1. CHAPTER TEN Dr. Rami Gharaibeh BUSINESS MODEL ANALYSIS 1

2. 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 2

3. 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 3

4. 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 4

5. 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 5

6. 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 6

7. 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 7

8. 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 8

9. Dr. Rami Gharaibeh CHAPTER TEN introduction 9

10. 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 10

11. 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 11

12. 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 12

13. Dr. Rami Gharaibeh Improvement analysis is not about improving the model CHAPTER TEN improvement analysis 13

14. Dr. Rami Gharaibeh CHAPTER TEN improvement analysis 14

15. 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 15

16. 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 16

17. Dr. Rami Gharaibeh CHAPTER TEN improvement analysis 17

18. 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 18

19. 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 19

20. 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 20

21. 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 21

22. 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 22

23. 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 23

24. Dr. Rami Gharaibeh CHAPTER TEN Business process simplification 24

25. 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 25

26. Dr. Rami Gharaibeh CHAPTER TEN Business process simplification 26

27. 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 27

28. 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 28

29. 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 29

30. Is the tactic Find Cheaper Alternative useful? On every procurement we save $100-$200 Dr. Rami Gharaibeh CHAPTER TEN Course of action valuation 30

31. 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 31

32. 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 32

33. 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 33

34. 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 34

35. Dr. Rami Gharaibeh CHAPTER TEN Course of action valuation 35

36. Dr. Rami Gharaibeh CHAPTER TEN Course of action valuation 36

37. 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 37

38. And there are risks as well Dr. Rami Gharaibeh CHAPTER TEN Course of action valuation 38

39. The attempt to understand the impacts of a proposed change before acting on the change is called impact analysis. Impact analysis is looking before leaping. What unintended consequences will result? Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 39

40. When a single change is made to a business, many consequences can occur. A new governmental regulation, seemingly simple, can lead to three new policies, a new organization to monitor compliance, and 13 changes to business processes. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 40

41. A small business process improvement can lead to one organization being underutilized and another far too busy. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 41

42. a change could be initiated by the organization or by the environment Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 42

43. When an organization initiate a change a change could have unforeseen impacts avoiding making a bad change Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 43

44. When change is enforced The business must comply with a new regulation. Impact analysis allows the business to understand the consequences before they happen, and prepare for those consequences. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 44

45. Businesses are complex, with many organizations, rules, and processes that interrelate in hundreds of ways. Without models, even the most thoughtful and thorough executives will miss some impacts. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 45

46. Example Reducing risk of lawsuit Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 46

47. The analysis begins by considering the existing motivation model. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 47

48. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 48

49. Innovative menus are just too important. In this situation the cure is worse than the disease. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 49

50. Instead the task force adopts a new business policy to govern this strategy. Legally Safe Menus: All menus must be reasonably safe from lawsuits. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 50

51. This policy is the basis for several business rules that check aspects of legal safety. For example, a new business rule is created to ensure that all meat is sufficiently cooked. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 51

52. Rule Meats Sufficiently Cooked: It is obligatory that each menu item is thoroughly cooked if the menu item contains meat. Dr. Rami Gharaibeh CHAPTER TEN Impact Analysis 52

53. Impact analysis takes time. Consider the change and then examine model elements one by one to see which are affected by the change. When a model element is affected by a change, the impact can have one of several different results. Dr. Rami Gharaibeh CHAPTER TEN How to perform impact analysis 53

54. policy or business rule may be required as illustrated by previous example Dr. Rami Gharaibeh CHAPTER TEN How to perform impact analysis 54

55. A business process activity might be eliminated or modified. For example, if pagers are to be installed, the host still greets and seats customers but now does so differently because a pager system is used. Dr. Rami Gharaibeh CHAPTER TEN How to perform impact analysis 55