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BUSINESS MODEL ANALYSIS
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introduction

Business model analysis is the work of
analyzing existing business models to learn more
about the business. Business model analysis is
about reaping value from models, using the models
to discover new insights.
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introduction

a customer at our restaurant claimed he became
sick after eating at the restaurant. The
restaurant settled the suit for 3.4 million.
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introduction

The restaurant attorneys want to reduce the
risk of being sued the business processes and
business rules are already modeled for other
purposes The models are useful for determining
what to do about the risk of lawsuits.
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introduction

They consider the menu creation process and
introduce a new activity into the process to
review new menu items for legal risk. They
examine the new server hiring process and decide
to add some new training for servers, so the
servers can explain food preparation to customers.
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introduction

Much can be learned about a business by
analyzing its business models. There are several
different techniques for business model
analysistechniques appropriate for different
business situations. This chapter explains how
to analyze a business model.
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introduction

In chapter 7 we were concerned with improving
the model The business model analysis described
in this chapter is analysis with the purpose of
improving the business being modeled
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analysis techniques

There are four different analysis techniques,
several to wring insight from an existing
business model. All four techniques are about
business change
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introduction

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analysis techniques

The table is not intended to be exhaustive.
There are other model analysis techniques not
listed and not described in this
chapter. Simulation is one way to realize the
model analysis techniques.
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improvement analysis

No business is perfect there are always
opportunities to make business processes faster,
to improve the accuracy of decisions, or to
change the organization structure in ways
that improve customer satisfaction.
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improvement analysis

Even when a business is well designed for a
particular environment, it never stays that way.
The business environment continually changes. A
business that fit the environment yesterday will
fail to fit today. Business improvement is a
never-ending task.
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improvement analysis

Improvement analysis is not about improving the
model
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improvement analysis

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improvement analysis

Can some of the handoffs be eliminated? Why are
all the activities performed? Are they all truly
necessary? These questions can be answered by
analyzing the motivation behind each activity.
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improvement analysis

The restaurant has some financial objectives and
tactics to achieve those objectives. One such
tactic is avoiding unnecessary investments Many
of the activities and gateways in the business
process are performed solely to realize this
tactic
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improvement analysis

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Business process simplification

Business process simplification is performed
for a business reason, either to reduce the cost
of the business process, improve the quality,
reduce the end-to-end cycle time, or for some
other reason. Model simplification is an
important objective but different from our focus
now business process simplification.
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Business process simplification

Model simplification is an important objective
but different from our focus now business
process simplification. Chapter 7s focus was
about creating a better model. Our focus now is
creating a better business.
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Business process simplification

Often a business process will have some
activities and gateways that are not justified by
any courses of action. The process includes
activities that are performed for no apparent
reason, no reason beyond tradition we have
always done it this way.
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Business process simplification

We see no vestigial activities or gateways in
the procurement process. Every gateway realizes
some course of action so does every activity.
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Business process simplification

There are five activities and two gateways in
the procurement process to achieve the tactic of
avoiding unnecessary investments. Of the 13
model elements in the end-to-end process, more
than half are there solely for that purpose.
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Business process simplification

The restaurant general manager decides himself
whether the equipment is needed. Once he decides
to purchase, the procurement specialist
determines whether there are cheaper alternatives
and then purchases the equipment.
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Business process simplification

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Business process simplification

• Instead of being realized by six activities and
  two gateways, the same tactics could be realized
  by a single gateway

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Business process simplification

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Course of action valuation

• A course of action is a set of tactics that the
  business will maintain while performing the
  business process. It is a strategy
• Some strategies might sound good in theory but in
  practice are not worth the effort of the business
  process activities that implement them.

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Course of action valuation

• With the model, we know what courses of action
  are realized by which activities and gateways.
• We could then determine the value of maintaining
  or improving the strategy

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Course of action valuation

• We can measure the cost of a course of action by
  summing the costs of all the activities and
  gateways that realize that cost.
• Then the total cost of efforts toward the course
  of action can be weighed against the benefits.
• This improvement approach is called
• course of action valuation.

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Course of action valuation

• Is the tactic Find Cheaper Alternative useful?
• On every procurement we save 100-200

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Course of action valuation

• Yet, the activity Research Equipment Alternatives
  consumes 3.2 hours of work.
• the total amount of time for the business
  process could be calculated through simulation

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Course of action valuation

• The simulation reveals that the simplified model
  takes 2.7 days more than the original process
• WHY?

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Course of action valuation

• Because if the owner of the task is engaged in
  many business process then the current activity
  will wait in queue.
• The more activities the higher the waiting and
  the higher the delay for the process

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Course of action valuation

• Does the value of pursuing this course of action
  really justify the cost and time to pursue it?
• The restaurant might be better served by letting
  the restaurant general manager make the purchase

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Course of action valuation

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Course of action valuation

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Course of action valuation

• But there are some costs of making the change
• the costs of training the general managers
• the cost of changing the application that
  supports todays process

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Course of action valuation

• And there are risks as well

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Impact Analysis

• The attempt to understand the impacts of a
  proposed change before acting on the change is
  called impact analysis.
• Impact analysis is looking before leaping.
• What unintended consequences will result?

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Impact Analysis

• When a single change is made to a business, many
  consequences can occur.
• A new governmental regulation, seemingly simple,
  can lead to three new policies, a new
  organization to monitor compliance, and 13
  changes to business processes.

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Impact Analysis

• A small business process improvement can lead to
  one organization being underutilized and another
  far too busy.

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Impact Analysis

• a change could be initiated by the organization
  or by the environment

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Impact Analysis

• When an organization initiate a change
• a change could have unforeseen impacts
• avoiding making a bad change

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Impact Analysis

• When change is enforced
• The business must comply with a new regulation.
• Impact analysis allows the business to
  understand the consequences before they happen,
  and prepare for those consequences.

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Impact Analysis

• Businesses are complex, with many organizations,
  rules, and processes that interrelate in hundreds
  of ways.
• Without models, even the most thoughtful and
  thorough executives will miss some impacts.

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Impact Analysis

• Example
• Reducing risk of lawsuit

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Impact Analysis

• The analysis begins by considering the existing
• motivation model.

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Impact Analysis

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Impact Analysis

• Innovative menus are just too important.
• In this situation the cure is worse than the
  disease.

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Impact Analysis

• Instead the task force adopts a new business
  policy to govern this strategy.
• Legally Safe Menus All menus must be reasonably
  safe from lawsuits.

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Impact Analysis

• This policy is the basis for several business
  rules that check aspects of legal safety.
• For example, a new business rule is created to
  ensure that all meat is sufficiently cooked.

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Impact Analysis

• Rule
• Meats Sufficiently Cooked It is obligatory that
  each menu item is thoroughly cooked if the menu
  item contains meat.

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How to perform impact analysis

• Impact analysis takes time.
• Consider the change and then examine model
  elements one by one to see which are affected by
  the change.
• When a model element is affected by a change, the
  impact can have one of several different results.

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How to perform impact analysis

• policy or business rule may be required as
  illustrated by previous example

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How to perform impact analysis

• A business process activity might be eliminated
• or modified.
• For example, if pagers are to be installed, the
  host still greets and seats customers but now
  does so differently because a pager system is
  used.