Expert CAD Management The Complete Guide phần 6 pdf

128 CHAPTER 7: UNDERSTANDING FINANCIAL PROCESSES ■ Figure 7.4 Spectacular projects like the pyramids were completed using old tools.But they could certainly be done faster and cheaper (in real terms) with today’s technology. Faster or Cheaper, or (We Hope) Both The only reason we’re using anything today that we didn’t use yesterday is because it makes existing tasks faster or cheaper, or (we hope) both. Believe me when I say that if we could do engineering with slide rules and paper faster than computers and plot- ters, we would still be doing so. All businesses need to consider how new CAD technologies, especially 3D tech- nologies, can best be integrated into the everyday engineering environment in a way that delivers faster, cheaper results. To illustrate faster/cheaper, let’s look at the evolving technology of business communication and draw a few conclusions as we go. Some examples of the faster/cheaper paradigm might be the following: Letters faster than couriers And people were even willing to pay more for speed when the Pony Express came into being. The motivating factor here was faster even though it wasn’t always cheaper. 16531c07.qxd 3/19/07 1:42 PM Page 128 129 ■ THE FASTER/CHEAPER PARADIGM Standard mail cheaper than express When standard mail delivery was implemented (along with the standard postage stamp), mail was available to everyone for less. The motivating factor here was cheaper even though delivery was slower. Air mail faster than standard mail Even when mail was cheap and available to all, air mail delivered the ability to get it there more quickly. The motivating factor here was faster even though it was more expensive. FedEx faster than air mail Unlike airmail before it, FedEx got mail there the next day, guaranteed. The motivating factor here was much faster even though it was much more expensive. Fax much faster than FedEx Faxing got the information there in minutes for the cost of a phone call. The motivating factors here were cheaper and faster. E-mail as fast as faxing E-mail had all the speed of faxing but didn’t require the printing and scanning of paper documents. Information is e-mailed in its native data format. The motivating factor here is cheaper because less labor is used to handle the information. Where was the real paradigm change? It was with the fax machine (not the com- puter), because the fax machine was where technological changes facilitated faster and cheaper at the same time. And please notice that the evolution of mail handling took a century, whereas the fax machine went from nothing to full business implementation in five years. The moral of the story? If you can find technology that is both faster and cheaper, that technology will be absorbed rapidly, and the change can’t be turned around. Faster/Cheaper Data What happens when we arrive at a plateau in the speed of information movement, like where we are today? We can’t make things faster anymore. Once speed is no longer the advantage, the entire process moves toward cost control. In today’s CAD market, we clearly have the following results in terms of data formats: • DWG files are ubiquitous in 2D environments. • 3D data formats are somewhat less defined. • Data is portable, though! Note: In architectural environments,more comprehensive building models and design platforms allow more people to use the same data without interface boundaries along the way.Motivation:cheaper. 16531c07.qxd 3/19/07 1:42 PM Page 129 130 CHAPTER 7: UNDERSTANDING FINANCIAL PROCESSES ■ What happens when we have enough agreement on data format that we can move information around via e-mail attachment? Here are a few ideas that come to mind: • Each person in the design chain can open the file without rekeying data. • Downstream users in the field can use the same data you do. • Ground-based shipping (and its cost) goes away via e-mail. • Errors are reduced. Don’t all of these point to faster and cheaper? I think they do! I therefore think that the formatting of data into industry standard CAD formats with electronic collab- oration via e-mail will be the way to go, because things can’t get much faster, but they can get cheaper by standardizing data formats. What will be the next faster/cheaper innovation that will totally change the way we design cars, buildings, and infrastructure? Who knows? The point is, we have to watch the trends carefully and try to forecast the change. Thinking Like Management Let’s try an alternate way of looking at the faster/cheaper paradigm from a manage- ment standpoint. I’ll use the example of moving to 3D design software as a back- ground for the discussion because I hear this discussion so much in industry. If you can visualize the transition to 3D from management’s perspective and use faster/ cheaper metrics, you’ll be surprised at how much better you understand the process. I’ve often made the assertion that management teams are increasingly ambivalent toward implementing 3D software because they think it will take time to do (not faster) and it will be expensive (that is, not cheaper). Given that perspective, you can see why they’re hesitant. Let me run through a list of typical management thoughts regarding implementing new software: The old software runs just fine Translation: They don’t see the cheaper in new software. New software requires customization The old software has been so highly customized that any new software will require a substantial amount of customization and debug- ging just to get it to production level. Management doesn’t see this as cheaper. Note: In manufacturing environments,we can now do 3D prototyping from the same model we used to per- form stress analysis, thermal calculations,and kinematics interference studies.Motivations:faster and cheaper. 