Thursday, January 16, 2014

Can the CMMI help position us for sale to an acquisition partner?

Dear CMMI Appraiser, in consideration of our long-term exit plans, we chose to adopt the CMMI last year, and are already seeing dramatic improvement, particularly with happier customers. Any advice on how we can demonstrate the value of our new CMMI-based process to potential acquisition partners? ~ Lou G.

Lou, this is something a lot of business owners struggle with. You’ve got a plan. You’ve got people identified. You’ve figured out the kind of company you want to be and the way you want to do your work. You put the plan in action, and now you want to be able to prove that it is working.

To demonstrate that your CMMI adoption is improving performance, first you need to ask yourself how YOU know it’s improving performance.

It’s amazing to me how many companies fail to do this. They deploy a process and then forget about it. They say, “OK, team, let’s start using this thing!” And then they just let it ride. Sometimes it works, and sometimes people are really suffering. And if the company has a particular focus on QA and auditing, then the auditors create all kinds of conflict with the project team because they don’t really have a good understanding whether the process works or not.

What a nightmare. That’s why being able to provide data about how well things are working is so important. Especially since you are contemplating exit strategies.

I once asked a friend of mine, who is a partner in a large M and A  firm, what constitutes the real value of a company. He said the real value of the company isn’t in its people, because people can come and go, and you can’t control that. And he said it isn’t in the products, because the products can be reproduced at any time, by anyone.

So what DOES make a company valuable?

According to my friend, who is a leader in his field, the real value of the company is the business model of that company: how you do your work, how you design software, how you write it, how you test it, and all of the intellectual property that goes into creating that product, which, by the way, is done by those very people who come and go.

Your business model is the one tool you have to compete with companies that are faster than you or more efficient than you. It’s the one part of your organization that potential acquisition partners will find more valuable than everything else.

This is actionable information.  You can (and should!) tweak your business model to demonstrate that the process working. There’s a practice in the CMMI that helps you do that, the eighth Generic Practice (also known as GP 2.8), which guides us to “Monitor and Control the Process.” With this practice, the CMMI is giving us the tools to understand how well our business process is working, and to modify it if it isn’t.

“Monitor and control” might be one of the hardest things to do, but you have to conquer this if you want to demonstrate that you are a great company.

Fortunately, this is something you can start doing right now. Just ask yourself the following questions:

How well is our team performing? How can we communicate that to leaders, especially non-agile leaders, in accounting, marketing, management and other parts of our company? How do we portray how well we are working to the people who don’t understand what we do?

I use that last question as a test, because if you have the appropriate data to tell non-technical people what you are doing, and how well you are performing, then you must have some pretty good data.

The CMMI helps you learn to tell the story of how well you are doing. It does this by first helping YOU understand how well you are doing, which keeps your company on the path of greatness. You’ll find this process of self-discovery to be a fascinating and worthwhile journey, Lou, whether you ultimately choose to take on an acquisition partner or not.

Like this blog? Forward to your nearest engineering or software exec!

Jeff Dalton is a Certified SCAMPI Lead Appraiser, Certified CMMI Instructor, ScrumMaster, author, and consultant with years of real-world experience with the CMMI in all types of organizations. Jeff pioneered agileCMMI, the leading methodology for incremental and iterative process improvement. He has taught thousands of students in CMMI trainings and has received an aggregate satisfaction score of 4.97 out of 5 from his students.

Visit for more information about engineering strategy, performance innovation , software process improvement and running a successful CMMI program.

To download eBooks about CMMI, visit Jeff’s Author Page on Amazon.

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