Principles of program governance

Glen Alleman
Glen AllemanAgile Program, Planning, and Controls en Niwot Ridge, LLC
Principles of Program
Governance

       Governance of enterprise
       programs focuses on delivering
       products or services to support
       top line growth while moving
       operational savings to the
       bottom line.
The management of enterprise programs has various descriptions
depending on business domain, management style, and technical
products or services.
In an emerging market or expanding business domain, one
common attribute of any successful organization is the transition
from “operational effectiveness” to “strategy focused.”
These firms do not abandon their operational excellence roots.
Rather they place these operational activities in their proper place
– as the foundation of a Strategy Focused Organization.
Strategy, objectives, and their measurement processes are
installed for managing the operational effectiveness of the
organization in the presence of this transition process.
The first step in this process is the realization the difference
between operational effectiveness and strategy. Operational
Effectiveness is necessary, but Strategy provides the means to
differentiate a firm from its competition.
Drivers for Governance
Situation                           Beneficial Outcome
   Weak leverage of resources         “Value engineering” redirects
    creates the perception that         the project to focus on cost
    governance is a cost rather         and productivity management
    than an asset
   The role of business               Silos of processes are moved
    processes have moved to the         to the enterprise level for
    enterprise level                    lateral deployment rather than
                                        vertical isolation
   Cost of poor governance            Making costs and delivered
    obscures the traceability of        value fully visible allows all
    value of investments to their       stakeholders to see the
    benefits                            returns on the balance sheet
Developing a Strategy Focused Organization produces a change
in the behavior of Program Management. Instead of “managing”
the operations in a static role, Program leadership now “governs”
resources and services through leadership as well as stewardship.
The desire to close the common operational gaps found in many
organizations is the motivation for this governance approach.
    Program Management operations are many times seen as a
     “cost center.” This cost center view comes about because
     there is no traceability between costs and business value.
    Traditional Program Management systems have “grown up” in
     operational silos. Transforming these silos to “enterprise”
     enablers is the goal of program governance.
    Visibility into all costs, including Program Management costs
     is mandatory for all responsible companies.
The Role of Governance
   “Fact based” strategy setting
   Manage from the customer’s point of view within the
    corporate framework
   Drive participation of senior management
   Be both strategic and tactical
   Trace all costs to business value in all activities
   Provide iterative and incremental improvements
   Treat architecture, technology and security as
    enterprise issues
   Install, motivate, and lead a high performance
    organization
Governance fills the gaps that naturally form between business
and technical domains and between management and strategy.
In traditional operations technology and business are readily
visible to senior management. What’s missing is visibility into the
activities in the “white space” between technology and business.
Managing these gaps is the role of the Governance
    The “alignment gap” appears when investments are not
     traceable to business strategy.
    The “execution gap” appears when those tasked with
     delivering products and services don’t have a clear “line of
     sight” to the corporate strategy.
    The “innovation gap” appears when leadership and staff are
     not connected to the needs of the market, emerging
     technologies and the investment strategies for future needs.
The Role of Governance
 Business Mission




                                   Provide Leadership and Management

                                                                       Leadership
     Alignment        Strategic
        Gap           Alignment




                                           of across all activities
     Strategy




                                                                                    Governance
     Execution        Execution
       Gap            Excellence




                                                                       Management
    Architecture

     Innovation       Innovative
        Gap            Solutions

 Product / Services
Getting “aligned” is not an event, it is a continuous improvement
process. Alignment must be tested through strategies, objectives,
and metrics.
Alignment starts with the business leadership team.
    Build consensus and commitment around the strategy
       Executive participation in the strategy formulation
       Executive education regarding strategy implementation
    Understand the benefits of a strategy focused organization
       How will the strategy benefit an individual department or
         function?
       How will strategy help achieve to overall mission of the
         firm?
    Demonstrate the power of a strategy
       Require participation and stewardship from all
         stakeholders
Strategic Alignment …
   “Aligns” initiatives with business objectives
   “Ties” system planning processes to
    business growth plan and bookable benefits
   “Manages” enterprise initiatives through
    portfolios of projects in support of strategic
    objectives
   “Informs” management of the activities and
    results of investment
Before projects can be identified to fulfill the strategic needs of the
firm, an understanding of their performance measures, connection
to strategy, and their past performance is needed.
Project Portfolio Management is one means of integrating these
needs:
    Project delivery is more than schedule and budget compliance.
    Projects must deliver the right value to the business
     processes, at the right time, for the right solution – creating
     “value” not just benefits.
    Benefits are bookable on the balanced sheet. Value is visible
     to the market and customers.
    This “value creation” process is more than just “keeping on
     schedule.” It is about understanding the business needs.
    This understanding comes from “knowing” the business
     beyond specifying the technical details of a software system.
    The leader must be an integral part of the process
     development process.
Portfolio Management