16531c07.qxd 3/19/07 1:42 PM Page 130 131 ■ THE FASTER/CHEAPER PARADIGM New software is buggy Software upgrades can be buggy, which makes CAD managers wait for service packs or the next release. These types of problems are neither fast nor cheap. Upgrading takes time Management has no patience for upgrades that don’t go smoothly, and thus CAD managers are hesitant to embark on upgrading out of fear. What is fascinating about these trends is that they’re all business and productiv- ity driven rather than technologically driven. It seems like you can have the greatest software release since time began, and it won’t matter if it isn’t easy to install, integrate, and run quickly with low learning curve times from everyone involved. Finding the Faster/Cheaper Because we’re talking about dealing with new software releases, let’s examine some ways that new software can be introduced into your company’s culture with minimal cost and maximum impact—thus garnering maximum management support. If you combine some of these suggestions with a healthy dose of faster/cheaper, you should be able to allay management’s fears. Try some of the following approaches to start the conversation: Generate a list of great time-saving features By listing the new software features that allow you to save time, you show management where the faster is. Often, management thinks that we always want new software and that we don’t give thought to what the benefits will be. Head off this skepticism by illustrating your thought process and showing management that you’ve found the faster in the new software. Generate a planning document You’ve found the faster in your new software. Now, plan things so you can get the faster done cheaper. Sometimes management just wants to know that you have a plan, so show them yours—and make sure they know you’ve got your eye on the faster/cheaper paradigm while you do so. Demonstrate a smooth implementation timeframe By planning for new software to transition in smoothly, you’ll minimize disruptions and keep mistakes to a minimum. Although smoothness doesn’t get things done faster or cheaper, it keeps down the costs of mistakes, thus maximizing whatever faster/cheaper you’ve already planned for. Plan for successful training Like a smooth implementation, planning for training keeps down mistakes. But training offers a powerful faster benefit by generating productive people that much faster. Sell your skeptical management team on training by using the faster motif, and watch how their opinion about training changes. 16531c07.qxd 3/19/07 1:42 PM Page 131 132 CHAPTER 7: UNDERSTANDING FINANCIAL PROCESSES ■ Planning for the Future (via the Past) I know the discussion of the faster/cheaper paradigm isn’t a technical topic per se, but a number of technical principles simplify down to what is faster/cheaper in the business world. My point in introducing you to the faster/cheaper paradigm is to give you the insight into why things change and to allow you to forecast which technologies will work for you. Whenever you’re in doubt, use some of my historical references, and then use that history to analyze current-day technologies and see how they apply to your current work environment. As you do so, always ask these questions: • Will taking this action make things faster (or cheaper)? • Will taking this action make us more competitive (faster or cheaper)? • Will taking this action allow us to serve our clients better (faster)? • Will we generate more profits by taking this action (cheaper)? If you can answer yes to one or more of the questions by making a change, then it’s probably a good change to make. If you can answer yes to all these questions, then you’ve found an idea that is faster and cheaper, and you should be moving rapidly to implement the change. Now that you’re thinking about the faster/cheaper paradigm, you may find it hard to go back to your old ways of thinking about technology. No matter what else, I guarantee that your company’s senior management is thinking faster/cheaper, so why not think the same way? Faster/Cheaper Internet Why should any CAD work process move to WANs or the Internet? Don’t we already have methodologies that work? The key to examining the possible impact of Internet methodologies is to focus on how costs can be reduced and time spans accelerated. It’s generally true in business environments that faster and cheaper are better, and cool technology is pushed aside if it doesn’t support these dual objectives. Let’s examine how the Internet can potentially make the business of design faster and cheaper, and see if you think it will affect your company. On the cheaper side of the equation, there is no dispute that most designers, engineers, and other technology professionals have access to the Internet at work or home. Therefore, if you can make drawings, markups, plots, digital pictures, and scanned images available to your employees, customers, and vendors via the Internet, you’ll save money. How did I arrive at this conclusion? Well, if your customers can help themselves to key files via the