What exactly is a company? What constitutes its value? Entry in the commercial register, tangible assets (buildings, machines, equipment, etc.), money in accounts, people, know-how, contractual relations with partners, data.
All these assets must be taken care of by the company in order to ensure its long-term prosperity. An essential part of care is to label, record, describe and quantify assets. The description should also include a recording of the links between the assets. Ties hold the whole together. They give context and direction to assets. These records form an imaginary image of the company – a model or models. Sometimes the models are even the most valuable thing about the company, because from this imaginary footprint, the entire company can be reconstructed and saved in case of existential problems. An imaginary image can be transferred “from person to person”. The company can thus be revived by completely different people than those who originally ran it, even with a shift in time or space. Information in the form of models ensures the independence of the company from specific people. They thus increase the value of the company when it is sold. This is because they reduce the risk of loss of value for investors when specific employees leave.
What do the models look like in reality? They are most often text-graphic documents, recording various aspects of the assets mentioned above. And not only their current state, but also past development and future intentions and goals. Models include documents describing what the company wants to do (production documentation), how it wants to succeed on the market (various business models), architectures of internal resources (plans of buildings, production lines, IT architecture), division of activities (process models), plans realization of their intentions (project plans) and, last but not least, financial models.
Some of the documents are even mandatory. E.g. accounting records, which the company must even submit to state authorities. Some are created voluntarily by the company. Of course, creating and maintaining models costs something. Naturally, each company will first start with mandatory data/documents, and according to the available sources, it will then proceed to the optional ones, which are less and less important (beneficial) from its point of view.
Financial models, process models, directives, management documentation are often found at the tail end of the imaginary peloton.
At the same time, models are not single-purpose. Multiple usability increases their value. They want to be seen by investors, customers (various “ISO” type certifications), regulatory bodies, banks when applying for loans, employees (when onboarding or promoting employees).
There should be clear continuity between the models so that their mutual consistency can be checked.
The usefulness (benefit) of models manifests itself in several directions: on the one hand, in the saving of resources (even if their creation itself costs something), in the improvement/development of work activities and in the reduction of risks.
This brings us to the central question of whether business modelling is worthwhile. The accuracy of the calculation will always depend on the reliability of the values entering the formula, which frankly will be debatable in most cases. In many cases, we will have to rely only on comparing limit values. At first glance it may seem little, but practice shows that it is often enough to make the right decision.
Models are a prerequisite for management. They unify communication language and view of the issue, visualize changes, support measurability. And as we know, you can’t drive without measuring.
A good practice can be to write down the activities (and we already have a model) on which company resources (time and money) are spent, quantify how much is spent and see if the existence of a model would not save these resources. Or whether the existence of a certain model would not help improve the quality of the outputs of the given activity, improve intra-company communication. A special case is the situation when we do not even carry out a certain activity and the use of a suitable model would make it possible to carry it out at all. An example from practice? As part of the discussions regarding the state of Czech sports in light of the failures at the 2024 Olympics, former athlete Lubenský says that sports officials are unable to critically analyse the results and investments made in individual sports and prepare a critical analysis with a proposed solution. They just don’t have the right tools for it – models.
Another good tool can be asking yourself questions about important things for the company. How is documented:
Any record giving an answer is a model. How well/efficiently will I function without these models?
So what are the costs compared to? Let’s take a look at some practical examples of values against which model creation costs can be compared.
HR professionals, e.g. calculated that the recruitment and training of a junior employee in the Czech Republic costs up to 150,000 CZK per person. In the USA, it is estimated at 20,000 USD. The average salary of an employee in the Czech Republic is CZK 45,000 (2023), in the Netherlands EUR 3,500, in Germany EUR 2,700 and in Austria EUR 2,800.
Without models, the introduction of any changes, including the implementation of new information systems, becomes substantially more expensive. For the first time, essential functionalities are missing in the systems or they work differently than the user would imagine. There are well-known cases of the introduction of public IS (e.g. in the Czech Republic in 2024 a new construction procedure or entrance exams for secondary schools), but private companies are also very well aware of the problem. More than a third of the projects end with a significant overrun of the budget or operational problems of the final product. The costs (not only direct financial, but also restrictions on the operation of the organization) are astronomical in some cases.
Another example of changes can be the effort to save money and reduce the size of the company. E.g. abolish middle management. The so-called wave Unbossing is very popular all over the world today. But such a move can benefit one company and harm another. How to avoid damage? Try to look into the future and model the changes.