Sunday, 14 February 2016

What’s in your Business Model? You Better Make some Good Decisions!

According to Al-Debei and Avison, a business model is an "abstract representation of an organization” that achieves strategic goals and objectives. Other definitions include phrases such as " a recipe or context for creating value". However you define a business model, there must be a mechanism to execute the plan and achieve the objectives. Process modeling is the prevalent technique for designing the action plan of the recipe. Yet, there are limitations to value chain analysis and workflow diagramming. These artifacts, while useful at a high level, leave out the critical details that create the value and strategically differentiate the model from the competitors —especially the decisions the participants make to deliver or receive value. So increasingly the process, the decision and the event are the most common metaphors for modeling the business objectives. The global standard for visually modeling the process, decision and event is Business Process Modeling Notation (BPMN) and Decision Model and Notation (DMN). Business Model outcomes or the goals are measured with key performance indicators (KPIs) and metrics. The notations, the data, and associated KPI’s are the keys to building a functional, automated business model.
A business model is implemented through event-activated, decision-directed processes:
  • A process is an orchestrated sequence of activities.
  • An event is a time-based occurrence of something significant or of interest.
  • A decision is a resolution of a question or a determination of a proposition.
The three are fundamentally different. Decisions are instantaneous choices while the process models the actions: a coordination of interactions, over time among participants. The event is observed either from incoming messages or transactions from customers and trading partners or from an analysis of external data. Often a decision determines the type and validity of the business event. Because they are different elements of a business model, it is useful to ascribe different characteristic KPI’s and Metrics to the process, decision and events.
Technically speaking, the process, designed in BPMN, is visualized as a series of tokens: markers that proceed through the pathways of the process. BPMN supports a series of workflow patterns that coordinate activities and interactions over time. When you use products that support BPMN, your technical team will have a rich tool set to solve the complex problems posed by the business model. The alternative is for infrastructure developers to develop their own approaches, a risky, expensive proposition.

Process is Important

Because BPMN models describe processes over time, instances can be long-running and must be hardened against failure. Orders, equipment maintenance, case work and other things can take weeks to complete. Naturally, businesses need to know the states of their processes. They need to be able to move them, correct them, stop them and restart them. Processes must be able to handle exceptions and recover from reasonable failures. Business also needs to know how well the process is running, what resources are consumed, what value is being created by the processes. These are process-specific KPI’s: how many, how fast, how much rework.

Decisions are Critical

At a fundamental level, the process should follow a path that is controlled by precise decisions that direct the best outcome for the circumstances. These decisions can select what should be done next, who should do the activity, and what information should guide the process. These are known as operational decisions. Decisions are the entry points for analytics and big data. The very nature of these analyses is to provide the information to make precise, tactical decisions.
This process, designed in the BPMN-based Signavio Process Editor depicts a process responding to an order. The decision, shown in the first box is: “Contract or Commercial Purchase?”
The decision, designed in decision model and notation (DMN), is a hierarchy of logic that is supported by decision tables. The evaluation of decision tables are based on various forms of directed graphs (basically a decision tree). The decision trees execute immediately. The logic in the decision tables and the values of the expressions decide the questions. This is where the intelligence of the business model resides, the mechanisms for choosing the correct alternatives: what to buy and sell, how to ship it, what to finance, how to avoid assuming too much risk, and what to do when a trading partner is bankrupt, or loses their credentials.
This decision, modeled in the Signavio Decision Manager depicts the selection of a contract or a direct commercial purchase. The decision directs the process in the model above.
The business model responds to events. Many business events are straight forward: customer purchases, employee onboarding, and budget depletion. Other business events can be complex: weather risk, asset depletion, public opinion.
When developing a business model, it is critical for business managers and stakeholders to think in terms of processes and how the decisions they make affect their operations. They should also think in terms of the business events and how well the processes respond to them. The visual models of BPMN and DMN represent maps of the reality that they are trying to create in for the business models. Events occur, business respond to them, the processes follow the directives. Business decisions are relatively new to the process modeling works; however, many businesses are providing equal weight to decisions.
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