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Rockville, MDFebruary 18, 2009
This document is confidential and is intended solely for the use and information of the client to whom it is addressed.
Discussion Document
Innovation & Service StrategyDeveloping a service innovation pipeline
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Agenda
What do we mean by Service Strategy?
Key business challenges facing the public sector
What are the advantages and benefits of pursuing a Service Strategy?
How can Booz Allen help?
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Agenda
What do we mean by Service Strategy?
Key business challenges facing the public sector
What are the advantages and benefits of pursuing a Service Strategy?
How can Booz Allen help?
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What does Service Strategy mean to you?
ServiceProposal
ServiceProposal
ServiceProposal
ServiceProposal
ServiceProposal
New services or changes to existing services that provide
value
Is it a process or a methodology?
Is it negotiation tool?
Is it an accounting method?
Is it a methodology for organizational design?
Does it help drive key business decisions?
Is it a fancy term for financial analysis?
Is it just a marketing “thing”?
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Service Strategy is best exemplified by presenting a scenario…
Hypothetical ScenarioHypothetical Scenario
A large state transportation agency has 8000 employees and 5 business units - each focused on modes of transportation: SHA, the MTA, the MPA, the MAA and the MMVA.
Due to reduced toll revenue at MTA, the Governor of that state directs the state secretary to look at cutting operational expenses by 20% - a press release to this effect is issued.
Joe is an IT Manager at MTA and discusses the press release around the water cooler. Most people in his IT group are concerned this means reduction in group size.
However, Joe is smart and realizes that the server virtualization project he has been working on for the past 6 months could be implemented across all 5 modals of the agency to reduce server hardware costs and ensure no reduction in staff.
The challenge is that this project would require an initial investment as well as obtaining the buy-in of 5 IT Managers and the CIO of the agency.
A large state transportation agency has 8000 employees and 5 business units - each focused on modes of transportation: SHA, the MTA, the MPA, the MAA and the MMVA.
Due to reduced toll revenue at MTA, the Governor of that state directs the state secretary to look at cutting operational expenses by 20% - a press release to this effect is issued.
Joe is an IT Manager at MTA and discusses the press release around the water cooler. Most people in his IT group are concerned this means reduction in group size.
However, Joe is smart and realizes that the server virtualization project he has been working on for the past 6 months could be implemented across all 5 modals of the agency to reduce server hardware costs and ensure no reduction in staff.
The challenge is that this project would require an initial investment as well as obtaining the buy-in of 5 IT Managers and the CIO of the agency.
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Public and private sector executives are faced with complex challenges…
Challenge Characteristics
Macro Economic Economic pressures in the public sector are driving organizations to do more with less, resulting in wide spread cost cutting or decisions to terminate certain programs
Relationships Relationships influence decision makingImplementing innovative solutions requires building effective relationships with agency senior executives (agency head, CFO, etc.).
Objective Setting Strategic planning is critical - misalignment of IT, organizational, and agency goals result in too many rogue and/or “pet” projects
Islands of Automation Islands of Automation caused by reluctance to share innovation and/or IT success stories across lines of business (across agency)
Legacy Systems As technology progresses, legacy systems are constantly needing to be replaced This results in less funding for new projects (sometimes more innovative projects)
Innovation Most organizations focus internally when seeking new product or service innovations Great organizations practice “open innovation”
Inadequate Funding Causes many civil organizations to start with a product or service and then try to “sell” that product or service to anyone that will buy Leads to very inefficient use of time and money
…many of which stem from the absence of a comprehensive vision and strategy on service strategy.
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Agenda
What do we mean by Service Strategy?
Key business challenges facing the public sector
What are the advantages and benefits of pursuing a Service Strategy?
How can Booz Allen help?
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So, what is Service Strategy and how does it help?
Service Strategy is like a funnel with innovative service ideas going in and new services (services that provide value to customers) coming out
Service Strategy improves an organization’s service management capabilities by focusing on effectively delivering value to customers and illustrating value of the service providers
Service Strategy leverages strategic analysis, planning, positioning, and economics relating to service models, strategies, and strategic objectives to enhance an organization’s service management approach
In a moment, we’ll take a look at what happens within the funnel to make this happen
Service Strategy in a Nutshell
ServiceProposal
ServiceProposal
ServiceProposal
ServiceProposal
ServiceProposal
New services or changes to existing services that provide
value
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So what happens within the Service Strategy funnel to help ensure only those ideas that provide value are implemented?