   Prioritizes and selects initiatives
   Understands how non–discretionary
    budget supports the bottom line
   Uses discretionary budget to increase
    the top line or remove cost from
    product stream
   Directly measures the impact of
    spending on the balance sheet
Once the specific needs of the organization are identified,
prioritization of the solutions takes place. This “selection” process
has many challenges.
  Defining the “value” of a project must connect the investment
   with its contribution to strategic goals. Simple monetary returns
   are necessary but not sufficient.
  Quantifying the benefits must consider financial, customer
   satisfaction, investment returns, strategic positioning,
   competitive assessment, and other intangible benefits to the
   firm. “Real options” is one quantification method used to
   produce tangible assessments in the presence of uncertainty.
  Balancing need for systems with the capacity to deliver is a
   continuous process.
    Continually assessing the portfolio of projects and their
     contribution to the corporate strategy is the role of senior
     management.
Project Selection & Prioritization
Challenges to Excellence             Strategies for Delivery
   Selecting the best valued           Use a uniform and consistent
    projects                             project selection process
                                         based on defined metrics
   Quantifying benefits as a           Define weighted paired
    basis of constructing a              comparison analysis process
    portfolio
   Balance demand within               Formal reserve list available
    limited appropriations and           when more funds become
    investments                          available
   A view of the portfolio as new      Incorporate reporting and
    projects are initiated               resource management.
There are four basic project types in any modern organization
providing mission critical services.
  Type I – Projects essential for the firm to remain in business
   and provide a unique service or product. These projects form
   the basis of normal operations. Without these projects the firm
   can not continue to prosper and grow.
  Type II - Projects that have to be done, but don’t differentiate
   the firm in the marketplace. These are “daily operations” or
   regulatory compliance projects.
    Type III – Projects that are not essential, but create an
     advantage for the firm. These are “experimental” projects to
     test new strategies, evaluate opportunities, or simply to explore
     new avenues of product and service delivery.
    Type IV - The business would survive without these projects.
     These are projects that must be avoided.
Project Criteria

                           Type II                               Type I
                           Projects that have to be              Essential projects for the
                           done, but don’t                       firm to remain in business
                           differentiate the firm in the         and provide a unique
                           marketplace                           service or product
Critical to the Mission




                           Type IV                               Type III
                           The business would                    Project is not essential, but
                           survive without these                 creates an advantage for
                           projects                              the firm

                          Differentiating to the business in the marketplace
In order for any organization to be considered part of the corporate
strategy its financial affairs must be kept in order.
    At best projects alone are a 2nd order impact on profitability. 1st
     order impacts come from revenue, sales margins, volume,
     supplier costs and other direct cost structures.
  For project to fully participate in the corporate strategy,
   traceability from investment to value creation is needed.
  This traceability starts with a detailed understanding of the cost
   structure of services. Not just cost, but the structure of those
   costs and each cost’s contribution to value creation.
  Seeing projects as “factories” that produce consumable items
   for a specific “cost of goods,” is a starting point.
  Projects can then be put on the same “unit of measure” footing
   as other products and services of the firm.
Financial Accountability