Internet, you don’t have to pay for FedEx or faxing 16531c07.qxd 3/19/07 1:42 PM Page 132 133 ■ FASTER/CHEAPER INTERNET charges, and you save time by not having to send e-mails or other manually generated correspondence. You save on both service and labor. On the faster side of the equation, Internet sites allow customers and vendors to access information at any time on their own terms. This self-serve mode of operation cuts down on phone tag, errant communications, misrouted e-mails, and so on. The simple fact that customers can help themselves allows the process to proceed at their own pace. This not only makes things faster for the customer but also gives them the feeling you’ve custom-tailored a solution for them. The Possibilities Now that you’re attuned to the faster/cheaper paradigm, it’s time to put the concept to use. What sort of Internet processes could you add to your CAD environment that would facilitate faster/cheaper work? An interesting question, to be sure. I’d like to split the possibilities into two categories: User-centric functions: • Wide-area network support for project file directories • Importing drawing content from vendor sites • Internet-based training Collaborative/Customer-centric functions: • Electronic publishing/sharing of drawing files • Electronic markup and draft printing of drawing modifications • FTP drop-box file sharing All these types of functions are nuts and bolts issues that aren’t terribly sexy but do need to be dealt with. My point is that new technology (Internet/WAN) is useful only if it solves problems you have (rather than creating new problems) at a lower price point than other options. Therefore, I’ve found that focusing on proven technologies that work well at low costs yields good results for almost all companies. Note: Don’t be afraid to use a time-tested technology with low costs (like FTP) rather than bleeding-edge technology that costs more.Remember,the point is to get the job done, and the faster/cheaper paradigm is the way you judge what works. Note: Faster/Cheaper: not newer-cooler! 16531c07.qxd 3/19/07 1:42 PM Page 133 134 CHAPTER 7: UNDERSTANDING FINANCIAL PROCESSES ■ Using ROI Metrics We’ve all encountered limitations within our CAD systems. Sometimes we just don’t have the functions we need to perform certain tasks efficiently. Chances are, you’ve wanted to use your CAD management position to do something about the shortcom- ings but have been met with management resistance to spending money. The key to get- ting what you want and building a case for CAD management is to use an ROI-based approach to justify your arguments. Every year you spend money on upgrades, supplies, training, hardware, and so on, but how do you know if you’re spending your money well? This is a question that management teams very much want an answer to and one that CAD managers should ask. In order to know if you’re spending your money well, you need a measuring stick: a set of metrics that allows you to evaluate your spending. ROI metrics allow you to keep score and prioritize which spending items in your annual budget are delivering the goods and which ones you could do without. Interested? The good news is that you don’t need a business degree or accounting certificate to understand and use ROI metrics. Let’s look at a case of how you can use ROI; as we go, we’ll examine how persuasive this is from management’s perspective. Defining ROI Return on investment is exactly what the name implies: a returned value that arises from investing in a certain way. In layman’s terms, think of purchasing a new software program and then wanting to know how well that investment is paying you back. In almost all CAD management scenarios, the return on your investment will be in time savings. Anything you spend money on should generate a savings amount that justifies the spending. Stick with me while we set out some basic terms and concepts that are crucial to understanding ROI metrics. Pay particular attention to the concept of different ROI values in different years, because this is crucial for CAD managers: ROI Return on investment. The savings an investment can produce divided by the outlay the investment requires, expressed in annual percentage form. For example, if putting a new plotter in place can save you $1,000 per year in costs, but the plotter costs $5,000 in outlays to purchase and implement, the ROI is (1000/5000)*100% or 20%. Realized savings The amount of money you can save by purchasing a new product or service. Two examples are reduced paper and toner costs realized by purchasing a newer plotter, and reduced labor from applying custom CAD programming. 