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. CHAPTER TEN 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 are cheaper alternatives and then purchases the equipment. CHAPTER TEN 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