   Accurately measures the impact of any
    project on investments
   Focuses on selection and prioritization
   Categorizes investments as …
       Fundamental to the business
       Innovative the business
       Growing the business
       Rational experiments
Balanced Scorecard is a means of connecting strategy with
operational excellence.
  Any modern firm is expected to be competitive, accountable,
   customer–friendly, and fiscally responsible.
  The external world is highly unstable, so planning systems
   must deal with this uncertainly. Rapidly changing technologies
   are only the start of this uncertainty.
  Research shows 9 out of 10 firms fail to execute on their
   strategy:
      Only 5% of the work force understands the strategy
      Only 25% of the managers have personal objectives and
       incentives linked to strategy
      60% of organizations don’t link budgets to strategy
        85% of executive teams spend less than one hour per
         month discussing strategy
Balanced Scorecard Approach
   Mobilize change and improvement through
    executive leadership
   Translate the strategy to operational terms
   Align the organization to the strategy
   Motivate by making strategy everyone’s job
   Learn and adapt through continuous
    improvement process
   Govern to make strategy a continual
    process
Creating a performance based organization based on “business
performance” as well as “technical performance” requires several
critical principles to be followed.
    Translate the strategy to operational terms, so everyone can
     understand the goals of the larger firm.
  Link and align the organization around the strategy to create a
   “line of sight” from the board room to the computer room.
  Make strategy everyone's job through personal contribution to
   strategic implementation.
  Make strategy a continuous process through organizational
   learning and adapting.
  Provide an agenda for change for executive leadership top
   mobilize this change.
Scorecard Metrics
   Move away from the “cost center” paradigm
    and toward the “value creation” paradigm
   Link what a project does and what a project
    does for the business
   Recognize that every investment must
    create value – infrastructure is the cost of
    doing business, but it can still be measured
   Produce measures that the CEO, CFO,
    Board, and shareholders actually care about
In many business domains operational excellence is seen as a
“back office” attribute. Operations are out of sight and many times
out of mind.
Senior managers usually focus on strategy, planning, budgeting,
and other “capital” based decision making. At times this leaves
operations as a second class citizen.
In the project domain, operations is a critical success factor for the
firm. But operations must also provide a platform for strategy,
planning, budgeting and other “capital” based decision making
processes.
Without a stable, reliable, scalable, and secure operations
organization, the expansion of any firm is at risk.
It is through “operational innovation,” that expansion can be
implemented. Simple scaling laws prevent a linear example in
most business domains. Something new is needed.
Operational Excellence

   Applications development and deployment
    based on a repeatable Software
    Development Life Cycle
   Production management tied to business
    processes
   Technical architecture assures operational
    integrity
   Security actively managed as a first priority
Conventional implementation of products or services often lead to
failure in the presence of “disruptive” markets. Firms that follow
traditional implementation methodologies inevitably take too long
getting to market with their products and services.
When traditional methods are applied in a domain, there is too
much to be done, too many systems to be integrated, taking too
long for the benefits to flow to the bottom line.
Building software systems to meet the needs of a “disruptive”
market requires innovation to delivery services.
This innovative approach should be:
  Iterative and incremental.
  Built on direct feedback from customers
    Break large scale deployments into a series of limited releases
    Continually reaffirm that delivered value matches the strategy
Operational Innovation

   Invention and deployment of new ways
    of doing things
   Acknowledge the core value–creating
    work of operations
   Acknowledge operational performance
    as a driver of financial results
   Look for process breakthroughs to
    gain traction across the organization
The active promotion and execution of a Strategy Focused
organization starts with awareness.
  All employees have “top of the mind” awareness of strategy.
  Strategic priorities are repeatedly communicated through
   multiple media outlets.
  Department, Team, and Individual goals are aligned with the
   strategy
  Departments, Teams, and Individuals have a feedback forum
   in which their ideas are heard and acted on.
In a successful IT–Enabled organization, the “critical few” must
continually focus the “operational many” on the goal of
differentiating the organization to create a competitive advantage.
This does not mean separation of roles or a hierarchy of
“knowing”.
It does mean that executing strategy is just a critical a job as
delivering products and services.
Executing the Strategy
          Strategic Outcomes


                                            Mission and Business critical
    Mission and                             results aligned with Business
                      Customer Results      Strategy measured from the
  Business Results
                                            customer’s perspective.


