Why your company requires a Funding Framework?

Many times, projects in large companies are funded in isolation. This mode of funding is ineffective because it does not consider the enterprise implications. Sometimes a ‘low priority’ project may be the critical link in the achieving end-to-end customer value.

So what do you do about it? This video explains….

Transcript:
Typically, a company’s funding model is aligned to its organizational structure. For example, different functional areas – such as sales, marketing, engineering, manufacturing, etc. each gets a slice of the enterprise budget.

Each area submits a list of projects, and the budget for those projects. The executives sit around a table and go through each areas projects and proposals, prioritizing them. Each project is considered in isolation. After some extended discussions, again all in isolation, the year’s budget is allocated to some of the projects.

This causes huge problems which is not even noticed by the executives. There is no mechanism to understand the dependencies across. In one large telecommunications company, a huge marketing strategy project was approved. As the year progressed, this project was a great success – with many customers calling in to purchase the products being offered. However, since the corresponding product development project was shuttled, only a few customers could actually buy products advertised by marketing. This resulted in bad publicity and loss of business.

What would have helped the executives make better funding decisions? A framework that enables them to look across all projects holistically and make funding decisions from an enterprise perspective. An overall corporate goal will drive the funding decisions instead of each project being evaluated in isolation. For this, dependencies across projects need to be identified. In this picture, the circle size indicates the funding required, and the colors indicate original priority.

A project that may have been originally a low priority may become critical because it helps in achieving the overall corporate goal. Without knowing such dependency, the project may never have got funded. At one grocery chain, delivery of groceries to customers was designated to be important. Many areas were individually funded, but not enough money was allocated to the transportation area to be able to conduct repairs quickly since that was a low priority project when considered in isolation. This broke the “chain” and the company was not able to deliver groceries to its customers effectively.

A simple framework can show cross dependencies. Of course, this can get fancier as we try to understand more about the projects, dependencies, and ownership. On your next funding cycle, build a framework that’ll help identify and talk through the dependencies across projects so funding decisions can be made from an enterprise perspective and not in isolation.

Видео Why your company requires a Funding Framework? канала Dr. Raj Ramesh