Predicting Business Performance
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As business demands are
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So it is that advances in computer technology, systems / holistic thinking, and human / organizational processes have made possible a new class of strategic tools to cope with some of today’s most critical business challenges.
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Up to now, as shown in Figure 1, business evaluation technology has been focused primarily on accounting-based reports and spreadsheet programs that can be used to answer "What-if" type questions. Such programs are certainly essential to business management and provide information about the current and potential state of the business. But all too often, accounting-based programs that, by definition, cover only period results of past actions taken, have been used as the primary tool upon which long-range decisions were made. Peter Drucker has recently pointed out that the major weakness of the information age is preoccupation with accounting data simply because it is there in quantity.
Figure 1
We choose to call the type of business evaluation technologies shown in Figure 1 "Static Technologies," in so far as these systems are usually used to answer specific business questions. This answer oriented way of thinking leads to absolutes, or to right or wrong. There are no shades of gray.
We recognize that businesses, like most natural organisms, are complex in nature. And we know from experience that Static Technology, by itself, was insufficient to handle the dynamic nature of our modern business systems. We’ve also come to believe that these systems consist of a series of connected and interdependent encounters where one event can affect another sometimes in wholly unpredictable ways and usually through feedback that may be hidden or not obvious. Frequently, examining the behavior of the complete system is the only way to solve problems inherent in business systems. Optimizing each of the parts of a system may yield something far from optimal system performance.
But as Drucker has suggested… "Information technology so far has been a producer of data rather than a producer of information – let alone a producer of new and different questions and new and different strategies" (Ref. 1). In other words, today’s business simulation technologies provide the business person with a lot of output but do not really help them ask the right questions needed to most efficiently redirect their business in these fast changing times. Today the quality of questions asked of simulators depends wholly on the business and financia
l savvy of the one asking the questions.How, then, does a business that wants to grow and survive keep up with the demands, the complexity and the dynamics of change? How can a business learn what elements in its system should be varied to best influence a desired change? How is this done with minimum risk, at least expense and in the shortest possible time? How can one explore the effect of business decisions before they are made and difficult to change?
How do we keep track of the intelligence that populates our business systems? Can a description of the business be created in such a way that can be understood by others? Will it be easily and readily available to the members of the ever-changing business teams? And, how will the structure of such a methodology provide the flexibility and adaptability to keep up with, if not anticipate, future business conditions?
While looking to answer these questions, a business is quickly forced to the "line of discontinuity", shown in Fig. 1. Existing tools and methods do not provide the strategic scope, power or adaptability required for exploring tomorrow’s horizons. No matter how hard one tries, conventional tools are inadequate.
What lies beyond?
We suggest the use of dynamic business performance modeling to support natural thinking about all aspects of business together. It will be the "Dynatural™ Simulation Technologies that will form the next stage in the development of strategy-defining tools. See Figure 2.
2Figure
Dynatural technologies are defined as being of a class of business simulation technologies that extends beyond "What-if" questioning and addresses the dynamic nature of circumstances routinely faced by most organizations.
These technologies will enable an organization to virtually explore opportunities for its future direction in a safe, cost–effective forum. They will provide a unique human-technology environment that encourages the emergence of ideas and questions – leading to right action. Dynatural technologies are a natural complement and extension to the human creative process. Continuity and innovation go hand-in-hand.
The basis for a Dynatural technology is the ability to make simulation not only dynamic but to mimic the way nature (as extended to business) really works. The major reason holding back this development has been the effort, skill and cost needed to create natural dynamics for each business. The design of Dynatural technologies is flexible and pre-built so that implementation by a typical business is both feasible and quick.
Dynatural technologies can be used with simple or with highly complex business systems. They promote a series of benefits that include increasing; a) the degrees of reality of a simulation, b) the rates of discovery, c) the breadth of options one can explore, d) the number of issues that can be addressed, e) the chances of success, and f) system performance.
What is included in the scope of Dynatural technology?
First, we suggest that Dynatural technologies include the ability to create a generic process simulation tool, i.e., to make the simulation of production processes practical from a single template. With this ability, one is presented with a business simulator that, with some "tuning," could be applied to all classes or types of businesses. Once the simulator is built there is essentially no need to reprogram it for changes in business type, scope, complexity, process design, etc.
Second, to the above one adds the ability to prebuild the fundamental dynamic financial interrelationships of business to include "causal loop" or feedback dynamics. These complex interactions that can change from period to period are rarely, if ever, addressed in spreadsheet models. Loop dynamics, however, are a very real part of every business and are responsible for a great deal of the surprise or unexpected results that frequently occur in business.
Third, we suggest that the class of Dynatural technologies includes the ability to track process and financial performance from operating period to operating period and to track that performance on a dynamic and on a cumulative basis. Further, the ability to control the major drivers of business must be part of the dynamic control function of the simulation engine.
The first application of Dynatural technology is now available in a computer-based, business performance simulation system designed specifically to facilitate the know-how creation process. In the
The
In addition, the
- is time (with delay) as well as activity-based,
- covers multiple products and multiple processes,
- covers batch and/or continuous production,
- accounts for market seasonality and growth,
- utilizes intuitive or measured inputs,
- contains an experience database,
- provides for "drill-down" analysis of business variables, and
- is fully interactive and fully documented
Besides being useful for developing, examining and storing business expertise, the
In summary, it is used to:
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