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David Ma Wei - How to Simulate a Complicated, Dynamic Business Process in Program Design

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A breakthrough method of design a business simulation for Sino-pharma executive. Sino-pharma is the No.1 distributor in China, and has very complicated business model due to geographic diversify. The …

A breakthrough method of design a business simulation for Sino-pharma executive. Sino-pharma is the No.1 distributor in China, and has very complicated business model due to geographic diversify. The supplier (Upstream) and terminal (downstream) are co-related and mixed. Face the business challenge of 20% organic growth and asset effectiveness. We find a way to help the executive to practice before the really deal with it.

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  • 1. “CATCH 3 MONKEYS” C U S TO M I Z E D S I M U L AT I O N F O R B U S I N E S S I M PA C T SERIOUS PLAY CONFERENCE 2014 USC, JULY 22-24 SIMU4WISDOM LEARNING CONSULTANTS & CO.
  • 2. WELCOME BY SIMU4WISDOM ! DAVID MAWEI 马伟 • TRAINER • DESIGNER • GAMER
  • 3. WHO IS SIMU4WISDOM? Simulation Design Training Deliver Strategy Alignment What we provide:
  • 4. AGENDA • Customer case 10’ • Business challen ge 5’ • Methodol og y 10’ • Introduce Vito -Cre e k simulati on 15’ • Q&A 5’
  • 5. CUSTOMER (SINO-PHARMA) • State owned company from 1950, 30Billon USD revenue in 2013 • Net profit rate<1%, Negative operation cash-flow • Market leader in China pharmacy distribution business • Past growth from M&A 200+ local distribution companies
  • 6. MARKET • 500Million rural people seldom go to hospital, they deal with disease like our ancestors • Average medical consumption per people per year: China 11$, USA 800$. • Notorious corruption among the local governments and hospitals, business deal mostly under-table
  • 7. DEMAND • Communicate the strategy shift from M&A to organic growth • Regulate the business operation ethic as a public list company • Leadership development of the head of new M&A local distribution companies
  • 8. RESEARCH:CONCENTRATION RATIO 26% 36% 33% 5% USA Amersourc ebergen Mckesson Cardinal Others 9% 5% 4% 82% CHINA Sinopharma SH Pharma Huarun Others 95% VS.18%
  • 9. SAME BUSINESS DIFFERENCE IN 2 COUNTRIES CHINA USA Major sales channel Hospital (85%+) Retail (87%+) Hospital admittance CFDA + Local gov. FDA Sales competition Local gov. Fair Payment term Local gov. Fair Upstream relationship Local gov. Fair …… “Guanxi” Fair
  • 10. INTERVIEW WITH CUSTOMER “What is the key successful factor of your business?” The answer is : “ GuanXi (Relationship)” • The relationship with • the local government • the major hospitals • the upstream company
  • 11. INTERVIEW WITH CUSTOMER “What is the headache problem that block your success?” The answer is : “ Meet the conflict and combined needs of 3 stakeholders” • Local government -----------------------------------accomplishment • Downstream channels ----------------------------categorize of medicine • Upstream companies ------------------------------volume of sales
  • 12. INTERVIEW WITH CUSTOMER “What kind of competition you deal with?” The answer is : “ The competition are variable in different local market” • Different area has different relationship level with • local government • Downstream channels • Upstream company
  • 13. THE UNIQUE BUSINESS MODEL Sino- Pharm Local government UpstreamDownstream
  • 14. THE DESIGN CHALLENGES 1. How to simulate “ Guan Xi(Relationship)” in a learning programs 2. How to simulate 3 stakeholdes coupling effects 3. How to simulate the strategy characters of different company Design Challenges “GuanXi” Conflict Characteristic
  • 15. THE DESIGN SOLUTIONS 1. Intangible asset measurement “ Guan Xi(Relationship)” 2. Upgrade system for 3 stakeholders coupling effects 3. Asynchronies startup among the learning groups Design Solutions Intangible Asset Upgrade System Asynchronies Startup
  • 16. METHODOLOGY 1. Business impact map analysis 2. Business big picture (Over view) 3. Business value structure 4. Business logic tree
