Coherent Business Modelling: Planning For an Uncertain Future

Sam Savage
Department of Management Science and Engineering
Stanford University

Daniel Zweidler
Global Exploration Planning & Porfolio
Shell Group


Wednesday, September 28, 2005
4:30 - 5:45 PM
Terman Engineering Center, Room 453


Abstract:

Business planning in the face of uncertainty is often built upon "Base Case" or "Average" assumptions, which leads to systematic errors that we refer to as the Flaw of Averages. Two technological trends; Distribution Databases and Interactive Simulation have the potential to improve the planning process in this regard. Together, they form the basis of Coherent Business Modeling, a framework for providing enterprise wide planning that avoids the flaw of averages. We describe our experience in applying this approach within a decentralized organization, and the degree to which it has created a more centralized perspective of corporate metrics.

This work was done jointly with Stefan Scholtes (Judge Business School, University of Cambridge).

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