16531c07.qxd 3/19/07 1:42 PM Page 134 135 ■ USING ROI METRICS Initial outlay The initial amount of money you spend on a given item or service. An example is the initial purchase price of a plotter, computer, or consultant. Labor outlay The amount of time it will take you and/or your staff to implement new items or services into your organization. An example is your time to set up a new plot- ter or computer, or staff time spent attending training classes. Recurring outlay The ongoing amount of money required to keep a given item in serv- ice. Examples include an annual service contract for hardware, software subscriptions, consulting retainer contracts, and even recurring labor. Year 1 ROI The amount of savings in the first year of the investment, divided by the total outlay in the first year. This number is typically low for new hardware and soft- ware because you have large initial outlays in the first year. Year 2 ROI The amount of savings in the second year of the investment, divided by the total outlay in the second year. This number is typically much higher than year 1 because the large initial and labor outlays were absorbed in year 1. Year N ROI The amount of savings in the last year of the investment, divided by the total outlay in that year. N generally is the number of useful years of service for the investment. For hardware, N can be anywhere from 3 to 5, whereas software usually has a useful life of two years. Aggregate ROI The average ROI values for year 1 through year N. This aggregate number gives a true measure of how well the investment performs over its entire life. Admittedly, there’s some uncertainty in forecasting an investment years into the future, but figuring the aggregate ROI value is better than guessing. Payback period The number of years/months it takes for the savings from an invest- ment to exactly equal the outlays for the investment. An example is a software utility that generates $2,000 per year in savings but costs $4,000 in outlays over two years to acquire; it has a payback period of two years. Computing a Quick Example Suppose you’ve done a study of your AutoCAD personnel and determined that they’re wasting an inordinate amount of time looking for standard blocks, title frames, XREF attachments, and graphics files. The waste is so obvious to you that you decide it would be worthwhile to create a standardized set of tool palettes that all users could use to quickly perform tasks that slow them down. Sounds good so far, right? But how do you get the approval to spend the time and resources you’ll need to make it happen? Let’s work up this idea in an ROI format and see how compelling the case can be from a financial standpoint. 16531c07.qxd 3/19/07 1:42 PM Page 135 136 CHAPTER 7: UNDERSTANDING FINANCIAL PROCESSES ■ Figure 7.5 ROI computations represent a balancing act between time and money and quantifying that balance. In order to do the ROI math, you need to determine the realized savings and outlays required to create and implement the tool palettes. Here are some values I’ve observed in the real world that can be used for this example: Realized savings Suppose you can find a small change to make in a given work process that will generate time savings for your CAD users. How do you quantify those savings? If you can save each CAD user one hour per week, and that CAD user makes $20 per hour, the average annual savings will be $960 based on a 48-week work year. If you have 10 CAD users, an annual savings of $9,600 can be realized. Initial outlay The initial outlay for this example is $0 because you already have the CAD software and you don’t need any additional software to create tool palettes. Labor outlay The amount of time it will take you to gather all the blocks and graph- ics, organize them into tool palettes, deploy the palettes to users’ desktops, and provide some basic training on the functionality of your tool palettes must be considered in two portions: Your time to create, deploy, and train based on an estimate of 28 hours of labor at $40 per hour equals $1,120; and 1 hour of training per CAD user at $20 per hour equals $200 for the entire department. The total labor outlay is therefore $1,320. 16531c07.qxd 3/19/07 1:42 PM Page 136 137 ■ USING ROI METRICS Recurring outlay Each time you upgrade your CAD software, you’ll need to make sure you move all the blocks, graphics, and palettes to the new version to assure proper functionality. You shouldn’t have to retrain users on palette use, so the outlay will be purely your labor. Assuming a generous 10 hours per upgrade cycle at your $40 per hour rate, the recurring outlay to maintain the palettes is $400 annually. Now you can move to an ROI computation for year 1 by dividing the $9,600 savings per year by the year one outlays of $1,320 and converting to percentages. Some quick calculator work will determine the ROI to be a staggering 727% for the first year. Think that’s good? Consider the year 2 analysis, where the same $9,600 is saved but only $400 is spent to achieve the savings, thus yielding an ROI of 2,400%. An aggregate ROI for the first two years of this example is an average of the year 1 and year 2 values—1,564%, if you do the math. The payback period for this example is achieved quickly because the project generates more savings in year 1 than it costs. If you divide the $1,320 in year 1 out- lays by $9,600 in year 1 savings, you’ll see that payback occurs in 0.14 years, or seven weeks! Think you can get management’s attention with these calculations and support- ing data? You bet. Drawing Conclusions I’ll now draw some conclusions from the example and extend the logic to make addi- tional recommendations you can use in your day-to-day CAD management tasks: Big savings from small investments The example saved a lot of money with a small investment of your time and no software expenditure. Management will love these types of efficiency improvements precisely because they generate big ROI values with no out-of-pocket expenses (because you’re already on salary). Achieving savings is what ROI is all about As you run through some example cases, you’ll start to think about how you can save money more than how you can spend it. This psychological shift is profound and one that your management will very much appreciate. ROI shows the big picture As you become increasingly aware of ROI methods, you’ll think more about how you work and how to make your workplace more efficient with minimal spending. The formula always works No matter what you’re buying, programming, or training, the formula of savings divided by outlays always covers the bases. Just make sure you capture all the outlays, and you’ll arrive at ROI values quickly and easily. When you think about your job from an ROI perspective, you can’t help being more business minded and value focused. When you combine your new-found ROI expertise with the technical skills you already have, you’ll be a true CAD management double threat. 