Modeling and simulation ch 1

Modeling and Simulation of Business

Dr. Rami Gharaibeh

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UNDERSTANDING REALITY

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wrong understanding of reality leads to wrong expectations

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WHAT IS A BUSINESS MODEL?

A business model is a simple representation of the complex reality of a particular organization. Business models are useful for understanding how a business is organized, who interacts with whom, what goals and strategies are being pursued, what work the business performs, and how it performs that work. 8

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BUSINESS MODELING

We need to learn how to create a business model that represents the reality of a business.

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BUSINESS MODELING VS. SOFTWARE MODELING

A software model is a model of software applications and databases and other information technology artifacts.

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A business model is a model of a business, a model of what people do and how they interact.

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in both cases we are modeling the actions and interactions among several elements.

• Different elements• Different techniques• Different tools

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BUSINESS MODELING

Creating a good business model is a complex skill, and like any complex skill, it requires time, knowledge, practice, and patience to learn.

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MODELING DISCIPLINES

Four distinct business modeling disciplines

• Business process models• Business motivation models • Business organization models • Business rule models

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Business process models

capture how a business performs its work, thestep-by-step activities that are performed.

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Business motivation models

Capture the goals and strategies of a business. what a business is attempting to do and how those attempts fit into its changing environment.

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Business organization models

capture who performs the work in an organization and who they interact with, both inside the organization and outside.

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business rule models

capture the constraints on a business the external constraints from regulations and laws, and the internal constraints from policies, rules, and other guidance.

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INTEGRATING THE FOUR DISCIPLINES

To be more effective, business modelers need to understand all four disciplines. They need to create models that include multiple disciplines.

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A business process is useful, but it is more useful when accompanied by details about the goals of the business, the organizations that participate in the process, and the rules and policies that guide the process.

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The four disciplines represent four dimensions that should be reflected in the model:What is the process, how does it serve my

goals, who should do what, what rules govern the people while implementing

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exampleany hospital includes the business process of emergency admission. To completely model this business process the BPM will model all activities:

• taking patient information• Patient examination• Patient referral to labs and ray• Ray imaging• Ray image reporting

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exampleany hospital includes the business process of emergency admission. To completely model this business process the BMM will show the link with the hospital goals :

• taking patient information• Patient examination• Patient referral to labs and ray• Ray imaging• Ray image reporting

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exampleany hospital includes the business process of emergency admission. To completely model this business process the BOM will link each activity with the department that should perform it :

• taking patient information (emergency nurse)• Patient examination (emergency physician)• Patient referral to labs and ray (emergency physician)• Ray imaging (ray imaging technician)• Ray image reporting (ray image physician)

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exampleany hospital includes the business process of emergency admission. To completely model this business process the BRM will show the laws, policies, procedures and rules in performing each activity:

• taking patient information (privacy rules)• Patient examination (clinical procedures)• Patient referral to labs and ray tests (referral procedures)• Ray imaging (safety policies)• Ray image reporting (privacy + timing policies)

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MODELING STANDARDS

Standards are important in business modeling. A model created by one group of people should be understandable by others. Others should be able to update the model when business circumstances change. Models created in one modeling tool should be readable and changeable by other tools.

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CHAPTER ONE

WHY BUSINESS MODELING

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ANSWER TWO QUESTIONS

what is a business model?

why create one?

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A business model is a simple representation of the complex reality of a business.

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ALERTALERT

By business model we do not mean “how the company makes money”.

we mean a model that describes the details of a business: its goals, organizations, business processes, or business rules.

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example Any city has a complex reality that includes locations of places, thousands of roads, thousands of pipe routes, thousands of cable routes, etc.

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example to be able to deal with the complexity of a city, we make maps. Maps of roads and locations. Maps for electrical cable. Maps for water pipes, etc.

Each of these maps is considered a model. The model will help us make good decisions on how to go to places, or where to dig to find the electrical cable or water pipe.

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Businesses have complex reality. To be able to manage this reality and solve business problems, we need to create business models.

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THE RISE OF BUSINESS MODELING

Businesspeople are increasingly using models to communicate. Over the last fifteen years, increasing numbers of people have built business models: models of the business processes of their organization, the goals and strategies, or the policies and rules.

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What’s driving the growth of business modeling?

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IT organizations are using business models to align IT initiatives with business needs.

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What’s driving the growth of business modeling?2

Models help with the implementation of change.

If nothing changes, you don’t need models, just as you don’t need a street map if you never travel anywhere.

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What’s driving the growth of business modeling?

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the need to manage increasing complexity. Complexity is the key problem in business today. Decisions are harder now because there is more to consider.

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What’s driving the growth of business modeling?3

Businesses have become more complex. Twenty years ago, businesses were easier to understand. There were fewer business processes, fewer products and services, less data stored in databases, fewer business partners, and fewer lines of business.

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BUSINESS VALUE OF BUSINESS MODELS

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•Communication between people•Training and learning•Persuasion and selling•Analysis of a business situation•Compliance management•Development of software requirements•Knowledge management and reuse


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Communication between peopleBusiness is a communication-intensive activity. Business people give presentations about company performance. Business people talk to their clients and their suppliers about new products and services. Business colleagues talk to each other about the changing competitive environment. Much of business is communication.Business models are better for conveying complex business information.


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Training and learning People learn in two ways. They learn from their own experience, via trial and error, and they learn from other people’s experiences, via conversations, books, or classroom material. Learning from other people’s experiences is of course cheaper, faster, and less risky. We allow others to make mistakes instead of making our own. Business models are one way of learning from other people’s experience. First, a model is built of the expert’s knowledge of the business rules or the business process. Then many novices can study the model to learn what the expert knows.


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Persuasion and sellingIn business, persuasion is ubiquitous. When we sell a customer on a product, we are persuading. When we pitch a new initiative to our management, we are persuading. When we convince employees to embrace a business process change, we are persuading. Persuasion is communication, of course, but it is communication in service of a goal: convincing someone to take action favorable to us, to our organization, or to themselves. Business models are useful for persuasion.


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Analysisinsight is power. Analyzing a business model is particularly useful when you have a decision to make. The different alternative scenarios can be modeled and the models then analyzed and compared. For example, you may compare different business process scenarios to see which is the lowest cost. That low-cost scenario can be compared to today’s business process so that you can understand what activities need to change, what new activities need to be performed, what activities should be automated, and what skills you will need to learn.


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Compliance managementBusinesses must comply with law, government regulations, and other guidance. They must comply with terms of contractual agreements with their lenders, suppliers, and customers. Corporate employees must comply with corporate policies. Compliance often impacts financial results. Sometimes the impact is larger than money; noncompliance can lead to jail. A business needs to design processes to ensure compliance. And when regulations change, it needs to understand the impact of the new regulations on its business.


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Requirements for software development

Requirements provide a description of what a proposed software application should do. Without detailed requirements, application development projects fail. Business models capture this detail in a way that is understandable to both the business users and the software developers. Business users do not need to understand how the system will be created; they need to understand how it will support their need. Business models are a better form of requirements for end users.


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Knowledge management Knowledge management is the practice of systematically capturing knowledge from some people in an organization so that the knowledge can be used by others elsewhere in the organization. But knowledge management practices today capture only half the relevant knowledge. Typical knowledge management practices capture the explicit knowledge found in existing documents but not the tacit knowledge found in people’s heads. Tacit knowledge includes what people do and how they do it. Tacit knowledge includes when each document is used and why.

CASE STUDY

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an implementation of an ERP system

Modeling and simulation ch 1

Engineering

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