Modeling and Simulation of Business

Dr. Rami Gharaibeh

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Understanding Reality

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Understanding Reality

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Understanding Reality

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Understanding Reality

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Understanding Reality

wrong understanding of reality leads to wrong

expectations

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Understanding Reality

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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.

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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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Business Modeling Vs. Software Modeling

A business model is a model of a business, a

model of what people do and how they
interact.

Dr. Rami Gharaibeh

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Business Modeling Vs. Software Modeling

in both cases we are modeling the actions and

interactions among several elements.
• Different elements
• Different techniques
• Different tools

Dr. Rami Gharaibeh

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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.

Dr. Rami Gharaibeh

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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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Modeling Disciplines

Business process models

capture how a business performs its work, the

step-by-step activities that are performed.

Dr. Rami Gharaibeh

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Modeling Disciplines

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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Modeling Disciplines

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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Modeling Disciplines

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.

Dr. Rami Gharaibeh

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Integrating the four disciplines

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.

Dr. Rami Gharaibeh

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Integrating the four disciplines

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 the process

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Integrating the four disciplines

example
any 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

Dr. Rami Gharaibeh

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Integrating the four disciplines

example
any 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
Dr. Rami Gharaibeh
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Integrating the four disciplines

example
any 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)
Dr. Rami Gharaibeh
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Integrating the four disciplines

example
any 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)
Dr. Rami Gharaibeh
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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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WHY BUSINESS MODELING

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Answer two questions

what is a business model?

why create one?

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what is a business model?

A business model is a simple representation of the

complex reality of a business.

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ALERT

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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what is a business model?

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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what is a business model?

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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what is a business model?

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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The rise of business modeling

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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The rise of business modeling

What’s driving the growth of business modeling?

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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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The rise of business modeling

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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The rise of business modeling

What’s driving the growth of business modeling?

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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

•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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Business value of business models

Communication between people

Business 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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Business value of business models

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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Business value of business models

Persuasion and selling

In 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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Business value of business models

Analysis
insight 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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Business value of business models

Compliance management
Businesses 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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Business value of business models

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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Business value of business models

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.

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CASE STUDY

an implementation of an ERP system

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