Modeling and Simulation

A friend and colleague reached out yesterday to ask about modeling and simulation tools.  Then went on to ask about consistent notations as a desire for the practice he supports.  During the span of my career I’ve had to learn various methodologies and notations around BPR/M as both the discipline has matured as well as terminology.  During BPR’s big push during the late 70s courtesy of the USAF’s Mantech program I was introduced and became a modeler for an Aerospace firm.  Dennis Wisnosky -who led the program- gather a few of us at various prime vendors with the objective of creating a generic model of an Aircraft manufacturer.  As part of the program Softech developed IDEF0 a modeling notation / methodology.  Today there is more distinction between what is a notation and what is a methodology.

During that same year I had to create various diagrams for systems, IT applications, shop floor processes and manufacturing processes.  This demand to learn the latest notation continued till I joined IBM, at which time my employer started sending me to various conference, consortiums and programs to develop methodologies and notations due to the years of build models.  Two years ago at a Summit meeting I presented the topic of Accuracy and Precision.  Topics that are closely related but as another of my mentors, Harrington pointed out these are different concepts and when building models one should understand a few things:

  • The greater the level of detail the more complex and expensive it is to create
  • Greater detail does not always translate to greater understanding or the ability to communicate that understanding

Since then when I’m asked about modeling and simulation engagements, the first question I have is what’s the point of the model or simulation?  If its to communicate to executives or other people that requires one level of detail; If its a step by step procedure for people to follow that’s another level; and it is for automating a process that’s still another level.

The next question I typically asks is what is the target audience’s level of experience with models and various notations; show typical line of business executives UML just won’t cut it, show programmers BPMN may or may not be helpful as they are often wanting more technical detail than process –though in my opinion that’s a big flaw in logic, as the process gives a programmer context which will help drive better design decision (enter the latest trend to build scenarios and user personas).

Lastly on my top three scoping questions is usually how much time is planned for the activity and due date for the deliverables.  With such questions notation and methodologies decisions become a little easier.  The only big question left is whether the enterprise as chosen a one size fits all standard or has a taxonomy of notations to use for specific purposes and all those involved have the needed training to use.

Structure in Threes: Process Notation

Spent past several days deep into research on various process documentation methods.  Specifically comparing IDEF0, Rummler-Brache and BPMN.  I’m still an IDEF0 fan due to its simplicity.  In about ten minutes you can describe a process to a business owner while other methods require a little more instruction and in some cases a significant about of understanding for the rules of construct usage and meaning.  BPMN while easier to understand than UML for line of business management still has a level of complexity that requires interpretation for most.  Thus when using BPMN its often best to do Collaboration and Choreography diagrams at higher levels when presenting to LOB Management.

BPMN however comes into is own when looking at documenting orchestration of processes with more detail.  The advantage of using BMPN at this level is it can be targeted toward translation to UML or automation in workflow systems.  The gap I see in most of these methods though is adequate mechanisms to express business rules clearly and concisely.  Typically one has to use an external method to document business rules which means having LOB management having to learn two methods to visualize the processes they use or are modifying for implementation or augmentation using information technology

Structure in Threes: Process Value

About two decades ago I was fortunate enough to collaborate with several brilliant people in IBM working in manufacturing research.  One of them Dr. Arno Schmachpfeffer had coauthored a paper in the IBM Journal of Research call Integrated Manufacturing Modeling System.   One of the key aspects of the paper was a taxonomy of activities in a process.  I was struck by the simplicity of the taxonomy and the ability for it to catalog any process activity into one of four categories: Rest, Move, Make, and Verify.  After working with this taxonomy for a while using it to catalog activities I had previously created in IDEF0 for various BPR engagements I came up with several simple insights:

  1. Most business ventures derive their value through the execution of one of these activities. Example, a Product development firm creates most of its value through the make activity, a Consulting firm typically from verify activities and an Airline from move activities
  2. Extending that insight further one can determine the efficiency of a process by inventorying, classifying and analyzing the rations of the activities in the processes these firms use to create their value.  Thus comparing the ratio of the firm’s primary value creating activity to the quantity of other activities provides one the BPR equivalent to a Asset Efficiency Ratio in Finance

Throughout the years –as a personal research project– I had been inventorying, cataloging and analyzing processes I have been reengineering.  This past few months as I started to look into valuation of services and processes, the question has come up often.  How does one create a valuation for a process.  Initially I was looking for a hard formula based upon standard accounting practices.  However, after considerable applications of such concepts as Activity Based Costing (ABC) I came to the conclusion that the formula may be standardize but the actual value of the parameters would change.  That is one could use the ration of primary value add activities to non-value add activates to determine the allocation of value applied to each process.

