Overview of examples

mystrategy® can be used for a variety of purposes, in much the same way as a spreadsheet can. On this page we provide some samples that illustrate how the software can be used.

Mapping vs Modelling

The first example looks at the difference between "mapping" and "modelling" with mystrategy. It starts with a brief explanation of the different modes and where they can be useful and then illustrates with some data taken form the airline industry. More...

Solving problems

A typical use for the software is to follow the strategy dynamics approach of working back from an issue of concern to try and identify the reasons for the problem and suggest potential management actions. In this example the issue relates to a service quality problem. More...

Exploring new options

The last example on this page looks at the exploration of a new opportunity. In this case mystrategy® helps explore the question of what must happen in order for a new option to be successful. More...

In all instances, when working as a team, mystrategy® can help achieve a shared understanding of a problem or opportunity.

The Bass Diffusion model

This model describes the process by which new products are taken up amongst a population of potential customers. Other phenomena show similar behaviour, such as the spread of fashions and shared opinions. More...

Other examples:

• You wish to "analyse data", from accounts, other public data or case studies – e.g. "We are thinking of acquiring business X and need to understand if its strategy is robust, and how best we might combine it with our existing activities".
• You want to put together an integrated business plan – e.g. "We need to present a sound business plan, showing the rate at which we need to develop and sustain our key resources - customers, staff, products, capacity etc – and showing how these come together to determine our past and future financial performance."
• You want to understand how a "standard structure" operates in your business, and its implications for your future strategy and performance - e.g. "We face a tough challenge developing customers through the 'Choice Pipeline', so they become committed to our products and services, and we need to explore opportunities and strategies for making this process work well."

Of course, this list is not exhaustive but provides some likely starting places. Follow the links to each example for help you get going. These should provide you with some initial ideas that you can try out.

Mapping and Modelling with mystrategy^®

mystrategy^® can be used in two distinct ways

• To 'map' actual or estimated information about an issue OR
• To 'model' [i.e. simulate] how a situation is changing

Mapping with mystrategy® - Overview

In this mode, data is entered numerically or as a graphical estimate in the variables. This is the same as entering data into a spreadsheet, rather than calculating values from other elements or cells.

You may find this useful for several purposes. It can bring to life real data from other sources, such as management reports or business plans. You can show real historic data, alongside 'sketch' estimates for the future in the same diagram. In other situations, you may want to display rough estimates of factors that are unknown, but thought to be important, as the basis for team discussions, e.g. how you think your company's reputation might be improved and its possible impact on growth.

Modelling with mystrategy® - Overview

In this mode, the model uses equations to calculate information, not only for each period, but also from each period to the next.

Structural clarity is assisted by ensuring that all elements with a direct link to the item being calculated must be used so you cannot accidentally omit to use an item that you have decided to link in.

The resulting simulated data can be displayed alongside your inputs or estimates from the mapping mode to compare your expectation with the assumptions and relationships built into the model.

Example - Part 1: Mapping an airline's profits.

The following diagram is a map of some top-level data for an airline, showing information from 2001 to 2007 - the vertical line shows 'today', i.e. end of 2004. The small time-charts display the time-path of each variable over this period, with actual data for the past, and estimated values for the future. The numbers alongside each variable, currently showing zero, would display values if the model were simulating. The actual data for each item is shown in detail by 'opening' the variable.

In mapping mode, the connecting arrows are red to warn you that the values are not calculated from each other. This is the same as cells in a spreadsheet containing values, rather than formulae - although a spreadsheet will not display a warning. In the same way as in a spreadsheet, if you make a change in one element it will not cause anything else to update.

The chart below shows how the Operating Profit data is entered once the variable is opened [note the 'Equation' tab where you enter a formula if you want to simulate]. The actual results from 1997 to 2004 have been copied from a spreadsheet into the column of cells on the left [or else typed in]. Although we have data for 1997-2004, we want to focus on recent history and the next 3 years, so in the map above, we have set MyStrategy time-display to show only 2001-2007, with 'today' at 2004.

The 'future' values can be typed into the last few data cells, or else 'sketched' by dragging the mouse pointer across the right-hand portion of the chart. [You could sketch in the historic values too, if you wish, but we assume you have real data to copy in]. If your challenge is purely about the future, you will set 'today' to be the first time-point, and you can drag the mouse pointer over the whole chart to create a view of the future time-horizon you are considering.

Example - Part 2: Modelling the airline's profits.

In practice, you might want to check that the numbers make sense, and at the same time check your arithmetic for the future values, so you can start adding other variables and equations to model the airline's progress. The equations you use are exactly equivalent to the calculations you put into spreadsheet cells. In mystrategy®, however, you always refer to variables by name [rather than cell-reference], and you can only use variables that are linked by the causal arrows - a useful protection against common spreadsheet errors!