In-Depth Market
Assessment
In-Depth Market
Assessment
Market segmentation Demand forecasting Market research Portfolio Mgmt
2
1 Day - 6 weeks
Business Need, Going-In Options, and Key Issues
Business Need, Going-In Options, and Key Issues
1
Focus on the problem in the market space
Don’t develop a solution and then go looking for a problem to solve
Working Session
Competitor Strategiesand Likely
Moves
Competitor Strategiesand Likely
Moves
Customer alternatives Possible new entrants
3
AnalyzeAnalyze
Estimate costs to implement
Estimate risks and effect on value creation
Calculate ROI Consider affect on
service portfolio
4
Build vs. Buy vs. Partner Alternatives
Build vs. Buy vs. Partner Alternatives
Look for business innovation
Consider new sourcing ideas
Consider partnerships
6
Suggested Roadmap &
Initiatives
Suggested Roadmap &
Initiatives
7
Service CharterService Charter
Design goals Implementation schedule Design constraints Technology options
9
Kick-Off
Innovation & Development Strategy Development & Go-Forward Plan
Booz Allen Approach
1 Day - 6 weeks
Final Review
Use risks to form the plan Look for solutions outside the
organization
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A structured Service Strategy approach is a way to…
Improve innovation by providing an objective and unbiased forum for innovative service proposals
Reinforce the need for a service proposal with analytical data that supports the business case
Improve speed of change by filtering out service proposals that are destined for failure (e.g., low ROI)
Improve legacy system replacement/upgrades by focusing on innovation
Provide an organizational (agency wide) awareness using service portfolio management
Improve financial compliance and control
Enhance value capture and creation by reducing uncertainty
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Essentials of value creation though Service Strategy
Build the right team to be able to capture and quickly analyze service proposals
Organize for rapid experimentation
– Revamp entrenched routines, organizational boundaries, and incentives to encourage rapid experimentation
– Consider using small development groups that contain key people (designers, testers, engineers) with all the knowledge required to iterate rapidly
Anticipate, identify, and exploit early information
– Recognize the full value of front-loading: identifying problems upstream, where they are easier and cheaper to resolve
– Embrace failures that occur early in the development process but significantly advance organizational knowledge
Combine new and traditional technologies
– Do not assume that a new technology will necessarily replace an established one - usually, new technologies are best used in concert
– Remember, technologies evolve continuously!
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What are the benefits you can expect?
Make your service “not optional”
Enhance decision making
Improve speed of change
Improve financial compliance and control
Enhance operational control
Total value capture and creation
Team members incentivized to be more innovative
Improves portfolio management – do what you do well…abandon what you don‘t do well
Organize existing services to be more efficient
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Agenda
Business decisions facing public sector executives
What is Service Strategy and what are the benefits?
Where can Service Strategy help?
How can Booz Allen help?
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Booz Allen’s Service Strategy approach includes special emphasis on creating an innovation pipeline supporting the entire lifecycle
Innovation Pipeline
Innovation Pipeline Strategy Strategy Design Design Transition Transition Operations Operations
Portfolio Management
Financial Management
Demand Management
Portfolio Management
Financial Management
Demand Management
Intellectual Capital Management
Capacity Management
Continuity Management
Supplier Management
Intellectual Capital Management
Capacity Management
Continuity Management
Supplier Management
Change Management
Release Management
Asset and Configuration Management
Knowledge Management
Change Management
Release Management
Asset and Configuration Management
Knowledge Management
Incident Management
Event Management
Problem Management
Request Fulfillment
Incident Management
Event Management
Problem Management
Request Fulfillment
Service Development Lifecycle
Continuous Service ImprovementReporting, Measurement and Service Level Management
Source: Based on ITIL v3, The Stationary Office publishing, 2007
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Selecting the right innovation model is critical to ensuring service development succeeds in your organization
Source: Wolcott and Lippitz. The Four Models of Corporate Entrepreneurship MIT Sloan Management Review, Vol. 49, No 1.
