Profit (qualitative and quantitative model)

Here you will find an example for a qualitative & quantitative model for the following challenge: a company is comparing different measures (Cost Cutting or Investments in Product Innovation, Product Quality, Marketing or Motivation of Staff Members) to increase the profit in a short-, medium- and longterm view. Although this model is very simply, it already allows to gain some crucial insights - as a demonstration on how to analyse and to gain insights with our iMODELER.

All we need to do is to provide connections between our various factors, and weight and define them using the values “weak, middle or strong” as well as "short-, medium- and longterm". Or, alternatively, we can describe the weighting with a percentage value. Having done this, we are then already able to analyse our model, and also identify and compare the impact that the different factors and risks will have over both the short and long term. For building up your model, you can use speech input, multitouch or touchless interactions.

After a quick visualization and the rough weighting of the impacts you can already analyze your model just by looking at the impact matrix of any factor. On the x-axis it shows the immediate impact factors have on the selected factor, and on the y-axis it is the change of this impact with each time step.

The diagram above shows the impact matrix of the central goal of profit. Obviously "Cost Cutting" has the highest positive impact on "Profit" in a shortterm view .....

... but a strong negative impact in a longterm-view based on its increasingly negative impacts on "Product Quality", "Marketing", "Product Innovation" and "Motivation of staff member" over time.

Therefore, manager - thinking in short-terms - would choose "Cost Cutting" as the most efficient measure to increase the profits a.s.a.p. - ignoring the strong negative side-effects of this measure in a long-term perspective. Manager, thinking in long-terms, would focus on investments in "Motivation of staff members", "Product Quality", "Marketing" and "Product Innovation" instead.

In order to get deeper insights into your model, you can quantify your model e.g. by using so-called "powerfunctions" like "relative_quantification" to get the needed formulas almost automatically.

The diagrams below and above show the results of 2 different scenarios: focusing on Cost Cutting (see diagram below) and avoiding Cost Cutting and focusing on Investments instead (see diagram above).

The results are similar to the outcomes of our qualitative approach. Focusing on Cost Cutting will lead to higher benefits in a short-term - but to losses in a long-term due to its increasingly negative impacts on "Product Quality", "Marketing", "Product Innovation" and "Motivation of staff member" over time (see diagram below).

Cost-Cutting will increase the Motivation of Staff Members in a short-term due to an existing profit-sharing program for employees depending on the yearly profits of the company.