Business models de-risk investment: Syntegra Inc. (Management: Viewpoint).

You're looking for a solution to a specific business problem, and you don't know where to invest your money. You're not sure which type of system you should purchase, or indeed whether you need a system at all. Perhaps you've implemented a new strategy, or made a change to an application or process that's yielding unexpected results revenue could be going down when it should be going up and you need to find out why, and quickly.

Today business dynamics modelling is becoming the most effective methodology for generating a unified, holistic view of an entire operation, and the levers that affect it, It allows you to define business change and explore policies and processes virtually, thus minimising investment risk. One of our customers - a large global communications provider has already identified potential annual savings of around [pounds sterling]12 million by implementing business dynamics modelling. Also armed with the detailed information that this powerful technique provides, one large energy company has put itself in a much better negotiating position with a regulator, and subsequently generated tens of millions of pounds of additional revenue as a result.

Consultants use business dynamics modelling to provide companies with insights into problems they don't understand, and a deeper understanding of the impact of certain changes oh the business as a whole. They dynamically explore the effect of new strategies by feeding them into a model and simulating the outcome, before any money is spent.

Today, more than ever, businesses need to know which technologies and processes will provide the biggest benefits, in terms of cost savings, and the best service. With business dynamics modelling, all changes are tested in a virtual world, without risk to a business or customer base. Every type of organisation in any market - from central government and defence through to telecommunications, energy, finance and leisure - can benefit.

In the telecommunications industry business dynamics modelling is used to optimise call centre operations; to assess the calls that come in and how they are handled, and to better understand the peaks and troughs. A recently developed business model for a very large and sophisticated call centre, developed a greater understanding of how and why the service switched from 'business as usual' into 'service failure' mode, and which key levers to manage when the situation deteriorated. As a result of the insights provided, the telco made changes that will improve service levels and save the company around [pounds sterling]12 million annually. Similarly business dynamics modelling has reaped huge benefits for a large energy company under pressure from OFGEM to improve service levels whilst taking less revenue from distribution businesses. By modelling its operational and investment processes, the utility was able to optimise its spend in order to get maximum value for money, but more importantly obtain the quantita tive information to go back and argue its case with OFGEM from a more accurate and powerful position. Armed with detailed models of its network performance and behaviour, the utility was able to successfully argue the case for a more favourable review than its competitors, and generate tens of millions of pounds of additional revenue as a result

Building a model

However, it takes a lot more than a modelling tool to help users clearly define a business. Syntegra use a range of tools and techniques, and draw upon in-depth knowledge of the key vertical markets, to help clients understand the cause and effect dynamics of the part of the business being studied. Initially the contexts for the project and the problem are agreed through management focus workshops and stakeholder interviews, followed by the construction of a cause and effect diagram that structures the complexity of the issue.

The next stage is to develop a model, using a simulation tool. This stage is iterative, so that different perspectives can be incorporated to develop new insights and reach rounded recommendations. The resulting front-end of the model, presenting a strong visual representation of results, generates far-reaching insights that can be communicated throughout the enterprise.

Business dynamics modelling is not a new concept; it's been around as a consultancy tool since the late 1960's. However it has become more important as processes have received more attention. In the past a lot of process modelling techniques failed to deliver the projected benefits, largely because consultants were using linear models that did not incorporate feedback.

Business dynamics modelling is useful for companies going through any kind of change. For instance it would be an ideal way of defining the baselines and projected benefits prior to mergers and acquisitions. The merger of two companies, aims to create a new company whose whole is greater, in terms of revenue, than the component parts. But frequently mergers fail to deliver on initial expectations. Companies could gain a greater understanding of market dynamics prior to a merger, by generating and experimenting with business models, to determine whether the newly-merged company would be successful. They might be able to negotiate a better price for a sale or acquisition, or, on the basis of the information business dynamics modelling provides, perhaps decide not to proceed with a planned merger after all.

It is important to remember though, that simulated models are a means to an end, not an end themselves. Users have to act on the information they provide in order to realise the projected benefits. More than 50 years ago, when asked what he would do with just one hour to save the world, Albert Einstein replied: 'I'd spend 55 minutes thinking about it, and five minutes doing it'. This age-old quote seems to underpin the overriding principle behind business this decade; that users should take a more considered approach to change, and look before they leap.

www.syntegra.com