How to communicate complexity effectively

Simplifying complexity

In today’s fast-paced and dynamic business environment, decision-makers are constantly faced with uncertainty and complexity. Every choice carries the potential for both success and failure, making strategic decision-making a daunting task. However, amidst this uncertainty, there exists a powerful ally – Simulation Modeling. With its “what-if” approach, Simulation Modeling empowers organizations to explore countless scenarios and evaluate any possible outcome, providing invaluable insights to support decision-making processes.

While Simulation Modeling offers a sophisticated methodology for analyzing complex systems, its success lies in the challenge to present results and scenarios clearly and effectively. Despite the complexity of the underlying algorithms and simulations, decision-makers require concise and actionable insights to inform their choices. This necessitates a structured approach from initial scenario generation and screening of potential operating alternatives to summarizing and visualizing results, ensuring that decision-makers can easily interpret and compare different scenarios.

The Data-driven scenario funnel for optimal corporate positioning

In the context of scenario selection, a typical funnel is a structured approach that narrows down a broad set of potential scenarios into a focused subset that warrants further analysis and consideration. The funnel serves as a filtering mechanism, guiding decision-makers through successive stages of evaluation to identify the most relevant and impactful scenarios for strategic decision-making. Here’s a breakdown of a typical funnel in scenario selection:

1. Preliminary analyisis

In the initial stages, diverse scenarios are generated considering various factors such as market trends and regulatory changes. Screening criteria are established to assess scenario relevance and feasibility, including alignment with strategic goals. Preliminary evaluation involves a high-level assessment of scenarios, utilizing initial efficiency and efficacy metrics to gauge their potential strategic value.

1. Preliminary scenario generation

The process begins with the generation of a wide range of possible scenarios. This may involve brainstorming sessions, data analysis, market research, or scenario modeling techniques. The goal is to capture a diverse set of scenarios that reflect different potential futures and uncertainties.

2. Screening criteria

Next, decision-makers establish screening criteria to assess the relevance and feasibility of each scenario. These criteria may include factors such as strategic alignment, feasibility, relevance to business objectives, potential impact, and likelihood of occurrence.

3. Preliminary evaluation

Scenarios that meet the screening criteria proceed to a preliminary evaluation stage. Here, decision-makers conduct a high-level assessment of each scenario to gauge its potential implications and relevance. This may involve qualitative analysis, expert judgment, or preliminary modeling to identify key drivers and uncertainties.

By following a structured funnel approach, decision-makers can systematically evaluate and prioritize scenarios, enabling them to make informed decisions and navigate uncertainties with confidence. The funnel serves as a roadmap for scenario selection, guiding decision-makers through a series of stages to identify the most relevant and impactful scenarios for strategic planning and decision-making.

2. The first level of deep dive - scenario comparison

Leveraging a first pre-screening of the scenarios support in gathering a good understanding of the problems and its constraints, while also streamlining the first level of deep dive by discarding some unfeasible or less interesting options.

In the first level of deep dive, the scenarios pictured now undergo two stress test during the first level of deep dive, whose scope is to compare the potential scenarios in order to select even less options.

  1. Quantitative Analysis: Selected scenarios undergo a more detailed quantitative analysis to assess their impact on key performance metrics or objectives. This is where simulation modeling, and sensitivity analysis, come into place to quantify the potential outcomes and risks associated with each scenario.

  2. Strategic Alignment: Scenarios are evaluated based on their alignment with strategic objectives and priorities. Decision-makers consider how each scenario aligns with the organization’s mission, vision, goals, and values, as well as its potential to create value or mitigate risks.

2.1. The strategical frontier

One effective method for presenting the results is through the use of a “strategical frontier” chart. In this chart, the X-axis represents the efficiency of a scenario, while the Y-axis represents the efficacy of the scenario. By plotting various scenarios on this chart, decision-makers can visually compare their performance based on these two key metrics.