The EnablerThe organization provides funding and senior executive attention to
prospective projects.Example: Google
The ProducerThe organization establishes and
supports a full-service group with a mandate for corporate
entrepreneurship.Example: Cargill
Diffused Focused
Ad Hoc
Dedicated
Res
ourc
e A
uth
ority
OrganizationalOwnership
The OpportunistThe organization has no deliberate
approach to corporate entrepreneurship. Internal
networks drive concept selection and resource allocation.
Example: Zimmer
The AdvocateThe organization strongly evangelizes for corporate
entrepreneurship but business units provide the primary funding.
Example: DuPont
Four Models of Innovation
The EnablerThe organization provides funding and senior executive attention to
prospective projects.Example: Google
The ProducerThe organization establishes and
supports a full-service group with a mandate for corporate
entrepreneurship.Example: Cargill
Diffused Focused
Ad Hoc
Dedicated
Res
ourc
e A
uth
ority
OrganizationalOwnership
The OpportunistThe organization has no deliberate
approach to corporate entrepreneurship. Internal
networks drive concept selection and resource allocation.
Example: Zimmer
The AdvocateThe organization strongly evangelizes for corporate
entrepreneurship but business units provide the primary funding.
Example: DuPont
Four Models of InnovationInnovation
PipelineInnovation
Pipeline StrategyStrategy DesignDesign TransitionTransition OperationsOperations
• Portfolio Management
• Financial Management
• Demand Management
• Portfolio Management
• Financial Management
• Demand Management
• Intellectual Capital Management
• Capacity Management
• Continuity Management
• Intellectual Capital Management
• Capacity Management
• Continuity Management
• Change Management
• Release Management
• Asset and Configuration Management
• Knowledge Management
• Change Management
• Release Management
• Asset and Configuration Management
• Knowledge Management
• Incident Management
• Event Management
• Problem Management
• Request Fulfillment
• Incident Management
• Event Management
• Problem Management
• Request Fulfillment
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The model to select depends on your specific strategic goal…
Source: Wolcott and Lippitz. The Four Models of Corporate Entrepreneurship MIT Sloan Management Review, Vol. 49, No 1.
InnovationPipeline
InnovationPipeline StrategyStrategy DesignDesign TransitionTransition OperationsOperations
• Portfolio Management
• Financial Management
• Demand Management
• Portfolio Management
• Financial Management
• Demand Management
• Intellectual Capital Management
• Capacity Management
• Continuity Management
• Intellectual Capital Management
• Capacity Management
• Continuity Management
• Change Management
• Release Management
• Asset and Configuration Management
• Knowledge Management
• Change Management
• Release Management
• Asset and Configuration Management
• Knowledge Management
• Incident Management
• Event Management
• Problem Management
• Request Fulfillment
• Incident Management
• Event Management
• Problem Management
• Request Fulfillment
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Service strategy will focus investment decisions on different aspects of the business depending on your objectives
Source: Luehrman, T.A. Strategy as a portfolio of real options. Harvard Business Review, Vol. 76, No 5, 89-99
Run – investments are centered around maintaining operations of services Grow – investments are intended to grow the scope of products and services Transform – investments are moves into new market spaces Retire - redundant or lower value services are divested
Run – investments are centered around maintaining operations of services Grow – investments are intended to grow the scope of products and services Transform – investments are moves into new market spaces Retire - redundant or lower value services are divested
Do Not Invest Invest
Exi
stin
gN
ew
Ma
rke
t S
pace
s
<1.0 >1.01.0Value-to-Cost Ratio
Over Served Under ServedCustomer Needs
Existing
Ne
wC
usto
me
rs
Unlikely Near-Term
Investment
Possible Future
InvestmentProbable Future
Investment
Likely Near-Term
Investment
Do Not Invest Invest
Exi
stin
gN
ew
Ma
rke
t S
pace
s
<1.0- >1.01.0Value-to-Cost Ratio
Over Served Under ServedCustomer Needs
Existing
Ne
wC
usto
me
rs
Unlikely Near-Term
Investment
Possible Future
InvestmentProbable Future
Investment
Likely Near-Term
Investment
Transform
Grow
Run
Run
Transform
Grow
Maintain Grow
Retire
InnovationPipeline
InnovationPipeline StrategyStrategy DesignDesign TransitionTransition OperationsOperations
• Portfolio Management
• Financial Management
• Demand Management