16531c07.qxd 3/19/07 1:42 PM Page 137 [...]... and, therefore, money Obviously, if you can eliminate bottlenecks, you’ll save time and, therefore, money, and management will love you for doing so I’ll use a real-world client example of a bottleneck that existed because of the lack of a software utility The CAD manager at the company couldn’t get management to authorize the software utility, thus perpetuating the bottleneck I’ll work through the. .. which to undertake them? The answer to this question will depend on the company you work for and several other factors Some of them are financial Some of them are personnel based Some of them may have to do with the type of work environment you function in The point is, you want to have a list of factors that you can use to analyze and evaluate the ideas from your list and build them into a chronological... the plan and the sequence in which you present it and know that it fits your company’s needs, time, and budget constraints Writing an ROI-Focused Summary of Your Plan 1 Use a spreadsheet to present your plan Management uses spreadsheets all the time, so they’re used to reading them and will respect your initiative to use them You’re trying to get management s blessing, so why not approach them in their... capture the entire experience of using the software Record your findings in a spreadsheet format, and make it easy for management to read Total the costs Add a tab to your spreadsheet that totals the costs of acquiring the software you wish to buy Consider the following components: • Purchase price • Ongoing software support • Your time to install the software • Time to train new users Compute the ROI... changed radically over the years Here’s the great news for CAD managers: CAD managers enjoy the ability to see everything that goes on with respect to their software tools Chances are, most CAD managers have seen almost every problem that could crop up in of a workplace and, more important, have already figured out how to fix it Therefore, CAD managers tend to know where the problems are and can formulate... I advised that you consider those items that save the greatest amount of user time and mark them with a T so you’ll realize which ones can yield the greatest user-time savings Considering the simple equation that says time equals money, you can look at the ideas on your list that save the most time and realize that they’ll be the ones that also save the most money Your next challenge as you examine... to outline the bottleneck and obtain approval for the software, so you can follow along Here’s how it works in the sequence we used: Savings buys the software We proposed to use the labor savings we could generate (by removing the bottleneck) to pay for the software Therefore, we had to illustrate that a $45/hour architect taking two hours to create a door and window schedule was costing the company... company $90 If we used the software utility to automate the production of these schedules, then we could save the company $90 Additional investigation showed that if the design firm produced 100 of these schedules a year, then a total cost saving of $9,000 could be realized Note: This example is a perfect real-world bottleneck analysis: It finds a process that is time consuming and then produces a payback... task, thus making it easier for your CAD users to do their jobs  165 31c08.qxd 3/19/07 3:11 PM Page 1 56 Great Ideas from User Point of View CHAPTER 8: BUILDING A LONG-TERM PLAN ■ 1 56 Great Ideas from Management Point of View Ideas Everyone Can Agree On Figure 8.8 Good ideas almost always have a payoff for both users and management In these cases, you can visualize the benefits of an idea as overlapping... why, they may not always agree, but at least they’ll support you If you have to attack things in a certain order because of financial constraints within the company, there’s nothing wrong with saying that If the company is busy, and certain projects (such as new software) that users may be in favor of must be put off because you’re too busy, there’s nothing wrong with saying that either The key to 165 31c08.qxd . because of the lack of a software utility. The CAD manager at the company couldn’t get management to authorize the software utility, thus perpetuating the bottleneck. I’ll work through the process. at their own pace. This not only makes things faster for the customer but also gives them the feeling you’ve custom-tailored a solution for them. The Possibilities Now that you’re attuned to the. we used the software utility to automate the production of these schedules, then we could save the company $90. Additional investigation showed that if the design firm produced 100 of these schedules