                  Value                     Direct effects of day-to-day
                                            activities and broader
                                            processes driven by the
              Processes and                 desired outcomes.
                 Activities                 Mode of delivery and business
                                            processes driven by strategy

                  Value                     Key enablers measured
                                            through their contribution to
                                            outputs and outcomes.
    Human                     Other Fixed
               Technology
    Capital                     Assets
The process of governance must be repeatable. Not just
repeatable across the organization, but repeatable in time.
Governance is possessing core competencies to manage both
tangible and intangible assets:
  Management of tangible assets
      Managing quality
      Managing risk
      Managing money
      Managing technology
  Management of intangible assets
      Managing strategy
      Managing people
      Managing customers
These core competencies are operate inside a repeatable
governance process to produce a “center of excellence.”
Repeatable Processes

         A process to mobilize the organization to
Mobilize be strategy focused
          A process to describe and communicate
Translate the strategy inside and outside a project
            A process to align projects around the
  Align     corporate strategy
         A process to ensure personal objectives
Motivate and incentives are supporting the strategy
            An integrated reporting and decision
 Govern     making process to senior management
Glen B. Alleman
Niwot Ridge Consulting
4347 Pebble Beach Drive
Niwot, Colorado 80503
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Principles of program governance

  • 1. Principles of Program Governance Governance of enterprise programs focuses on delivering products or services to support top line growth while moving operational savings to the bottom line.
  • 2. The management of enterprise programs has various descriptions depending on business domain, management style, and technical products or services. In an emerging market or expanding business domain, one common attribute of any successful organization is the transition from “operational effectiveness” to “strategy focused.” These firms do not abandon their operational excellence roots. Rather they place these operational activities in their proper place – as the foundation of a Strategy Focused Organization. Strategy, objectives, and their measurement processes are installed for managing the operational effectiveness of the organization in the presence of this transition process. The first step in this process is the realization the difference between operational effectiveness and strategy. Operational Effectiveness is necessary, but Strategy provides the means to differentiate a firm from its competition.
  • 3. Drivers for Governance Situation Beneficial Outcome  Weak leverage of resources  “Value engineering” redirects creates the perception that the project to focus on cost governance is a cost rather and productivity management than an asset  The role of business  Silos of processes are moved processes have moved to the to the enterprise level for enterprise level lateral deployment rather than vertical isolation  Cost of poor governance  Making costs and delivered obscures the traceability of value fully visible allows all value of investments to their stakeholders to see the benefits returns on the balance sheet
  • 4. Developing a Strategy Focused Organization produces a change in the behavior of Program Management. Instead of “managing” the operations in a static role, Program leadership now “governs” resources and services through leadership as well as stewardship. The desire to close the common operational gaps found in many organizations is the motivation for this governance approach.  Program Management operations are many times seen as a “cost center.” This cost center view comes about because there is no traceability between costs and business value.  Traditional Program Management systems have “grown up” in operational silos. Transforming these silos to “enterprise” enablers is the goal of program governance.  Visibility into all costs, including Program Management costs is mandatory for all responsible companies.
  • 5. The Role of Governance  “Fact based” strategy setting  Manage from the customer’s point of view within the corporate framework  Drive participation of senior management  Be both strategic and tactical  Trace all costs to business value in all activities  Provide iterative and incremental improvements  Treat architecture, technology and security as enterprise issues  Install, motivate, and lead a high performance organization
  • 6. Governance fills the gaps that naturally form between business and technical domains and between management and strategy. In traditional operations technology and business are readily visible to senior management. What’s missing is visibility into the activities in the “white space” between technology and business. Managing these gaps is the role of the Governance  The “alignment gap” appears when investments are not traceable to business strategy.  The “execution gap” appears when those tasked with delivering products and services don’t have a clear “line of sight” to the corporate strategy.  The “innovation gap” appears when leadership and staff are not connected to the needs of the market, emerging technologies and the investment strategies for future needs.
  • 7. The Role of Governance Business Mission Provide Leadership and Management Leadership Alignment Strategic Gap Alignment of across all activities Strategy Governance Execution Execution Gap Excellence Management Architecture Innovation Innovative Gap Solutions Product / Services
