Simulation: Can you put a Value on Confidence?
“The more I practice, the luckier I get”. It’s a quote most often attributed to golf champion Gary Player and an apt one for a discussion about simulation and modeling. The worst way of trying out a new strategy or procedure for the first time is when the stakes are highest and the consequences of failure most severe. In an earlier blog, Test, Fail, and Learn Safely, we pointed out that to learn from your mistakes, you first have to survive them. Thankfully simulation technology means we no longer need to place so much reliance on good fortune. If you know the outcome of your actions before you start, because you’ve practiced them over and over in a virtual environment, you can be bolder and move faster, because the risk of failure is so much less.
In Prerequisites for Effective Business Simulations, we gave you a short checklist of “must-have” functionality for any effective simulation and modeling tool. This time we’ll describe how you can use that functionality to model the impact of your proposed change initiatives on your operation.
Mastering the Tools
Step one is to build an accurate representation of your current operation using a combination of modeling, mining, and rapid capture. Don't be fooled into thinking your current process manual will suffice, yet it might be a good reference but all too often drift occurs between how organizations actually operate and how they think they operate. Once you have your model reflecting reality, you can start experimenting with the digital versions of your processes and sub-processes - changing or automating individual steps, sending different volume profiles through different process routes (to represent channel shift, for example), or using different resource types to enact the process. You can then use the scenario engine to model the flow of transactions through the altered process and the system will produce visualizations showing you the impact on key metrics. You can create a range of scenarios by using different volume profiles or tweaking the processes in a variety of ways, compare the performance of different groups of changes, and select those which are most effective.
This simple cycle of change and review enables you to model different disruption scenarios and test your operation’s tolerance to risk (and ultimately your operational resilience). Traceability and audit trail functionality built into our platform makes it easy to catalog and compare different simulations. The best thing is you’ll gain all this insight and experience without any impact on your day-to-day operations because it all happens within a safe digital environment. As you become more skilled at using the tools, you’ll be able to build and test disruption scenarios which would be impossible to perform in the real world.
Building Proficiency and Confidence
Before you’ll be comfortable putting your company’s fate in the hands of a piece of software, you must trust it implicitly. That’s why BusinessOptix recommends an incremental approach to using simulations, slowly building up levels of complexity and verifying the output against the real world. This “start small, start simple” methodology allows you to become proficient with the tool while minimizing the risk you’ll introduce errors as you build the digital version of your organization. As your confidence in your simulation and its outputs increases, so will your confidence in the decisions you base upon them. You can’t have confidence in your decisions without confidence in your simulation – that’s just human nature.
We recommend breaking the learning process up into five steps, each of which delivers a valuable outcome.
- Basic transformation – For this first step, we recommend you map out a single business process, capture some metadata, then make some small changes to the process, and review how the metrics change. This will get you used to using the tools to test potential future changes and see what they would look like compared to your current state.
- Basic simulation – By adding more detail to the simple model you created above, you can drill deeper into your process and better understand how it is operating – for example, how long it takes to run. At this stage, you can run simple simulations to see how changes to the process affect metrics like process volumes and wait and work time
- Cost simulation – Now you’re ready to introduce another layer of complexity - resource modeling. Adding headcount, staff costs & improvement costs gives insight into your cost per process and ROI.
- Complex simulation – Having mastered how to model and simulate simple processes, you’re ready to tackle those with greater complexity. These include processes with different timing structures, multiple paths/decision points, variable transaction arrival patterns, or which have variable costs associated.
- Scenario simulation – Now you can bring together everything you’ve learned in the previous four stages to run different simulations for different states of change. This allows you to assess multiple future outcomes and decide the best option for your business. In practical terms, it enables you to evaluate complex business decisions, such as whether outsourcing is cheaper and more effective than automation.
Simulations offer a risk-free way of working out what to change, how, and by how much. They’re an invaluable tool to increase both the quality of your decision-making and your confidence in it. Think of them as your 10,000 hours of hitting a ball before you do it for real.
To learn more, contact us today.