This document discusses the importance and value of business modeling. It begins by defining a business model as a simple representation of the complex reality of a business. It then describes the rise of business modeling, driven by the need for communication between parties, managing increasing complexity, and enabling change. The key benefits of business modeling include improved communication, training and learning, persuasion and selling, analysis of business situations, compliance management, software requirements development, and knowledge management. Integrating multiple modeling disciplines provides the most insightful models.

1. Modeling and Simulation of Business
Dr. Rami Gharaibeh
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2. UNDERSTANDING REALITY
2
PREFACE

3. UNDERSTANDING REALITY
3
PREFACE

4. UNDERSTANDING REALITY
4
PREFACE

5. UNDERSTANDING REALITY
5
PREFACE

6. UNDERSTANDING REALITY
wrong understanding of reality leads to wrong
expectations
6
PREFACE

7. UNDERSTANDING REALITY
7
PREFACE

8. WHAT IS A BUSINESS MODEL?
A business model is a simple representation of
the complex reality of a particular organization.
Business models are useful for understanding
how a business is organized, who interacts
with whom, what goals and strategies are
being pursued, what work the business
performs, and how it performs that work.
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PREFACE

9. BUSINESS MODELING
We need to learn how to create a business
model that represents the reality of a
business.
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PREFACE

10. BUSINESS MODELING VS. SOFTWARE
MODELING
A software model is a model of software
applications and databases and other
information technology artifacts.
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PREFACE

11. BUSINESS MODELING VS. SOFTWARE
MODELING
A business model is a model of a business, a
model of what people do and how they
interact.
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PREFACE

12. BUSINESS MODELING VS. SOFTWARE
MODELING
in both cases we are modeling the actions
and interactions among several elements.
• Different elements
• Different techniques
• Different tools
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PREFACE

13. BUSINESS MODELING
Creating a good business model is a complex
skill, and like any complex skill, it requires
time, knowledge, practice, and patience to
learn.
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PREFACE

14. MODELING DISCIPLINES
Four distinct business modeling disciplines
• Business process models
• Business motivation models
• Business organization models
• Business rule models
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PREFACE

15. MODELING DISCIPLINES
Business process models
capture how a business performs its work, the
step-by-step activities that are performed.
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PREFACE

16. MODELING DISCIPLINES
Business motivation models
Capture the goals and strategies of a
business. what a business is attempting to do
and how those attempts fit into its changing
environment.
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PREFACE

17. MODELING DISCIPLINES
Business organization models
capture who performs the work in an
organization and who they interact with, both
inside the organization and outside.
17
PREFACE

18. MODELING DISCIPLINES
business rule models
capture the constraints on a business the
external constraints from regulations and
laws, and the internal constraints from
policies, rules, and other guidance.
18
PREFACE

19. INTEGRATING THE FOUR
DISCIPLINES
To be more effective, business modelers
need to understand all four disciplines.
They need to create models that include
multiple disciplines.
19
PREFACE

20. INTEGRATING THE FOUR
DISCIPLINES
A business process is useful, but it is more
useful when accompanied by details about
the goals of the business, the organizations
that participate in the process, and the rules
and policies that guide the process.
20
PREFACE

21. INTEGRATING THE FOUR
DISCIPLINES
The four disciplines represent four dimensions
that should be reflected in the model:
What is the process, how does it serve my
goals, who should do what, what rules govern
the people while implementing the process
21
PREFACE

22. INTEGRATING THE FOUR
DISCIPLINES
example
any hospital includes the business process of emergency
admission. To completely model this business process the
BPM will model all activities:
• taking patient information
• Patient examination
• Patient referral to labs and ray
• Ray imaging
• Ray image reporting
22
PREFACE

23. INTEGRATING THE FOUR
DISCIPLINES
example
any hospital includes the business process of emergency
admission. To completely model this business process the
BMM will show the link with the hospital goals :
• taking patient information
• Patient examination
• Patient referral to labs and ray
• Ray imaging
• Ray image reporting
23
PREFACE

24. INTEGRATING THE FOUR
DISCIPLINES
example
any hospital includes the business process of emergency
admission. To completely model this business process the
BOM will link each activity with the department that should
perform it :
• taking patient information (emergency nurse)
• Patient examination (emergency physician)
• Patient referral to labs and ray (emergency physician)
• Ray imaging (ray imaging technician)
• Ray image reporting (ray image physician)
24
PREFACE

25. INTEGRATING THE FOUR
DISCIPLINES
example
any hospital includes the business process of emergency
admission. To completely model this business process the
BRM will show the laws, policies, procedures and rules in
performing each activity:
• taking patient information (privacy rules)
• Patient examination (clinical procedures)
• Patient referral to labs and ray tests (referral procedures)
• Ray imaging (safety policies)
• Ray image reporting (privacy + timing policies)
25
PREFACE

26. MODELING STANDARDS
Standards are important in business modeling. A
model created by one group of people should be
understandable by others.
Others should be able to update the model when
business circumstances change. Models created in
one modeling tool should be readable and
changeable by other tools.
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PREFACE

27. CHAPTER ONE
WHY BUSINESS MODELING
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28. ANSWER TWO QUESTIONS
what is a business model?
why create one?
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CHAPTER ONE