  • 8. Getting “aligned” is not an event, it is a continuous improvement process. Alignment must be tested through strategies, objectives, and metrics. Alignment starts with the business leadership team.  Build consensus and commitment around the strategy  Executive participation in the strategy formulation  Executive education regarding strategy implementation  Understand the benefits of a strategy focused organization  How will the strategy benefit an individual department or function?  How will strategy help achieve to overall mission of the firm?  Demonstrate the power of a strategy  Require participation and stewardship from all stakeholders
  • 9. Strategic Alignment …  “Aligns” initiatives with business objectives  “Ties” system planning processes to business growth plan and bookable benefits  “Manages” enterprise initiatives through portfolios of projects in support of strategic objectives  “Informs” management of the activities and results of investment
  • 10. Before projects can be identified to fulfill the strategic needs of the firm, an understanding of their performance measures, connection to strategy, and their past performance is needed. Project Portfolio Management is one means of integrating these needs:  Project delivery is more than schedule and budget compliance.  Projects must deliver the right value to the business processes, at the right time, for the right solution – creating “value” not just benefits.  Benefits are bookable on the balanced sheet. Value is visible to the market and customers.  This “value creation” process is more than just “keeping on schedule.” It is about understanding the business needs.  This understanding comes from “knowing” the business beyond specifying the technical details of a software system.  The leader must be an integral part of the process development process.
  • 11. Portfolio Management  Prioritizes and selects initiatives  Understands how non–discretionary budget supports the bottom line  Uses discretionary budget to increase the top line or remove cost from product stream  Directly measures the impact of spending on the balance sheet
  • 12. Once the specific needs of the organization are identified, prioritization of the solutions takes place. This “selection” process has many challenges.  Defining the “value” of a project must connect the investment with its contribution to strategic goals. Simple monetary returns are necessary but not sufficient.  Quantifying the benefits must consider financial, customer satisfaction, investment returns, strategic positioning, competitive assessment, and other intangible benefits to the firm. “Real options” is one quantification method used to produce tangible assessments in the presence of uncertainty.  Balancing need for systems with the capacity to deliver is a continuous process.  Continually assessing the portfolio of projects and their contribution to the corporate strategy is the role of senior management.
  • 13. Project Selection & Prioritization Challenges to Excellence Strategies for Delivery  Selecting the best valued  Use a uniform and consistent projects project selection process based on defined metrics  Quantifying benefits as a  Define weighted paired basis of constructing a comparison analysis process portfolio  Balance demand within  Formal reserve list available limited appropriations and when more funds become investments available  A view of the portfolio as new  Incorporate reporting and projects are initiated resource management.
  • 14. There are four basic project types in any modern organization providing mission critical services.  Type I – Projects essential for the firm to remain in business and provide a unique service or product. These projects form the basis of normal operations. Without these projects the firm can not continue to prosper and grow.  Type II - Projects that have to be done, but don’t differentiate the firm in the marketplace. These are “daily operations” or regulatory compliance projects.  Type III – Projects that are not essential, but create an advantage for the firm. These are “experimental” projects to test new strategies, evaluate opportunities, or simply to explore new avenues of product and service delivery.  Type IV - The business would survive without these projects. These are projects that must be avoided.
  • 15. Project Criteria Type II Type I Projects that have to be Essential projects for the done, but don’t firm to remain in business differentiate the firm in the and provide a unique marketplace service or product Critical to the Mission Type IV Type III The business would Project is not essential, but survive without these creates an advantage for projects the firm Differentiating to the business in the marketplace
  • 16. In order for any organization to be considered part of the corporate strategy its financial affairs must be kept in order.  At best projects alone are a 2nd order impact on profitability. 1st order impacts come from revenue, sales margins, volume, supplier costs and other direct cost structures.  For project to fully participate in the corporate strategy, traceability from investment to value creation is needed.  This traceability starts with a detailed understanding of the cost structure of services. Not just cost, but the structure of those costs and each cost’s contribution to value creation.  Seeing projects as “factories” that produce consumable items for a specific “cost of goods,” is a starting point.  Projects can then be put on the same “unit of measure” footing as other products and services of the firm.
  • 17. Financial Accountability  Accurately measures the impact of any project on investments  Focuses on selection and prioritization  Categorizes investments as …  Fundamental to the business  Innovative the business  Growing the business  Rational experiments
  • 18. Balanced Scorecard is a means of connecting strategy with operational excellence.  Any modern firm is expected to be competitive, accountable, customer–friendly, and fiscally responsible.  The external world is highly unstable, so planning systems must deal with this uncertainly. Rapidly changing technologies are only the start of this uncertainty.  Research shows 9 out of 10 firms fail to execute on their strategy:  Only 5% of the work force understands the strategy  Only 25% of the managers have personal objectives and incentives linked to strategy  60% of organizations don’t link budgets to strategy  85% of executive teams spend less than one hour per month discussing strategy
