CHAPTER TEN
BUSINESS MODEL ANALYSIS
Dr. Rami Gharaibeh
1
CHAPTER TEN
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.
Dr. Rami Gharaibeh
2
CHAPTER TEN
introduction
a customer at our restaurant claimed he became sick
after eating at the restaurant.
The restaurant settled the suit for $3.4 million.
Dr. Rami Gharaibeh
3
CHAPTER TEN
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.
Dr. Rami Gharaibeh
4
CHAPTER TEN
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.
Dr. Rami Gharaibeh
5
CHAPTER TEN
introduction
Much can be learned about a business by analyzing
its business models. There are several different
techniques for business model analysis—techniques
appropriate for different business situations.
This chapter explains how to analyze a business model.
Dr. Rami Gharaibeh
6
CHAPTER TEN
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
Dr. Rami Gharaibeh
7
CHAPTER TEN
analysis techniques
There are four different analysis techniques, several
to wring insight from an existing business model.
All four techniques are about business change
Dr. Rami Gharaibeh
8
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
9
CHAPTER TEN
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.
Dr. Rami Gharaibeh
10
CHAPTER TEN
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.
Dr. Rami Gharaibeh
11
CHAPTER TEN
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.
Dr. Rami Gharaibeh
12
CHAPTER TEN
improvement analysis
Improvement analysis is not about improving the model
Dr. Rami Gharaibeh
13
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
14
CHAPTER TEN
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.
Dr. Rami Gharaibeh
15
CHAPTER TEN
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
Dr. Rami Gharaibeh
16
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
17
CHAPTER TEN
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.
Dr. Rami Gharaibeh
18
CHAPTER TEN
Business process simplification
Model simplification is an important objective but
different from our focus now: business process
simplification.
Chapter 7’s focus was about creating a better model. Our
focus now is creating a better business.
Dr. Rami Gharaibeh
19
CHAPTER TEN
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.
Dr. Rami Gharaibeh
20
CHAPTER TEN
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.
Dr. Rami Gharaibeh
21
CHAPTER TEN
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.
Dr. Rami Gharaibeh
22
CHAPTER TEN
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.
Dr. Rami Gharaibeh
23
CHAPTER TEN
Business process simplification
Dr. Rami Gharaibeh
24
CHAPTER TEN
Business process simplification
Instead of being realized by six activities and two
gateways, the same tactics could be realized by a
single gateway
Dr. Rami Gharaibeh
25
CHAPTER TEN
Business process simplification
Dr. Rami Gharaibeh
26
CHAPTER TEN
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.
Dr. Rami Gharaibeh
27
CHAPTER TEN
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
Dr. Rami Gharaibeh
28
CHAPTER TEN
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.
Dr. Rami Gharaibeh
This improvement approach is called
course of action valuation.
29
CHAPTER TEN
Course of action valuation
Is the tactic Find Cheaper Alternative useful?
On every procurement we save $100-$200
Dr. Rami Gharaibeh
30
CHAPTER TEN
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
Dr. Rami Gharaibeh
31
CHAPTER TEN
Course of action valuation
The simulation reveals that the simplified model
takes 2.7 days more than the original process
WHY?
Dr. Rami Gharaibeh
32
CHAPTER TEN
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
Dr. Rami Gharaibeh
33
CHAPTER TEN
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
Dr. Rami Gharaibeh
34
CHAPTER TEN
Course of action valuation
Dr. Rami Gharaibeh
35
CHAPTER TEN
Course of action valuation
Dr. Rami Gharaibeh
36
CHAPTER TEN
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 today’s process
Dr. Rami Gharaibeh
37
CHAPTER TEN
Course of action valuation
And there are risks as well
Dr. Rami Gharaibeh
38
CHAPTER TEN
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?
Dr. Rami Gharaibeh
39
CHAPTER TEN
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.
Dr. Rami Gharaibeh
40
CHAPTER TEN
Impact Analysis
A small business process improvement can
lead to one organization being underutilized
and another far too busy.
Dr. Rami Gharaibeh
41
CHAPTER TEN
Impact Analysis
a change could be initiated by the organization or
by the environment
Dr. Rami Gharaibeh
42
CHAPTER TEN
Impact Analysis
When an organization initiate a change
a change could have unforeseen impacts
avoiding making a bad change
Dr. Rami Gharaibeh
43
CHAPTER TEN
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.
Dr. Rami Gharaibeh
44
CHAPTER TEN
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.
Dr. Rami Gharaibeh
45
CHAPTER TEN
Impact Analysis
Example
Reducing risk of lawsuit
Dr. Rami Gharaibeh
46
CHAPTER TEN
Impact Analysis
The analysis begins by considering the existing
motivation model.
Dr. Rami Gharaibeh
47
CHAPTER TEN
Impact Analysis
Dr. Rami Gharaibeh
48
CHAPTER TEN
Impact Analysis
Innovative menus are just too important.
In this situation the cure is worse than the
disease.
Dr. Rami Gharaibeh
49
CHAPTER TEN
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.
Dr. Rami Gharaibeh
50
CHAPTER TEN
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.
Dr. Rami Gharaibeh
51
CHAPTER TEN
Impact Analysis
Rule
Meats Sufficiently Cooked: It is obligatory that
each menu item is thoroughly cooked if the
menu item contains meat.
Dr. Rami Gharaibeh
52
CHAPTER TEN
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.
Dr. Rami Gharaibeh
53
CHAPTER TEN
How to perform impact analysis
policy or business rule may be required as
illustrated by previous example
Dr. Rami Gharaibeh
54
CHAPTER TEN
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.
Dr. Rami Gharaibeh
55