1. You open the operating profit variable and add an equation .. profit = revenue - costs
2. Revenues depend on fares as well as journey numbers, so you add a variable for average fare, and an equation for revenue .. revenue = journeys * average fare
3. Total journeys reflect not only the number of passengers [i.e. people], but also how often they fly with you, so you add a variable for journey frequency, and an equation for total journeys .. journeys per year = passengers * average journey frequency

Now you have told mystrategy® how to calculate everything in your map, you can hit the Run button and it will simulate both the history and the future. [Note: for this example, we have put historic data into the variables for average journeys and average fare that match the other reported values].

It looks like your estimates for the future could be exceeded if this scenario for passengers, journey frequency and fares occurs. Note the values shown alongside each variable in this diagram are displaying data for the end of the simulation, i.e. end-2007. You can, though, 'step' the model through year by year to display values at each year-end, and also create graphs or tables of any variable for all points in time.

Using simulation to compare the result of alternatives.

To check the realism of your projections, you may also want to see what this future requires in terms of winning new passengers, so you add an in-flow to the passenger resource, called 'net passengers won per year'. mystrategy® offers the facility to work out what this flow must be in order to explain the time-path for the passengers [right-click the net passengers flow and select 'derive']. A grey time-line appears in the net passenger flow chart - it seems your projection implies a further acceleration in passenger win-rates both this year and next, with a slight slow down in the final year.

[Note: mystrategy® reports period-end values, so the passenger win rate 'today' - i.e. the last moment of 2004 - is what we estimate will apply throughout 2005. Consequently, the final value for 'net passengers won' is the win-rate from the last moment in 2006 that will apply throughout 2007, and no value is shown for the end of 2007].

To see how sensitive your projections are to this demanding win-rate target, you first make the 'sketched' values for net passengers won match this derived time-path - right-click the flow once more and select 'set sketch to derived', and a red time-line appears behind the grey. You can now try out an alternative projection, e.g. what happens if the win-rate falls immediately? In the diagram below, you have sketched a less optimistic view of the net customer win-rate [top-left], and run the model to show you the impact on passengers, journeys, revenue and profits.

It looks like hitting your revenue and profit forecasts could be tougher than you hoped!

Download the sample mystrategy® model for this example - zipped .msf file

Problem solving with mystrategy® - an example using service quality

mystrategy® example: You want to solve a problem e.g "I am concerned about falling service quality and want to explore ways to improve it."

In this situation, work backwards from the 'problem' itself. This is a typical "Strategy Dynamics" question and we would suggest the following approach.

If you need more assistance refer to the helpfile in mystrategy®.

1. Identify and specify the measure[s] that most clearly indicate the problem you are seeking to solve, and the time over which the problem has changed, and will be solved.
   • State the problem: E.g. "Our service quality has fallen over the last few months, and needs to be improved during next year"
   • Identify the measure: The fraction of customer enquiries solved first time.
   • Action: Set the timescale in mystrategy® to run from month 0 to 24, and "Today" equals month 12. Create a variable called Service Quality and add your data to the graph of it.
2. Work back through the logic of what is causing the problem, using any information that may be relevant, to the 'resources' that are driving it e.g.
   • "We need 7 staff per 1000 customers so for our customer base of 85,000 we should have 595 staff. We actually have 508 staff so 87 too few. Proportionally we can say our staff are 17% overworked - calculated as the shortfall divided by the actual staff we have - 87/508."
   • We can add elements for each of these factors - customers and staff are resources, staff needed, and pressure on staff are variables and staff needed per '000 clients is a constant. We can add simple equations to calculate the variables just as we would in a spreadsheet cell: for example staff needed is simply the number of customers divided by the number of staff needed per '000 customers.
3. Look at the history of the inflow and outflows that have brought these resources to their current level.
   • "Over the last year net growth in customers has been strong. (The numbers are not available for lost customers so a single inflow is described as 'net change')"
   • "Over the same period, our hiring rate was just about enough to keep staff numbers stable, though staff losses are starting to rise."
4. Sketch out how you think a solution for the future might work, by changing the resource flows and working through what could happen to resource levels and performance outcomes.
   • "I can increase hiring from next month. but will need to stop customer growth for 3 months [by cutting my marketing].
   • We will lose a few customers during that time, but my increasing staff will be able to offer better service.
   • Thereafter, if I keep the faster hiring we should be able to cope, though if customer growth continues there is a risk that we will be under pressure again later in the year.
   • I believe that staff losses will slow down as the work pressure eases"
   • Note: the figures show sketched data which does not display end values until the model is run.