While this is a simplistic approach it enables the Process Analyst and the Portfolio Manager to work together to determine the value of services through a hierarchy without having to get too detailed in data collection.  The next aspect of using this relative allocation approach is to add adjustments for non-value add activities that are required or mandated (e.g., safety and regulation compliance).  However a case can be made for calling such activities value add as they enable a firm to fulfill its mission and requirements.  Thus compliance and safety activities are feature requirements of a product or service and without meeting such do not perform as required.

This month’s agenda is to merge my activity ratio spreadsheet with the value portion of the IT Portfolio Management spreadsheet.

Structure in Threes: Tools Development

Organizational Design Tools Need Completion

Continuing to build out Enterprise Analysis and Design tools this morning along with a workflow to integrate the Modern IT Portfolio Management methodology.  After finishing the Org Design Tool, the next steps will be to finish off the Portfolio Management Tool and then document the workflow for possible automation.

Strategy Analysis

Modern IT Portfolio Management

Digital Nervous System Architecture

It looks like I’m going to build out the original concepts I developed when discussing what and how Active Directory should be with Hans.  I had presented to Hans an idea that Active Directory (SMS Server) could accomplish its mission through usage of federation and abstraction into logical units (see below late 1996 presentation).  Added to that were the concepts I had been working on as a side research project during my employment at IBM the 80’s.  This later became a white paper “The body enterprise” where I through the network could become an enterprise’s digital nervous system.  Unfortunately, Hans and I could not get the funding to pursue going any further than simple IT product management.  However, I continued -though through small pieces of other projects- to research how to build a management and control system.  With my Modern IT Portfolio Management R&D at a foreseeable conclusion I’ll be able to build the CIO Workbench I had envisioned years ago.


The unfortunate aspect to this was both IBM and Microsoft had the opportunity to build this out a decade ago but failed to see the vision was achievable. I guess you can chalk it up to other missed opportunities that companies have for not reaching far enough in the future.  I remember hearing internal chatter by Microsoft management when I departed for DMR Consulting this was a dream decades away, though BillG must not have through so or his Ghostwriter wouldn’t have spent so much time interviewing me to included in his book.

Structure in Threes: IT Investment Strategy Lessons

This week as I continue to research IT Strategic Planning issues for a series white papers I’m writing I’m noticing more gaps in the average IT organization’s planning approaches.  Despite more sophistication in technology, the planning efforts are still rather primitive.   Many IT Planning organizations spend significant time on the technology requirements, functions and interactions; which they should.  However, when it comes to the effects and benefits to the business which they serve, these functions come up fairly short still.  The average business case just little more that a primitive ROI based upon very weak assumptions.  It is not wonder why CFOs and Controllers are tightening the screws on IT projects and considering outsourcing and cloud alternatives.  A few organizations I’m aware of are looking at eliminating their IT function entirely and moving everything to the cloud.

Review of prior Portfolio Management R&D at IBM

This coming week’s agenda is to develop the optimum means for presenting the Modern IT Portfolio Management process to executives and managers.  During the initial portfolio management R&D for business investment at IBM an interesting reaction was observed.  Executives and Managers disliked operating on models with more than two to three factors, preferring two factor matrices with binary values.  This was rather interesting observation in that each Stakeholder when surveyed asked for multiple factors to be evaluated.  However, in practice only a couple of factors are examined for consideration.  These factors typically center around near term monetary consideration.   optimal portfolios with high risk.  Thus other factors or strategies should be considered which infers a more complex matrix of considerations.

Lessons learned from Venture Capitalists

Venture Capitalists (VCs) evaluate investment candidates based upon returns like other investors, however, other factors are often used to classify and filter opportunities.  These are often used in what has been called a stage-gate process.  This is a series of smaller decisions that in effect gate weaker opportunities out of the pool of candidates.  This makes the decision not a single yes/no but a series of yes/no decisions.  The other aspect of a VC‘s investment process is the core to the portfolio management concept; multiple independent investments.  Typically this is accomplished by VCs teaming with other VCs enabling them to make smaller bets but spread amount a larger group of opportunities.  This strategy reduces risk by eliminating the eggs all in one basket approach.  The final strategy many venture capitalist used to mitigate risk is employing a variation of options theory.  Employing this strategy, VCs will often stage release of funds based upon a business venture’s ability to meet specific goals.  If a venture does not meet these goals the VC has the option to discontinue funding and cut their losses or potentially take a more active role in the management of the venture.

