF: Critical Success Factors

Management & Operational Reporting

 Deploying Initial BSC

 Deploying Initial BSC

Nils-Goran Olve and Anna

Nils-Goran Olve and Anna

 Deploying Dept./Proj. BSC

 Measuring & Analyzing

Perspective 1 Perspective 2 score

CFS score CFS score CFS score CFS score

 Store Data &

 Action Planning & Monitoring

 Integrated Project Management for

Perspective 1 score Perspective 2 score

CFS score CFS score CFS score CFS score

100% 100% 100% 100%

ORGANIZATIONAL PROCESS PERFORMANCE

 Organizational Process Performance

Quality and process

Assessment & Certification

Process Process Innovation and Environment Process Quantitative

PARTNERSHIPS & SOCIETY

PERSPECTIVE INTERNAL FINANCIAL CUSTOMER LEARNING

STRATEGIC AVAILABILITY OF EFFICIENT USE ENSURE RELIABLE CONTINUOUS

CRITICAL 1 - ENSUREKEY- ...... ...... ......

- Resources & Capacity Planning

 Identify CSF through CMMI PAs

 Many of the BSCE software releases

Jul 96 Oct 97 Jul 98

Dec. 96 Mar 97 Mar 98 Oct. 98

 The Improvement approach has led

 “Process Improvement Pays Back”

Defects per Number of Line of Codes

BSCE Cost of Software Quality

Cost of Software Quality

 CMMI PAs Scenario

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CMMI & BS - Tutorial v1.3.1

CMMI & BS - Tutorial v1.3.1