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Crystal Ball
CB Predictor
CB Turbo
Spreadsheets - Pros
Easy to use
Popular
Flexible model-building tool
What-if Analysis
What is missing?
What is Simulation?
Modeling a real system to learn
about its behavior
The model is a set of mathematical
and logical relationships
You can vary conditions to test
different scenarios
Advantages of Simulation
Inexpensive to evaluate decisions
before implementation
Reveals critical components of the
system
Excellent tool for selling the need for
change
Disadvantages of Simulation
2+2 = 4 ?
Decision Intelligence
Includes
Crystal Ball
Optimization
Extenders
Developer Kit
Optimization Model
Decision Variables
Quantities
Optimization
Function
F(X) = Y
Project Selection
Project Mix
Model
Combined
NPV
A Realistic Model
Uncertainty analysis
Constraints and Requirements
Milton Friedman
Difficult
to implement
Clients do not understand the results
Multiple What-if
scenarios confuse as
much as enlighten...
A Picture is Worth...
A thousand What-ifs
Decisioneering, Inc.
Provider of Analytic Tools since 1986
Headquartered in Denver, Colorado,
USA
More than 70,000 Users
85% of Fortune 500 Companies
45 of Top 50 Business Schools
65% CAGR over 3 Years
Monte Carlo
Deterministic v. Stochastic
Deterministic
Fixed
Data
Fixed Outcomes
$1,200,00
7%
Stochastic
Variable
data
Variable
Outcomes
M onthly S a v ings
Frequency Chart
6 Outliers
.09 4
47
.07 1
3 5 .2 5
.04 7
2 3.5
.02 4
1 1 .7 5
M e an = $6 46,19 8
.00 0
3 5 0 .0 0
4 2 5 .0 0
5 0 0 .0 0
5 7 5 .0 0
6 5 0 .0 0
0
$3 00,00 0
$5 25,00 0
$7 50,00 0
D o l l a rs
$9 75,00 0
$ 1 ,2 0 0 , 0 0 0
Statistics
Mean
Standard Deviation
3 5 0 .0 0
4 2 5 .0 0
5 0 0 .0 0
5 7 5 .0 0
6 5 0 .0 0
Retirement Example
Monthly Dollar Saving
Number of Years
Annual Growth Rate
Value at Retirement
Uncertainty
500
20
12%
432,315
Define Assumptions
Retirement Example
Assumptions
Retirement ExampleForecasts
Retirement Example
Forecasts
Communicating Results
Get the client to understand alternatives
Take action
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