Other Research

Other areas of investment research under current study for this practice include:

  • Stock Brokerage [reviewing interview notes]
  • Investment Bankers
  • Insurance Actuaries
  • Natural Resource exploration enterprises

Intellectual Arbitrage Group: Website Redesign

intellectual Arbitrage Group’s Office365 Small Business Premium website V0.7

Spent a few minutes each day this week working on Intellectual Arbitrage Group’s new public website.

intelarbgrp-website-homeOffice365 Small Business Premium IAG Contact Up Page Design

It has taken a little while to get some time on my schedule to work this activity.  Like other small consulting firms,  Time to work on marketing, backoffice systems, and practice development is always in short supply when you don’t have a dedicated people working each task.  Fortunately, using most of the Office365 Small Business Premium templates means I can focus on content and customers instead of presentation.  Only wish it had more flexibility or useful help on how-to customize like WordPress.comto is very minimal.  While the library of SharePoint web parts is helpful, the flexibility of these parts is minimal or not very well supported by documentation.

IAG-Office365 Website WP Blog-Webpart

This past Sunday, I asked my DNS Hoster [ZoneEdit] to build new records to forward my URL and Mail over to my Office365 site.  Both Registrar [DomainPeople] and DNS name service [ZoneEdit] were very fast and responsive, I switched over to new services in less than two hours.  I only hope Microsoft can match that Service Level, though I didn’t see a clear Service Level Agreement (SLA) from Microsoft when I signed up.  But then again they are still new to Services.

Creating Workflow for Modern IT Portfolio Management

On this week’s agenda is building out the workflow for the IT Portfolio Management Practice.  Unlike how IBM, DMR, and Microsoft accomplish practice implementation, I plan on creating a semi-automated workflow using SharePoint, MS Access and Excel.  While using PowerPoint and Word templates may capture content and present it in a “pretty” way, it does nothing for ensuring the quality of the output.  That was one of the reasons I created B.A.S.E. years ago.  I had gotten disgusted back then with the quality of analysis peer consultants were performing, choosing to spend all their time on formatting.  I guess I shouldn’t complain about such, as it created a market for me back then; fixing all the poor engagements and projects these people performed.  I’ve see lots of “pretty” engagements go bad due to poor analysis and thinking which creates the ultimate consulting sin in my book; doing harm to the client.  Having a structured process and supporting system may not guarantee perfect results or avoidance of harm, but it sure reduces the probability and provides better visibility to detect such.

Modern IT Portfolio Management: Investment Profiles

Last night I reviewed of my notes interviewing investment brokers, portfolio managers the past few months and delved deeper into my growing collection of Wiley Finance Series of books.  This morning I scanned through “The Art of Asset Allocation” by David M. Darst searching for the next analogs in financial portfolio management to pair up with IT Portfolio Management.  It occurred to me the metaphors currently in usage in wall street: Bulls, Bears and other animals used to characterize investment behavior is close to but not exactly a match for IT Investment.  In a previous White paper I had researched and written for Microsoft’s Services division on Business Continuity and Disaster Recovery I had started to layout a third dimensional grid-work on the organizational decision behavior and environment.   As I re-read the insight I had working on various aspects of decision science I can see how to apply these learnings plus several other insights to IT Portfolio Investments.

Investor Profiles

The only downside to this approach is that most consulting firms prefer to adhere to the 2×2 matrix.  The logic behind such is they feel more than 2×2 or binary decision values confuses management and executives.  A little insulting to their clients if you think about it.  However, the objective is to communicate quickly to the client not show the complexity and nuance behind the analysis.  As such when I develop a more comprehensive tool, I’ll have to have it yield several simple 2×2 views of the decision for ease of understanding.  I did this with the design of the Cloud and APM Portfolio Tool for Microsoft IT Strategy and Enterprise Architecture services division a few months ago.  The feedback I got from my personal CxO advisory panel were very positive.   Expect to have a wireframe of the tool’s output to match the personas I’ve developed ready by end of next month**.  The it becomes a decision on what technology to build.

**I like the advice I got from Alan Cooper a few years back; “Design from the outside in”.  The common sense of it seems apparent, however, so few companies and developers do such.  Today all the rage is teaching developers and consultants to use personas.  Unfortunately, the lessons typically stop at using them as sales tools to justify what has already been built rather than design tools to ensure operation and aesthetics match with the enduser’s needs and desires.