Streamlining complexity

The concept of “isoquantum” lines can further enhance the utility of the strategical frontier chart. Isoquantum lines connect scenarios that achieve the same payoff, the sum of the level of efficiency or efficacy, allowing decision-makers to identify trade-offs between these two metrics. Additionally, the chart can include a “non-compliance area” to highlight scenarios that fail to meet predefined expectations and should be discarded.

By leveraging the strategical frontier chart, decision-makers can quickly identify promising scenarios that offer a good balance between efficiency and efficacy, hopefully better than the AS-IS situation. They can also pinpoint areas of improvement and potential risks by analyzing the distribution of scenarios relative to the isoquantum lines and non-compliance area.

This structured approach facilitates informed decision-making, enabling organizations to select strategies that align with their goals and objectives.

3. The second level of deep-dive - anti-fragility test

While with the first level deep dive the funnel narrowed some more, the analysis maturity level and the understanding of the problem and constraints should be enough to proceed to stressing further more the remaining scenarios: it is time to conduct the anti-fragility test.

    1. Risk Assessment: The remaining scenarios undergo a comprehensive risk assessment to identify potential vulnerabilities, uncertainties, and downside risks. Decision-makers evaluate the likelihood and impact of various risks associated with each scenario and develop mitigation strategies to address them.

    2. Final Selection: Based on the results of the evaluation process, a final selection of scenarios is made. These scenarios represent the most relevant, impactful, and strategically significant outcomes for further analysis and consideration.

    3. Refinement and Iteration: The selected scenarios may undergo further refinement and iteration as new information becomes available or as strategic priorities evolve. Decision-makers continue to monitor and evaluate the chosen scenarios over time, adapting their strategies and actions as needed.

 

2.1. Mono and multivariate analysis

In the pursuit of strategic excellence, organizations must delve deeper into the intricacies of their chosen pathways. While the strategical frontier chart provides a valuable first level of analysis, it is imperative to conduct mono and multivariate analysis to uncover critical thresholds and risks that may impact the efficiency and effectiveness of optimal scenarios identified. By integrating this second level of analysis, decision-makers can fortify their strategies and navigate potential pitfalls with precision and foresight.

The multivariate analysis builds upon the insights gleaned from the strategical frontier chart, drilling down into the underlying factors that contribute to scenario performance. Through a comprehensive examination of various variables, such as market conditions, operational constraints, and external influences, decision-makers can identify the critical thresholds at which efficiency and effectiveness may be compromised.

By establishing these thresholds, organizations gain a deeper understanding of the risks associated with their chosen strategies. They can anticipate potential challenges and implement proactive measures to mitigate risks and maintain optimal performance. Additionally, the multivariate analysis enables decision-makers to assess the interplay between different variables and identify synergies that may enhance scenario outcomes.

Furthermore, the multivariate analysis facilitates scenario testing under different conditions, allowing decision-makers to simulate the impact of various scenarios on efficiency and effectiveness. By conducting sensitivity analyses and scenario simulations, organizations can refine their strategies and develop robust contingency plans to address potential risks and uncertainties.

Integrating the insights from this analysis with the findings from the strategical frontier chart enhances decision-making capabilities, enabling organizations to make informed choices with a deeper understanding of the underlying dynamics at play. By identifying critical thresholds and risks, organizations can proactively manage uncertainties and steer their strategies towards success.

In conclusion, adding a multivariate analysis to the strategical frontier chart enriches decision-making processes by providing a deeper understanding of the factors influencing scenario performance. By identifying critical thresholds and risks, organizations can fortify their strategies and navigate uncertainties with confidence. With this comprehensive approach to strategic analysis, organizations can optimize their decision-making processes and achieve sustainable success in today’s complex and dynamic business environment.

 

01

Master the supply chain BASICS

Learn about the ABC of the supply chain management

Coming soon!

02

Broadening Perspectives: Supply Chain and Beyond

Go beyond the ABC of the Supply Chain to provide deeper insights and guidance to your team on more advanced topics in the Supply Chain and its satellite topics

Deep dive

03

How to communicate complexity effectively

Structured approaches, charts, Tips and tricks to address complex problems and to delivering simple, effective presentations 

Deep dive