Business Modeling

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We are experts at System Dynamics, a flexible, powerful, and insightful way to understand the economics of new or complex business opportunities.

Where it's useful

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

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

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

Here are some examples of recent work using system dynamics to solve complex problems:

Loyalty programme economics: we developed a model to help a major credit card company figure out the economics of a new loyalty scheme, in an environment with complex interactions among consumers, merchants, and payment mechanisms; we tested programme economics under a wide variety of scenarios and configurations, leading to innovative and optimal launch
Pharmaceutical product launch: we used system dynamics to help a global pharmaceutical company plan the launch of a new and innovative disease treatment, taking into account the complex interations between patients, physicians, and payers
Bidding strategy: we helped a major government contractor understand the economics of a new programme to help the unemployed find work, in order to refine bidding strategy for contract
Army housing strategy: for the UK Army, we helped identify ideal housing stock and commercial parameters in advance of troops returning from Afghanistan