Business Modeling
We are experts at System Dynamics, a flexible, powerful, and insightful way to understand the economics of new or complex business opportunities.
Please click here to send us a message describing your problem,
and we will explain how we would approach it, with an estimate, at no charge.
Where it's useful
- New markets
- Shifting environment (e.g., technology or market change, deregulation)
- Complex configuration (multiple players, coalition of partners)
- Uncertain business models (different revenue streams, changing over time)
How it's different from spreadsheets
- Visual and transparent: we describe your business using a diagram that represents how the pieces fit together, rather than as sheets of rows and columns of numbers
- Concise: a 16 megabyte spreadsheet was reduced to 80 model equations
- Easy to audit: fewer equations and visual presentation make it easy to trace dependencies, understand model assumptions, and reduce errors
- Incorporates feedback: both reinforcing feedback (exponential growth or "vicious circles") and negative feedback (goal-seeking and limits to growth), both import in business systems, are included in a natural way
- Time perspective: deals with how things build up over time, avoiding naive assumptions about (for example) instant availability of infrastructure
- Easy to scale: if the model structure is right, it can be applied to additional market segments, regions, or other dimensions, by changing parameters
How it works
- Represents your business and the market as a network of stocks (e.g., customers, cash) and flows (customers joining and leaving, income and expenditure)
- Relationships between stocks and flows are represented by simple mathematical equations (e.g., cash on hand = cash before + income this period - expenditure this period)
- Equations are simulated over time, typically 3 to 10 years
- We use visual software that diagrams the model, showing linkages more clearly than in a spreadsheet
- Output is also very visual and transparent, with graphs of any variable, allowing you to trace and understand
- We run the model with different inputs (scenarios) to test model sensitivity, and understand likely outcomes under different conditions
Typical project
- Ranges from 2 weeks to 4 months
- Initial workshop to understand and map out the business
- Modelling off-site, and reviews once or twice a week to review output
- Output is paper document or annotated on-line model, summarizing and explaining key findings
- Model and documentation left with client, support available as required
Case studies
- Loyalty scheme for a major credit card: tested economics under a wide variety of scenarios and programme configurations, leading to innovative and optimal launch
- Government employment programme: helped a major contractor understand the economics of a new programme to help the unemployed find work, in order to refine bidding strategy for contract
- Housing strategy for UK Army: identified ideal housing stock and commercial parameters in advance of troops returning from Afghanistan