   Use the architecture you developed in mystrategy® for steps 1 and 2 to sketch out how you see the numbers for each factor developing into the future, and the time-path for the improvement you are seeking. With the calculations we added for staff needed, pressure on staff, and service quality, the model then shows how we think the next 12 months could play out.

Exploring new business options with mystrategy®

In this situation the best approach is to work from the "opportunity" back to the resources you must develop to take it. For example... 'If we were to add a new sales channel, what might we be able to achieve in extra sales and profits?'

1. Specify the opportunity in terms of the number of tangible resources [most often 'customers'] you think you can develop into the future.
   • Opportunity:'We could use dealers to reach perhaps 16,000 smaller customers over the next 12 quarters.'
   • Measure:Customers, which is a resource.
   • Action: Set the timescale in mystrategy® to run from periods 0 to 12, in quarters, with "Today" being 0. Add a resource to the desktop and sketch or type in an estimated growth in customers over the 12 quarters.
2. Use the mystrategy® calculation facility to calculate the sales volume and revenue that may result. Build this up in the same way as you might in a spreadsheet - each element is equivalent to a spreadsheet cell. Keep it simple so you can see the logic.
   • 'Expected sales per small customer of 10 units per quarter will produce sales volume of 160,000 units per quarter' ...
   • ... and if we charge dealers €10 then sales of this volume would result in incremental revenues of ~€1.6m per quarter.'
3. Assess the other resources that you will have to develop if the increased sales channel is to be achieved.
   • 'There are about 50 dealers to be won, the largest bringing us up to 100 small customers in the early quarters [though later dealers will reach fewer new customers].' In the example we have added a data set for new small customers per dealer per quarter that peaks early and then tails off.
   • 'We can allocate 3 sales people for 2 months, reducing to 2 and then 1 to win these dealers.' Add this data to the "Sales staff focused on dealers" resource. Note: make sure these are joined to an inflow into the resource "dealers serving smaller customers" - not directly to the resource.
   • The customer win rate (the inflow into the resource "smaller customers") can now be calculated from the number of dealers multiplied by the average number of customers they bring each quarter.
   • Now that there is an inflow to "smaller customers", you can delete the data entered in step 1 - on the graph tab for smaller customers, select the "clear" button. If you run the sample simulation the numbers won now reach 16.35 ('000).
4. Calculate the extra costs involved and subtract these from the expected new revenues to forecast incremental profits
   • The extra sales people cost €25,000 per quarter each, so add a variable for the sales force costs and enter the equation in.
   • Dealer support will cost €10,000 per dealer, so add another variable for that with an equation.
   • Add variables for total costs and incremental revenue with the costs and revenued leading in. On running the simulation we can see total costs will grow to €565,000/qtr and incremental profits will reach ~€1million per quarter.'
5. With a small amount of data we have built a small model that illustrates the basis of a possible increment to the business. But what if our estimates turn out to be too optimistic? Use mystrategy® comparative graphs to explore what will happen if key assumptions change - for example:
6. 'If our dealers struggle to sell to these small customers, only achieving average sales of 3 unit per quarter, we will not hit sufficient revenue to make this channel profitable.'

New product uptake [the 'bass diffusion model']

This model describes the process by which new products are taken up amongst a population of Potential customers are persuaded to take up a new product by advertising or other marketing efforts, but are also persuaded to take it up by interacting with existing customers or owners of the product. Word-of-mouth is the common term for this interaction, but there need be no active interaction - simply seeing others with the product may be enough to persuade new customers to buy it.

The model runs on the mystrategy® software

Download the mystrategy® model for this example - zipped .msf file

Since there are no existing customers at the outset, some minimum marketing effort is required to start the uptake process. Then, the speed of the word-of-mouth process reflects the frequency with which potential customers and existing customers interact. This will initially be slow, since there are few existing customers, but accelerates as this number rises. However, the process eventually slows down again, as the number of remaining potential customers declines.

The impact on sales volume reflects the characteristics of the product and its use. For consumables, such as food and drink products, cleaning materials and so on, sales are most strongly driven by the population of active customers and the frequency with which they buy the product. For durables, such as TVs or the iPod, sales are initially driven by the uptake rate amongst new customers, but may then be added to when customers replace or upgrade the product. There may also be sales of related products, such as the ink-cartridges for printers, driven by the active customer group. The original description of the model is in Bass F, 1969, A New Product Growth Model for Consumer Durables Management Science 15: 215-227. It has been extensively developed and extended for a wide variety of situations - see for example, Milling P M, 2002, Understanding and Managing Innovation Processes, System Dynamics Review, Volume 18, Issue 1 , Pages 73 - 86.

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