How to simulate the changing "qualities" of business resources
An Extension to the Core principles and business models.
This short course is just one of several Extensions you can use on its own or add to other Dynamic Business models, and remember you can also buy the complete set here for a lower total price (opens in a new tab).
What will I learn?
This class shows how to model the changing "qualities" of business resources. (See the curriculum near the end of this page). It is clear enough that we do not just want more customers, staff and products; we want better customers, staff and products. What does that mean?
Customers who buy more, or are more loyal - better 'customer value'
Staff with more skills or experience
Products that appeal to more potential customers
The principle is simple enough ... when you add a new customer or hire someone, they bring with them qualities you want. It is like adding hot water to a bath to make it warmer! If you have a 'hotter' product, for example, more people want it ... but how many more people will it bring, and how fast can you win them and grow sales?)
And when you lose customers, you lose their purchase rate - lost staff take their skills with them - drop a product and you lose the customers who would have bought it. Lastly, the resources you have will change - customers may grow, staff will gain experience, and products will lose their appeal.
This sounds straightforward but is easier to deal with using a visual approach than with spreadsheets and this class shows how to modelthese mechanisms correctly, shares several examples that may be useful to you, and opens up more possibilities - like how to model cases where a 'quality' of one resource (say, a new product) is in fact access to another resource (potential customers) that you can then capture.
Use the Attributes model-structure alone - or enrich your Core business model. Like all the dynamic-model extensions, this framework is very useful on its own - how fast can we build a team's experience, or get better customers in a region. But the framework should also be used for any model of the overall business when the quality of each resource can change - as they nearly always do!
The "RoI" of this course.
Building and sustaining a high-quality business by best-managing the "quality" of each of its resources can transform business performance.
The Mars Wrigley confectionery business is just one example of a company with a limited range of top products that is much more successful than rivals with more, but less-popular brands
Companies in many sectors that focus on high-value customers are more profitable and resilient than rivals who accept all-comers
Top consultancies and law-firms justify considerable price premia because they select and develop only the best young professionals, not the largest number.
But getting business "quality" wrong is disastrous - Starbucks and MacDonalds both went through hugely costly rationalisations of over-expanded networks of poor stores. And the investment company in this graphic nearly destroyed itself by pushing poor savings products through small brokers to low-value investors - our model turned them round fast, leading to a business less than half the size, but thriving and fit to grow again - more carefully!
Turning round an investment company in crisis ...
Getting business quality right is a constant work-in-progress - those top-performing businesses have been building and protecting the quality of their resources for decades! So what is it worth to you to build a tool
... that shows exactly how this balance between size and quality will play out into the future if circumstances are OK, but also ensures you will be safe if the environment turns out to be more challenging?
... that - if your business is in trouble - shows exactly how much of what must be done to get the quality of all its resources back to a level that will put it back on its feet?
... that shows exactly how fast to do what over, what time-scale to make the improvement you want to the value-profile of your customers, the skill-levels of staff in different teams, or the reach of your products into the markets you want to serve?
Who is this course for?
Business leaders Some heads of marketing, R&D, HR - even some CEOs, feel it is so important to get a grip on the quality of their business that they invest effort in modelling it themselves - even a top level appreciation of the model will aid your thinking.
Analysts and accountants. Every analyst supporting a business or functional leader should know how to model the quality of their organisation's resources, and understand how they are changing through time so they can advise leaders on what needs to be done.
Consultants. These models are so powerful that clients will be blown away by the value you bring to their business. It's faster and easier than using spreadsheets and less prone to error. The approach used provides a valuable addition to a consultants toolbox.
Business students (and teachers*) The mechanisms in this course are a critical element of how business works - so understanding them will give you an important additional method for approaching strategic questions - and employers will really value this skill.
*Teachers - we can provide materials from this course for you to use in your classes - contact us for information. Please do let us know where you teach and approximate student numbers in addition to any questions or comments you have.
How long does it take?
Like all of our courses, you do not have to start at the beginning and slave through every lesson to the end - we suggest key items to focus on first. Working carefully through just those key lessons may take about a half-day.
You can then come back to fill in important extra principles and skills. That could be another ½ to 1 day, depending on how deeply you want to get into each lesson and practice it on your own cases – all time that you can claim as self-directed CPD (continuous professional development).
Then, of course, you can spend any time you want on consolidating your skills and following our detailed guidance on how to apply the modelling to your own case and issues.
Why use these models - and when? Whether you are launching a new business, taking some problem or opportunity, or planning for the longer term, surely you would want to simulate what could happen, just like we do with other complicated things we do. They let us:
Design what we plan to do before we risk serious cash and effort
Test those plans against all kinds of uncertainties (Would you rather experiment with the real world, using real money and people!?)
Manage the business or issue continually against a living model of what will likely happen next.
... and if you want to be really bold and "re-invent your business model" or undergo "digital transformation" it might be best to explore where you are going before you set out!
What is the alternative?Well, nothing really:
... spreadsheets could theoretically calculate-out everything in a business, but no human could reliably capture a living business system with only rows and columns of numbers to work with
... balanced scorecards rely on guessing what is important, and they leave out huge issues - like competitors!
... KPI systems assume you already know how everything is working (a dynamic business model actually is a far better KPI system !)
... business-model canvas and tools like Strategyzer or Leanstack share the same limitations as balanced scorecards and spreadsheets.
Note: If you purchase a single Extensions class and then decide to upgrade to the full Extensions course we provide a coupon at the end of of the individual classes which can be used to recover the cost of your single class.
Kim is an experienced strategy professional, teacher and publisher of online courses and teaching resources on business modeling
– fast becoming a main-stream capability for executives, consultants and business students. He also offers resources to help model non-business challenges, notably in health-care and international aid.
After senior corporate strategy roles, Kim joined London Business School, to teach on MBA and Executive programs. To overcome serious limitations with standard strategy methods, he developed the powerful strategy dynamics modelling method for designing and managing strategy for any organisation or challenge. Once a specialist skill, building these simulations is now easier, faster and more reliable than spreadsheet modeling. Such models mimic real-world behaviour and performance of businesses and other organisations with uncanny realism.
Kim is author of the prize-winning Competitive Strategy Dynamics (Wiley, 2002), a major strategy textbook Strategic Management Dynamics (Wiley, 2008), and summary e-book now widely used in MBA and executive teaching – Strategy Dynamics Essentials (Kindle, 2011). He is also co-founder of Strategy Dynamics Ltd, which publishes "serious games" and online courses exploiting the user-friendly modelling application, Silico.