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CHAPTER TEN
Dr. Rami Gharaibeh
BUSINESS MODEL ANALYSIS
Dr. Rami Gharaibeh
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.
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
a customer at our restaurant claimed he became sick after eating at the restaurant.
The restaurant settled the suit for $3.4 million.
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
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.
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
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.
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
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.
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
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
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
There are four different analysis techniques, several to wring insight from an existing
business model.
All four techniques are about business change
CHAPTER TEN
analysis techniques
Dr. Rami Gharaibeh
CHAPTER TEN
introduction
Dr. Rami Gharaibeh
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.
CHAPTER TEN
analysis techniques
Dr. Rami Gharaibeh
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.
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
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.
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
Improvement analysis is not about improving the model
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
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.
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
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
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
CHAPTER TEN
improvement analysis
Dr. Rami Gharaibeh
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.
CHAPTER TEN
Business process simplification
Dr. Rami Gharaibeh
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.
CHAPTER TEN
Business process simplification
Dr. Rami Gharaibeh
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.
CHAPTER TEN
Business process simplification
Dr. Rami Gharaibeh
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
Dr. Rami Gharaibeh
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.
CHAPTER TEN
Business process simplification
Dr. Rami Gharaibeh
The restaurant general manager decides himself
whether the equipment is needed. Once he decides to purchase, the procurement
specialist determines whether there arecheaper alternatives and then purchases the
equipment.
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Business process simplification
Dr. Rami Gharaibeh
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
CHAPTER TEN
Business process simplification
Dr. Rami Gharaibeh
CHAPTER TEN
Business process simplification
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
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
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.
This improvement approach is called course of action valuation.
Dr. Rami Gharaibeh
CHAPTER TEN
Course of action valuation
Is the tactic Find Cheaper Alternative useful?
On every procurement we save $100-$200
Dr. Rami Gharaibeh
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
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
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
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
CHAPTER TEN
Course of action valuation
Dr. Rami Gharaibeh
CHAPTER TEN
Course of action valuation
Dr. Rami Gharaibeh
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
CHAPTER TEN
Course of action valuation
And there are risks as well
Dr. Rami Gharaibeh
CHAPTER TEN
Course of action valuation
