Tuesday, 2 July 2013

Quantitative Complexity Management: The Process

The following five-step process illustrates the typical structure and workflow in a business simplification and robustification project.

STEP 1: Data Collection, Integration and Consolidation 

This crucial first step produces a set of business parameters which are used for monitoring and diagnosing a business. We work closely with our client to determine which endogenous and exogenous parameters are necessary to correctly reflect the operation and functioning of his business. For example, information from Balance Sheets, Income Statements, Cash Flows, Ratios, or production-specific data may be taken into account, as well as external parameters, such as macro-economic indicators, commodity prices, or stock market data.  This produces the so-called ecosystem, which is then analyzed using our Complexity Management analysis tools. The sources of the mentioned data are, typically, ERP systems, Data Warehouses and various institutions such as EuroStat, IMF, World Bank or local Chambers of Commerce.

STEP 2: Data Processing

Data processing is performed using OntoNet™, our Quantitative Complexity Management Engine, which runs our patented and proprietary algorithms. The analysis can be run on our servers, on the client’s servers on in the cloud, using our on-demand web-based service. In no case is client’s data stored by Ontonix.

STEP 3: Business Structure Mapping and Analysis 

OntoNet™ produces the so-called Business Structure Map which illustrates the interdependencies between the business parameters established in STEP 1, revealing how information flows throughout the ecosystem and pinpointing the critical parameters and paths, as well as constraints. A simple example of a Business Structure Map is illustrated below.

The map is composed of:
  • nodes, which correspond to the various business parameters and which are aligned along the diagonal of the map.
  • links, indicated by means of connectors (grey dots located off-diagonal).
The Business Structure Map represents a form of a modern “CAT scan” of a business. See more examples of maps.

STEP 4: Business Complexity Analysis and Profiling 

Our analysis produces measures of business complexity, its corresponding critical complexity – at which the business becomes ungovernable - and business resilience. Furthermore, the so-called Business Complexity Profile is synthesized.

A Complexity Profile of a business establishes a natural ranking of business parameters in terms of their footprint on the system as a whole. This is performed by OntoNet™ and does not imply subjective weighting of the various business parameters of KPIs of any form. An example is illustrated below. The value of the Complexity Profile is tremendous. It indicates the critical business parameters – these are located at the top of the graph – as well as those that are less relevant – these are situated at the bottom – when it comes to business robustification and simplification.

STEP 5:  Business Robustification and Simplification Strategy 

The closer a business functions to its critical complexity the less resilient it is. It becomes therefore necessary to reduce its complexity. The process is known as Business Simplification and leads to a more resilient business. A specific simplification strategy is devised based on the Complexity Profile and Business Structure Map. Business simplification is obtained by reducing the variability of a set of critical business parameters and by performing specific what-if analyses using our Quantitative Complexity Management tools. This is done working closely with the client.