Using performance drivers within scenario based models

Organisations face relentless pressure on prices and markets. At the same time financial return has to be balanced with managing risk and corporate governance as a requirement from stakeholders. Traditional analytical approaches – such as market research – have limited value for identifying and exploiting new growth opportunities. We need an approach that integrates the technology and market insights with customer demand, cost and capability for informed decision‐making.

For instance, in the 1990s high‐growth businesses appeared offering a range of software applications hosting, management, and infrastructure services. These Application Service Providers were the darlings of investors. The initial value proposition “lower cost enterprise applications and infrastructure” ran out of steam as many ASPs focused on large‐scale, low‐cost rental models, lacked differentiation ‐ and did not add compelling value to customers. By contrast, a few focused on understanding customer needs beyond “low cost” and:

• Created tailored applications ‐ not just re‐cycling versions of existing functionality;
• Enabled incremental service delivery – not a wholesale shift to applications rental;
• Innovated with access to scarce skills, superior service and leading methodologies.

Companies willing to evolve their original value propositions survive crunch periods. Trying to anticipate how demand is shifting is a tricky and risky proposition. Managers need robust models and an effective process to reach consensus and execute strategy successfully.

Modelling allows managers to test scenarios, get everyone on the team to see where the greatest value lies, and quickly redeploy resources to capture business improvement opportunities. Across sectors, these methodologies have led to growth in revenues, margins and underpinned sustainability.

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