• Portfolio Management
• Financial Management
• Demand Management
• Intellectual Capital Management
• Capacity Management
• Continuity Management
• Intellectual Capital Management
• Capacity Management
• Continuity Management
• Change Management
• Release Management
• Asset and Configuration Management
• Knowledge Management
• Change Management
• Release Management
• Asset and Configuration Management
• Knowledge Management
• Incident Management
• Event Management
• Problem Management
• Request Fulfillment
• Incident Management
• Event Management
• Problem Management
• Request Fulfillment
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Market Focusand Position
DistinctiveCapabilities
CompetitiveAdvantage
Market Focusand Position
DistinctiveCapabilities
CompetitiveAdvantage
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Service strategy helps focus your efforts on the market space
Could Play Can Play Can Lead Leader
Could Play Can PlayCan
CompeteCan Lead
Could Play but
DifficultCan Play Can Play Can Play
Cannot Play
Could Play but
DifficultCould Play Could Play
Low HighGreen
Low
Hig
hC
lea
n
Bissell Competitive Position in the Clean and Green Playing Field
IndustryBest
IndustryAvg
EntryLevel
Entry Level Industry Avg Industry Best
MarketSpace
ServicePortfolio
ServiceCatalog
SuccessFactors
CustomerPortfolio
UndervaluedMarket Space
BusinessModel
New BusinessPipeline
StrategicAssets
1 & 3 - Based on ITIL v3 Service Strategy, The Stationary Office publishing, 20072 - Source: Based on Accenture research and analysis
Analyzing the Market Space1
2
3
Illustrative
Illustrative
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The Service Strategy approach is ideal when you require ITIL certified professionals and service management approach
IT Infrastructure Library v3.0IT Infrastructure Library v3.0
Service Strategy at Stage 1 of Service Lifecycle Formulate IT strategy from business vision
Using Financial Management process, map cost of infrastructure to cost of service for entire service lifecycle (inception to retirement)
Form IT Steering Group (business and IT) to evaluate and act on new service proposals
Engage relevant groups across lifecycle to assess impact of new services; lower risk, raise success rate of change implementation
Demand management focus on new technology to meat capacity requirements going forward
Financial Management evaluates each new or changed service for ROI; tracks actuals against budget
Make use of expertise and tools to enhance proactive communication and incident resolution.
Service Strategy at Stage 1 of Service Lifecycle Formulate IT strategy from business vision
Using Financial Management process, map cost of infrastructure to cost of service for entire service lifecycle (inception to retirement)
Form IT Steering Group (business and IT) to evaluate and act on new service proposals
Engage relevant groups across lifecycle to assess impact of new services; lower risk, raise success rate of change implementation
Demand management focus on new technology to meat capacity requirements going forward
Financial Management evaluates each new or changed service for ROI; tracks actuals against budget
Make use of expertise and tools to enhance proactive communication and incident resolution.
Booz Allen Service StrategyBooz Allen Service Strategy
Focus on organization delivering value to customers
Leverage strategic analysis, planning, positioning, economic
Provide a forum for innovative service proposals Improve speed of change by filtering out service
proposals that are destined for failure (low ROI) Improve legacy system replacement/upgrades by
focusing on innovation Provide an organizational (agency wide) awareness
using service portfolio management Improve financial compliance and control Enhance value capture and creation by reducing
uncertainty
Focus on organization delivering value to customers
Leverage strategic analysis, planning, positioning, economic
Provide a forum for innovative service proposals Improve speed of change by filtering out service
proposals that are destined for failure (low ROI) Improve legacy system replacement/upgrades by
focusing on innovation Provide an organizational (agency wide) awareness
using service portfolio management Improve financial compliance and control Enhance value capture and creation by reducing
uncertainty
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How would you answer these questions? Strategy
– Can your team articulate the positioning statement for each service it provides?
– Are there economies of scale you could be capturing?
Customers vs. Stakeholders
– Can your team articulate who your target customer is?
