Intorduction to models

Question 1

What model describes?

Answer 1

Formal description of business process

Question 2

What models typically involves?

Answer 2

Mathematical equations and/or random variables

Question 3

What models typically relies on?

Answer 3

Set of assumptions

Question 4

Where models are usually implemented?

Answer 4

Computer program or/and spreadsheet

Question 5

Why we want to simplify lot of models?

Answer 5

We don’t want to over-simplify but if the models are too complex they are not useful. Models are not thriving to be excact representation of what is going on.

Question 6

Give 4 examples of different type of models?

Answer 6

Linear model, exponential model, power function, logistic function

Question 7

How models are used in practice? (7)

Answer 7

Prediction,
Forecasting,
Optimization,
Ranking and targeting,
Exploring what if scenarios,
intepreting coefficient model,
assessing how sensitive the mode is to key assumptions

Question 8

Give 6 main benefits of modelling?

Answer 8

Identify gaps
Make assumption explicit
Description of the business process
Institutional memory
Decission support tool
Serendpitious insight generator

Question 9

What means institutional memory?

Answer 9

Many business have some smart person who they relay on forecasting etc. If that person leaves the knowledge leaves with them. Model is creating institutional memory (set of equation, inputs and output) that stick around beyond any individual.

Question 10

Why models are used as a decision support tool?

Answer 10

It’s naive to think that any model is gonna reveal truth. They are always approximations.

Question 11

What means serendipitous insight generator?

Answer 11

You learn something that you haven’t thought before.
Serendipitous = Onnekas = Occurring or discovered by chance in a happy or beneficial way.

Question 12

Why models should make assumptions explicit?

Answer 12

Everyone can see what you have been assuming and sometimes those assumptions have been implicit before (not everyone been awere of them)

Question 13

What are two first steps to modeling process workflow?

Answer 13

1. Identify and define inputs and outputs
2. Define scope (range for the model)

Question 14

What is the second step of the modeling process workflow?

Answer 14

6. Formulate the model

Question 15

What is the fourth step of the modeling process workflow

Answer 15

7. Fit for purpose?
   Yes –> Implement model
   No –> Go back (iteration process)

Question 16

What are two third step of the modeling process workflow

Answer 16

4. Perform sensitivity analysis
5. Validate model forecast