  • 17. BUSINESS IMPACT MAP Behaviors Initiatives Results Maintain No.1 and increase the share of market in China Rev reach 40 Billion USD in 2016 (CAGR 22.6%) Increase 1% Nopat rate and positive operation Cash-flow Identify the key strategy factors and correlated Proactively deal with market dynamic, build up the solid business relationship with stakeholders. Effectively allocate the precise resources to influence the value chain, to achieve the profit rate and cash- flow Market and value chain analysis, estimate the trend and dynamic Decomposition the group strategy and planning the business and risk control Manipulate the key successful factors to influence the growth, profitability and cash-flow Use KPI to guarantee the execution and measurement Understand the business challenge and improve the industry insight Build up the strategy, finance, market and opeation capability Find a way to increase the negotiation power in value chain Make decision in relationship foster and realize Competence HOWHOWHOW?
  • 18. Local Government BUSINESS BIG PICTURE DUMMY Distributor Downstream Channel Upstream Company Backoffice Business Logistic Financing Cash Mgmt. Front Business Upstream team Downstream team Product Category Gov. relationship Demand generation Purchase • Deal • Upgrade • Value add Sales • Deal • Upgrade • Value add Wholesale Sino-Pharma
  • 19. Business Value Tangible Cash-flow Profitability Asset structure Intangible Upstream Downstream Local Gov. BUILD THE VALUE STRUCTURE
  • 20. ROLE OF MANAGERS Sino-Pharma Output (Collect money) Input (Use resource) Foster resource to build edge
  • 21. 2014/7/26
  • 22. 2014/7/26
  • 23. THE BOARD 2014/7/26 Upstream Relationship Downstream RelationshipLocal gov. Relationship Payment & Collection Order Area
  • 24. UPSTREAM BRIEF Category ◎ Generic ☆ Original ▲ Anesthetic Company Portfolio Strategy preference Contract term White ◎+☆ Market share High penetrate Good refund Upgrade optimize payment Blue ◎+ ☆ Muilti channels Good refund Upgrade is useless Green ☆ Hospital focus Mid refund High margin Black ◎+▲ Binding sales ▲ No refund, need license Bad payment term Dummy Null Money and cash 1% profit. cash on delivery
  • 25. Name Category Demand Preference H I Hospital ◎☆▲ Relationship Variety etc. H II H III RC Rural Clinic ◎☆ Relationship Discount etc. RS Retail shop ◎☆ Promotion Logistic etc. WS Wholeseller ◎☆ Discount Variety etc. DOWNSTREAM BRIEF
  • 26. LOCAL GOVERNMENT RELATIONSHIP Foster: • Government Task Accomplishment • Investment, Industry benchmark , Generic coverage, etc. • Upgrade the value chain control Realize: • Influence the local directory admittance • Influence the hospital decision • Accelerate the hospital money collection
  • 27. DOWNSTREAM RELATIONSHIP Relationship Logistic
  • 28. UPSTREAM RELATIONSHIP Hospital/Clinic Order Retail Order Wholesell Order Downgrade Upgrade Distributor rank
  • 29. THE SIMULATION PROCESS Planning 1. Loan 2. Quota 3. Support Bid 4. Hospital 5. Clinic 6. Retail 7. Wholesale
  • 30. TANGIBLE ASSET Cash 314 AR 250 Deposit 40 Logistic 16 Total asset 620 AP 0 Loan 300 Total liability 300 Beginning equity 309 Gain/Loss 11 Ending equity 320 Equity & liability 620
  • 31. DIFFERENCE OF STARTUP Alpha Beta Gamma Tangible SAME Intangible Difference Wa 2 2 3 Ba 3 1 2 Gov.pt 5 5 3 Main force Hospital I Hospital II Hospital III
  • 32. MEET THE NEEDS OF 3 STAKEHOLDERS
  • 33. THE MARKET FORECAST
  • 34. RESOURCE PLANNING (UPSTREAM) √ √ √ √ √ √ √ √ √ √
  • 35. UPSTREAM QUOTA BID
  • 36. LOCAL DIRECTORY ADMITTANCE
  • 37. UPSTREAM BID
  • 38. RESOURCE PLANNING(DOWNSTREAM) 2014/7/26 √ √ √ √ √ √ √
  • 39. DOWNSTREAM BID
  • 40. DOWNSTREAM BID 2014/7/26
  • 41. EXAMPLE: THE NEED OF HOSPITAL I GA*4, BA*1, DA*1 PRIORITY: ALPHA > DUMMY > BETA
  • 42. EXAMPLE: THE RESULT OF HOSPITAL I ALPHA DUMMY BETA
  • 43. YOU GET ORDER ! Hospital/Clinic Order Retail Order Wholesale Order DO YOU HAVE QUOTA? CAN THEY LIST IN LOCAL DIRECTORY?
  • 44. YOU GET MONEY ! WHEN YOU HAVE TO PAY ! WHEN GOV.
  • 45. YOU GET STATUS ! GOV. GOV. GOV.
  • 46. SIMULATION TARGET Alpha Group Tangible Cashflow Income statement Rev. = M Margin + Refund = M Fixed Cost = M Net profit = M Balance sheet Total Asset = M Loan = M Equity = M ROA = Intangible Upstream Relationsip Wa·◎ Wb·☆ Ba·☆ Ga·◎ Da·▲ Downstream Relationship Hospital I Hospital II Hospital III Clinic Retail Gov. Relationship Use ,Earn ,Reserve for next year:
  • 47. BUSINESS SETTLEMENT 2014/7/26
  • 48. WRAP UP Customi ze simulati o n fit unique customer’ s business situation and talent developme nt needs Design Challenges “GuanXi” Conflict Characters Design Solutions Intangible Asset Upgrade System Asynchronies Startup
  • 49. VALUE CREATED W h a t w e h a v e d o n e ?
  • 50. WE SEEK US PARTNERS ! Game Designer: Templar LU Learning Designer: David Mawei Simu4wisdom learning consultants & Co. Room 1607, No, 1076,Changshou Rd, Shanghai, 200042 T +86-21-62567710/51600196 skype: Simu4wisdom E: davidma@simu4wisdom.com www.simu4wisdom.com