– Can your team articulate the difference between user and customer?
– Does your organization value market research?
Competition/Alternatives
– Can your team members articulate what their customers’ alternatives are?
– How are the alternatives to your services going to change in the coming years?
Innovation (see the innovation survey for more information)
– Can your team members articulate where innovative ideas come from?
– Does your organization have a process for evaluating innovation?
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Agenda
Business decisions facing public sector executives
What is Service Strategy and what are the benefits?
Where can Service Strategy help?
How can Booz Allen help?
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Applied Business Analysis (ABA)
– Provides analyses to help DECIDE among competing alternatives and options
– Focuses on optimizing capability and acquisition development resource allocations
Integrated Financial and Resource Management (iFRM)
– Helps secure and manage the budgets that FUND programs, initiatives and procurements
– Focuses on fiscal planning, budgeting and execution, internal controls, and operational compliance and reporting
Quantitative Management Controls (QMC)
– Provides services and tools to monitor and CONTROL program execution activities
– Focuses on integrating scope, schedule, cost and risk into a comprehensive planning and management structure
Booz Allen’s EBA service offerings support the full life cycle of financial management and Service Strategy
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Questions?
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Appendix
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Where does your organization fall on this innovation scale?
Do Not Agree
Partially Agree
Agree Activity Phase
Our culture makes it hard for people to put ideas forward 1 2 3 In house idea generation
High scores indicate that the business needs to focus on idea generation
People in our unit come up with very few good ideas on their own 1 2 3
Few of our innovation projects involve team members from different units or subsidiaries
1 2 3 Cross-pollination among business unitsOur people typically don’t collaborate on projects across business
units, businesses, or subsidiaries1 2 3
Few good ideas for new services comes from outside our business unit 1 2 3 External sourcing of ideasOur people often exhibit a “not invented here” attitude – ideas from
outside are not considered as valuable as those invented within1 2 3
We have tough rules for investment in new projects – it’s often too hard to get ideas funded
1 2 3 Selection High scores indicate that the business needs to focus on conversion of ideas to services
We have a risk adverse attitude toward investing in novel ideas 1 2 3
New development projects often don’t finish on time 1 2 3 Development
Managers typically have a hard time getting traction for developing new services
1 2 3
We’re slow to roll out new services 1 2 3 Diffusion High scores indicate the company needs to focus on diffusion of services into the organization
Our competition quickly copies our service introductions and often make pre-emptive launches in other business lines
1 2 3
We don’t penetrate all possible channels, customer groups, and regions with new services
1 2 3
Service Strategy Questionnaire
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ABA provides cost, financial, and economic analyses to optimize resource allocation and regulatory decisions
Cost Estimating and Analysis
Cost Estimating and Analysis
Life Cycle Cost Estimate (LCCE) Total Cost of Ownership (TCO) Cost modeling and simulations Affordability assessments Statistical analysis and parametrics
Asset Inventory Valuation and Condition Assessment Facilities capital planning Capital Infrastructure Renewal Forecasting (CIRF™) Real Properties Portfolio Management
Capital Asset ManagementCapital Asset Management
Decision Analysis and
Resource Optimization
Decision Analysis and
Resource Optimization
Portfolio Analysis IT Capital Planning Business Case Analysis Analysis of Alternatives (AoA) Cost Benefit Analysis Value Measuring Methodology (VMM™)
Broad-Scale Economic Analysis
Broad-Scale Economic Analysis
Economic Impact Analysis Regulatory Impact Analysis Market and Industrial Base Analysis Econometric Modeling
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iFRM helps clients be responsible stewards of funds, providing both financial management improvement and long-term assistance
Financial Management Process ImprovementFinancial Management Process Improvement
Core FM process expertise: A/R, A/P, Cost, GL, Reporting, Budget Structured approach to process review and improvement Repositories of generic process description, flows and data
