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Module 4

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77 views

Module 4

Uploaded by

christine
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CHAPTER 6

Generic Business Analysis


Approaches and Tools
KNOWLEDGE OBJECTIVES
Contents:
Business Analysis Tools
1. Conventional capital-budgeting tools
These tools estimate increases in cash flows from different investments to
determine which projects should be funded.

2. Quantitative multiple scenario tools


These analyze decision outcomes by sketching all possible outcomes and the
probabilities of them occurring, making use of financial, mathematical, statistical
and simulation methods to determine the risk/return profiles of each possible
choice. Examples: Monte Carlo methods, Decision analysis and Real options
Business Analysis Tools
3. Qualitative scenario analysis
Under conditions of uncertainty, a full set of outcomes cannot be articulated by
decision-makers. These scenarios detail the many possible ways in which the
present may evolve into any one of a number of possible futures.

4. Information aggregation tools


- Dephi method
- Sourcing “the wisdom of the crowd”
Analyzing a Business Case
Business cases teach three essential managerial skills:

• Critical thinking skills


• Persuasion skills
• The development of decision-making habits
The limitations of the case method
Type of Case

1. Field Cases: a description of an actual series of events


culminating in a set of outcomes – a history
2. Library Cases: make use of public, publicized information
3. Armchair Cases: are, as the words imply, made-up, fictional
cases
Preparing yourself to read the case
Point of view: When reading a case you always do so from a
particular point of view; if you do not think about it,
this view will, of course, be your own.

Hypothetical thinking: This frame of mind helps you to step


away from your own prejudices, likes and dislikes.
Develop your understanding of “the situation”
Read the case with an eye for detail. After you have read the case
carefully and come up with your preliminary thoughts and conclusions –
read the case again, and again. Allow yourself to be influenced by
information you missed in previous readings and be prepared for your
conclusions to change as your insight into the case matures.

Take notes. Tables and annexures often contain balance sheets, cost,
expenditure and revenue reports, sales per geographical area, competitor
details, performance reviews and audit reports and so on and so on.
Sources of strategy information
• Business aspirations: Find these in the firm’s vision, goals and
objectives.
• Business domain: Look at the firm’s product/market portfolio.
• Value proposition: What are the features of the firm’s product or
service offering? What are the core competencies of the firm? How does it
differentiate itself from competitors?
• Core activities: Inspect the firm’s value chain: which activities does it
own/where does it partner/what does it
outsource?
Identify the business problem
In each case there is at least one business problem (with an
armchair case) to many and diverse business problems (with a
field case). It may be a small, tactical problem or a larger chronic
and critical set of problems. You have to determine the essential
problem(s) that require attention.
Specify an outcome for the managers involved
Solving a strategy case
1. Questions about scope
2. Questions about choices
3. Questions about process
THE MINTO PYRAMID© (SCQA ANALYSIS)
developed by Barbara Minto
THE MINTO PYRAMID© (SCQA ANALYSIS)
S describes the current Situation. Situation – where are we now? “For a long time
we have been …” First describe the basic situation in a way that is easy to
understand.

C creates the tension, states the problem or otherwise Complicates S to produce


the Q. The Complication creates tension in the story you’re telling.

Q states the essential Question that we are confronted with.

A supplies the Answer to ease out the tension and draws out implications
Dealing with Uncertainty

We are always dealing with some level of uncertainty. Good leaders are
comfortable with that and never mistake the answers provided by tools as
reality – these answers are always approximations, though often useful
models to guide our thinking.
Modelling
The Cynefin framework
Dealing with Bias- Bias in decision making
PRACTICAL PROBLEM-SOLVING TOOLS
The five “whys” technique to find the root cause
The five “whys” technique to find the root cause
Pareto Analysis

The well-known Pareto principle (the so-called 80/20 principle)


states that 20 per cent of causes create 80 per cent of problems. It
was discovered by Vilfredo Pareto from the University of Lausanne
when he first noticed that in his garden about 20 per cent of the pea
pods produced about 80 per cent of all the peas.
Pareto frontier
Based on his 20/80 thinking, Pareto also defined the so-called “Pareto
improvement”: the point at which the lot of one individual can be
improved, but not at the expense of another individual. The
mathematics of this idea is currently used to determine the point to
which a product can be improved, but not at the expense of the
ecology.
The McKinsey 7-S model
Summary of problem-solving tools
BIOMATRIX SYSTEMS FRAMEWORK
Conclusion

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