Strategy With Data Analytics

When faced with a challenge, businesses need to determine a strategy towards approaching that challenge.  However, this is a high risk endeavor, as the wrong strategy will prevent you from taking advantage of opportunities and may blindside you to possible threats.
One common application of simulation modeling is to use it to try to “predict” the market or environment and then align the company to succeed if the prediction is accurate.  However, the problem with approaching strategy this way is that prediction of complex systems is simply inaccurate; there are too many variables and too many unknowns in the modern business environment to forecast with any degree of precision. Simulation is a powerful tool, but trying to use it to predict the future doesn’t play to simulation’s strengths.

Instead, with computerized simulation, it is possible instead to run simulations for hundreds or thousands of scenarios, each one based on different assumptions about what the future will hold. (For fans of science fiction, it’s a bit like showing thousands of possibilities in simulated parallel universes.)  Instead of trying to predict a singular future that is unlikely to occur, it is better to seek a robust strategy – one that will not just work in the “predicted” future but one which will enable the company to survive in all or nearly all of the plausible futures. It’s far better to go with a strategy that succeeds in 800 out of 1000 possible futures than to go with a strategy that succeeds spectacularly in only ten out of those 1000 futures.

 

Communicating Strategy to Stakeholders

Strategic decisions not only have to be made, they also need to be explained to the stakeholders on the project.  Boards and other organizations want to be appraised by the reasoning behind the strategic approach.

Simulation modeling is the perfect way to communicate the reasoning behind the strategy to this with a vested interest in knowing why decisions have been made. Technical information needs to be communicated to the non-technical, mathematical information needs to be communicated to the non-mathematical, and business information needs to be communicated to the non-business savvy. Through simulation, ideas can be shown visually using interactive tools, rather than merely explained verbally or through technical documents, increasing comprehension.

Being able to give control of a simulated environment to stakeholders and seeing the factors into the decision-making process can trigger those “Eureka” moments and allow you to communicate your strategy very quickly.