Structured approach to systems modernization planning and management Familiarity with standard application functionality: Oracle, SAP, Peoplesoft Repositories of systems requirements Related acq strategies; RFP templates; cost estimates, program mgmt
Financial Management Systems ModernizationFinancial Management Systems Modernization
Enterprise Compliance & Controls ManagementEnterprise Compliance
& Controls Management
Structured control assessment methodology, supported by desktop tools Experience in process and related IT controls assessment and testing
Financial Management & Accounting Operations
Financial Management & Accounting Operations
Operational acctg expertise (GAAP and federal GAAP equiv + JFMIP skills) Fin statement preparation; pre-audit preparation (data analysis and cleansing)
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QMC provides an analytical approach to improving program and project planning, measurement, risk management, and control
Earned Value and Integrated Scheduling
Earned Value and Integrated Scheduling
PM policies, standards, structure, and processes Integrated Baseline Review (IBR) process Implementation of ANSI 748-A compliant Earned Value Mgmt Systems Analysis and validation of program EVMS Integrated Master Planning/Scheduling
Project/program risk management assessment, development and implementation RISC-IQ™ Implementations Measurement program design and implementation Organizational Project Management (OPM3) assessments
Program Risk and Performance Management
Program Risk and Performance Management
Acquisition Strategy & Planning
Acquisition Strategy & Planning
Acquisition/contract strategy development and execution Source selection planning and facilitation Life cycle documentation development Contract compliance, oversight and management
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The offerings are all delivered by expert staff, armed with both industry standard and proprietary tools …
Leadership and participation: Society for Cost Estimating and Analysis (SCEA) National Property Management Association (NPMA) Chartered Financial Analyst (CFA) Institute American Economic Association (AEA) Project Management Institute (PMI) Association for the Advancement of Cost Engineering (AACE)
Leadership and participation: Society for Cost Estimating and Analysis (SCEA) National Property Management Association (NPMA) Chartered Financial Analyst (CFA) Institute American Economic Association (AEA) Project Management Institute (PMI) Association for the Advancement of Cost Engineering (AACE)
Over 50% hold advanced degrees Over 45% hold various security clearances Over 40% have 10+ yrs experience in CF&BA subject matter
Over 50% hold advanced degrees Over 45% hold various security clearances Over 40% have 10+ yrs experience in CF&BA subject matter
Professional CertificationsProfessional Certifications
Risk Integrated with Cost and Schedule-Intelligent Quantification (RISC-IQ™)
Value Measurement Methodology (VMM) Capital Infrastructure Renewal Forecasting (CIRF) Information Technology Investment Portfolio System (I-TIPS)
Risk Integrated with Cost and Schedule-Intelligent Quantification (RISC-IQ™)
Value Measurement Methodology (VMM) Capital Infrastructure Renewal Forecasting (CIRF) Information Technology Investment Portfolio System (I-TIPS)
Cost Estimating ACE-IT™ EDCAS™ Function Point
Workbench™ OSCAM PRICE™
Systems SEER-H™, -SEM™ RACER™ CostPROF™ @Risk™ Crystal Ball™ Metify™ Oros Analytics™ Planning™
Econometric Models
and Statistical Applications
IMPLAN™ SPSS™ SAS™
Decision Analysis Applications and
BenchmarksLogical Decisions™ Team Expert Choice™GartnerGroup TCO Manager™
Project Management Tools
Primavera®Active Risk ManagerDeltek CobraDeltekWelcomHomePertmasterwInsightMPMProsightWelcomRisk
Over 35% hold professional certifications Certified Cost Estimator/Analysts Certified Project Management Professionals Certified Professional Contract Managers Certified Public Accountants Certified Government Financial Managers
Over 35% hold professional certifications Certified Cost Estimator/Analysts Certified Project Management Professionals Certified Professional Contract Managers Certified Public Accountants Certified Government Financial Managers
Custom Methodologies and ToolsCustom Methodologies and Tools
Expertise in Standard Industry ToolsExpertise in Standard Industry ToolsExperience, Degrees and ClearancesExperience, Degrees and Clearances
Professional Organization LeadershipProfessional Organization Leadership
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ITIL Expertise
For more information about Booz Allen’s Service Strategy Offering:
– Kenneth Jones
ITIL Version 3 Certified
(301) 838-3765
For more information about ITIL v3:
– Multithreads LLC
Mimi Struck, Ph. D.
ITIL Manager (Master) Version 2
ITIL Expert Version 3
Accredited Training Provider
25+ years of experience
www.Multithreads.com