Watch the video presentation and/or read the full text below
Most of this modelling exercise has been focused on the essential foundation of
thinking through the various cost headings, and determining how they scale with
demand. In the last two sections (ten minutes of the associated video), we have
used the model to calculate the cost per customer, and hence the profit margin for
a given tariff, and then ‘turned the handle’ repeatedly to explore the
business-case dynamics.
This is what a business model is for. We create a shiny set of icons and calculations
that best capture the uncertain parameters facing a business, but then it is the
flexing of that model through varying input assumptions and more structured scenario
and sensitivity analysis that delivers the real insight.
Look for an explanation if the results are strange. Is it the model or the business
which is broken? It will be much cheaper to fix either before the dollars modelled
become real!
The topics in this tutorial reflect the kind of conversations you should be having
with the project team evaluating a business opportunity, focusing on the principles
and dynamics, rather than the workings and the math. A STEM model is built on a
rich fabric of pre-validated elements which can be wired up much more visibly and
consistently than hand-crafted logic in a spreadsheet. Your colleagues and/or customers
will value a model that connects
technical credibility with reliable financial impact.
Please contact Implied Logic
if you would like advice on working with STEM in your business.