  • 19. Balanced Scorecard Approach  Mobilize change and improvement through executive leadership  Translate the strategy to operational terms  Align the organization to the strategy  Motivate by making strategy everyone’s job  Learn and adapt through continuous improvement process  Govern to make strategy a continual process
  • 20. Creating a performance based organization based on “business performance” as well as “technical performance” requires several critical principles to be followed.  Translate the strategy to operational terms, so everyone can understand the goals of the larger firm.  Link and align the organization around the strategy to create a “line of sight” from the board room to the computer room.  Make strategy everyone's job through personal contribution to strategic implementation.  Make strategy a continuous process through organizational learning and adapting.  Provide an agenda for change for executive leadership top mobilize this change.
  • 21. Scorecard Metrics  Move away from the “cost center” paradigm and toward the “value creation” paradigm  Link what a project does and what a project does for the business  Recognize that every investment must create value – infrastructure is the cost of doing business, but it can still be measured  Produce measures that the CEO, CFO, Board, and shareholders actually care about
  • 22. In many business domains operational excellence is seen as a “back office” attribute. Operations are out of sight and many times out of mind. Senior managers usually focus on strategy, planning, budgeting, and other “capital” based decision making. At times this leaves operations as a second class citizen. In the project domain, operations is a critical success factor for the firm. But operations must also provide a platform for strategy, planning, budgeting and other “capital” based decision making processes. Without a stable, reliable, scalable, and secure operations organization, the expansion of any firm is at risk. It is through “operational innovation,” that expansion can be implemented. Simple scaling laws prevent a linear example in most business domains. Something new is needed.
  • 23. Operational Excellence  Applications development and deployment based on a repeatable Software Development Life Cycle  Production management tied to business processes  Technical architecture assures operational integrity  Security actively managed as a first priority
  • 24. Conventional implementation of products or services often lead to failure in the presence of “disruptive” markets. Firms that follow traditional implementation methodologies inevitably take too long getting to market with their products and services. When traditional methods are applied in a domain, there is too much to be done, too many systems to be integrated, taking too long for the benefits to flow to the bottom line. Building software systems to meet the needs of a “disruptive” market requires innovation to delivery services. This innovative approach should be:  Iterative and incremental.  Built on direct feedback from customers  Break large scale deployments into a series of limited releases  Continually reaffirm that delivered value matches the strategy
  • 25. Operational Innovation  Invention and deployment of new ways of doing things  Acknowledge the core value–creating work of operations  Acknowledge operational performance as a driver of financial results  Look for process breakthroughs to gain traction across the organization
  • 26. The active promotion and execution of a Strategy Focused organization starts with awareness.  All employees have “top of the mind” awareness of strategy.  Strategic priorities are repeatedly communicated through multiple media outlets.  Department, Team, and Individual goals are aligned with the strategy  Departments, Teams, and Individuals have a feedback forum in which their ideas are heard and acted on. In a successful IT–Enabled organization, the “critical few” must continually focus the “operational many” on the goal of differentiating the organization to create a competitive advantage. This does not mean separation of roles or a hierarchy of “knowing”. It does mean that executing strategy is just a critical a job as delivering products and services.
  • 27. Executing the Strategy Strategic Outcomes Mission and Business critical Mission and results aligned with Business Customer Results Strategy measured from the Business Results customer’s perspective. Value Direct effects of day-to-day activities and broader processes driven by the Processes and desired outcomes. Activities Mode of delivery and business processes driven by strategy Value Key enablers measured through their contribution to outputs and outcomes. Human Other Fixed Technology Capital Assets
  • 28. The process of governance must be repeatable. Not just repeatable across the organization, but repeatable in time. Governance is possessing core competencies to manage both tangible and intangible assets:  Management of tangible assets  Managing quality  Managing risk  Managing money  Managing technology  Management of intangible assets  Managing strategy  Managing people  Managing customers These core competencies are operate inside a repeatable governance process to produce a “center of excellence.”
  • 29. Repeatable Processes A process to mobilize the organization to Mobilize be strategy focused A process to describe and communicate Translate the strategy inside and outside a project A process to align projects around the Align corporate strategy A process to ensure personal objectives Motivate and incentives are supporting the strategy An integrated reporting and decision Govern making process to senior management
  • 30. Glen B. Alleman Niwot Ridge Consulting 4347 Pebble Beach Drive Niwot, Colorado 80503