29. WHAT IS A BUSINESS MODEL?
A business model is a simple representation of the
complex reality of a business.
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CHAPTER ONE

30. ALERTALERT
By business model we do not mean “how the
company makes money”.
we mean a model that describes the details of a
business: its goals, organizations, business
processes, or business rules.
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CHAPTER ONE

31. WHAT IS A BUSINESS MODEL?
example
Any city has a complex reality that includes locations of
places, thousands of roads, thousands of pipe routes,
thousands of cable routes, etc.
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CHAPTER ONE

32. WHAT IS A BUSINESS MODEL?
example
to be able to deal with the complexity of a city, we make
maps. Maps of roads and locations. Maps for electrical
cable. Maps for water pipes, etc.
Each of these maps is considered a model. The model will
help us make good decisions on how to go to places, or
where to dig to find the electrical cable or water pipe.
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CHAPTER ONE

33. WHAT IS A BUSINESS MODEL?
Businesses have complex reality. To be able to
manage this reality and solve business problems, we
need to create business models.
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CHAPTER ONE

34. THE RISE OF BUSINESS
MODELING
Businesspeople are increasingly using models to
communicate. Over the last fifteen years, increasing
numbers of people have built business models:
models of the business processes of their
organization, the goals and strategies, or the policies
and rules.
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CHAPTER ONE

35. THE RISE OF BUSINESS
MODELING
What’s driving the growth of business
modeling?
1
IT organizations are using business models to
align IT initiatives with business needs.
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CHAPTER ONE

36. THE RISE OF BUSINESS
MODELING
What’s driving the growth of business modeling?
2
Models help with the implementation of change.
If nothing changes, you don’t need models, just
as you don’t need a street map if you never travel
anywhere.
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CHAPTER ONE

37. THE RISE OF BUSINESS
MODELING
What’s driving the growth of business
modeling?
3
the need to manage increasing complexity.
Complexity is the key problem in business
today. Decisions are harder now because
there is more to consider.
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CHAPTER ONE

38. THE RISE OF BUSINESS
MODELING
What’s driving the growth of business modeling?
3
Businesses have become more complex. Twenty
years ago, businesses were easier to
understand. There were fewer business
processes, fewer products and services, less
data stored in databases, fewer business
partners, and fewer lines of business.
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CHAPTER ONE

39. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
•Communication between people
•Training and learning
•Persuasion and selling
•Analysis of a business situation
•Compliance management
•Development of software requirements
•Knowledge management and reuse

40. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
Communication between people
Business is a communication-intensive activity.
Business people give presentations about company
performance. Business people talk to their clients and
their suppliers about new products and services.
Business colleagues talk to each other about the
changing competitive environment. Much of business
is communication.
Business models are better for conveying complex
business information.

41. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
Training and learning
People learn in two ways. They learn from their own experience,
via trial and error, and they learn from other people’s
experiences, via conversations, books, or classroom material.
Learning from other people’s experiences is of course cheaper,
faster, and less risky. We allow others to make mistakes instead
of making our own. Business models are one way of learning
from other people’s experience. First, a model is built of the
expert’s knowledge of the business rules or the business
process. Then many novices can study the model to learn what
the expert knows.

42. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
Persuasion and selling
In business, persuasion is ubiquitous. When we sell a
customer on a product, we are persuading. When we
pitch a new initiative to our management, we are
persuading. When we convince employees to embrace
a business process change, we are persuading.
Persuasion is communication, of course, but it is
communication in service of a goal: convincing
someone to take action favorable to us, to our
organization, or to themselves. Business models are
useful for persuasion.

43. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
Analysis
insight is power. Analyzing a business model is particularly useful
when you have a decision to make. The different alternative
scenarios can be modeled and the models then analyzed and
compared. For example, you may compare different business
process scenarios to see which is the lowest cost. That low-cost
scenario can be compared to today’s business process so that
you can understand what activities need to change, what new
activities need to be performed, what activities should be
automated, and what skills you will need to learn.

44. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
Compliance management
Businesses must comply with law, government regulations, and
other guidance. They must comply with terms of contractual
agreements with their lenders, suppliers, and customers.
Corporate employees must comply with corporate policies.
Compliance often impacts financial results. Sometimes the impact
is larger than money; noncompliance can lead to jail. A business
needs to design processes to ensure compliance. And when
regulations change, it needs to understand the impact of the new
regulations on its business.

45. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
Requirements for software development
Requirements provide a description of what a proposed software
application should do. Without detailed requirements, application
development projects fail. Business models capture this detail in a
way that is understandable to both the business users and the
software developers. Business users do not need to understand
how the system will be created; they need to understand how it
will support their need. Business models are a better form of
requirements for end users.

46. BUSINESS VALUE OF BUSINESS
MODELS
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CHAPTER ONE
Knowledge management
Knowledge management is the practice of systematically
capturing knowledge from some people in an organization so that
the knowledge can be used by others elsewhere in the
organization. But knowledge management practices today
capture only half the relevant knowledge. Typical knowledge
management practices capture the explicit knowledge found in
existing documents but not the tacit knowledge found in people’s
heads. Tacit knowledge includes what people do and how they do
it. Tacit knowledge includes when each document is used and
why.

47. CASE STUDY
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CHAPTER ONE
an implementation of an ERP system