Modeling for Insight: A Master Class for Business Analysts

496 Pages·2008·5.88 MB·English

by  Stephen G. Powell

MODELING FOR
INSIGHT
A Master Class for Business Analysts
Stephen G. Powell
Robert J. Batt
Tuck School of Business
Dartmouth College
Hanover, NH
A JOHN WILEY & SONS, INC. PUBLICATION

MODELING FOR
INSIGHT

MODELING FOR
INSIGHT
A Master Class for Business Analysts
Stephen G. Powell
Robert J. Batt
Tuck School of Business
Dartmouth College
Hanover, NH
A JOHN WILEY & SONS, INC. PUBLICATION
Copyright © 2008 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Cataloging-in-Publication Data
Powell, Stephen G.
Modeling for insight : a master class for business analysts /
Stephen G. Powell, Robert J. Batt.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-470-17555-2 (cloth)
1. Decision making. 2. Business planning. 3. Business—Computer
simulation. 4. Electronic spreadsheets. I. Batt, Robert J. II. Title.
HD30.23.P69 2008
658.4′0352—dc22
2008009579
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
For Nick and Annika

CONTENTS
PREFACE xiii
USING THIS BOOK xix
ACKNOWLEDGMENTS xxiii
ACKNOWLEDGMENTS FOR CASES xxv
ABOUT THE AUTHORS xxvii
PART I 1
1. Introduction 3
1.0 Models and Modeling 3
1.1 Well-Structured versus Ill-Structured Problems 4
1.2 Modeling versus Problem Solving 5
1.3 Modeling for Insight 6
1.4 Novice Modelers and Expert Modelers 7
1.5 Craft Skills in Modeling 8
1.6 A Structured Modeling Process 9
1.7 Modeling Tools 9
1.8 Summary 10
2. Foundations of Modeling for Insight 11
2.0 Introduction 11
2.1 The Modeling Process 11
2.1.1 Frame the Problem 12
2.1.2 Diagram the Problem 15
2.1.3 Build a Model 16
2.1.4 Generate Insights 16
2.2 Tools for Modeling 19
2.2.1 Infl uence Diagrams 19
2.2.2 Spreadsheet Engineering 22
2.2.3 Parameterization 23
2.2.4 Sensitivity Analysis 24
2.2.5 Strategy Analysis 25
vii
viii CONTENTS
2.2.6 Iterative Modeling 25
2.3 Presentation Skills 26
2.3.1 Special Challenges for Quantitative Analysts 27
2.3.2 Principles for Effective Presentations 27
2.3.3 The Process of Creating an Effective
Presentation 30
2.3.4 Pitfalls in Presentations 33
2.4 Summary 34
3. Spreadsheet Engineering 36
3.0 Why Use Spreadsheets? 36
3.1 Spreadsheet Engineering 37
3.1.1 Design 37
3.1.2 Build 39
3.1.3 Test 40
3.1.4 Analyze 43
3.2 Summary 49
PART II 51
4. A First Example—The Red Cross Problem 53
4.0 Introduction 53
4.1 The Red Cross Problem 53
4.1.1 Frame the Problem 54
4.1.2 Diagram the Problem 56
4.1.3 Build the Model—Surplus 62
4.1.4 Generate Insights 66
4.2 Bringing Blood Quality into the Analysis 69
4.2.1 Infl uence Diagram for Quality 69
4.2.2 Build the Model—Blood Quality 73
4.2.3 Generate Insights 76
4.2.4 Wrap-up 78
4.3 Improving and Iterating 78
4.4 Summary 79
5. Retirement Planning Problem 80
5.0 Introduction 80
5.1 Retirement Planning (A) 80
5.1.1 Frame the Problem 80
5.1.2 Diagram the Problem 83