Pretesting and Controlling Initiatives using Simulations

IMIA has significant experience in developing industry and organisational simulations and related scenarios for educational, planning and policy support purposes.

An industry simulation is an interpretation of reality from a specific perspective that is used to foresee systemic effects and outcomes of changes to input conditions, given a set of organisational or industry circumstances. For example, a simulation may be used to respond to questions such as “How will an x% price increase affect net revenue and number of customers retained?” taking into account other organisational circumstances that affect the outcomes being considered.

Simulations are developed based on the staged procedure outlined in the diagram below. It is possible to achieve the purpose of the industry simulation by step 3 of the development cycle, however a simulation becomes a dynamic industry model when linked to external data in step 4 to provide industry and external environment updates that maintain the real time relevance of the simulation.

 



Multi-Stage Industry Simulation Development Process

Simulation Example

We developed an industry simulation of the Tasmanian energy sector for the Tasmanian Hydro Electric Commission to assess the long term trade-offs during negotiations between the Tasmanian State Government and a major aluminum company in regard to a potential investment in exchange for a long term electrical energy supply agreement significantly below normal prices.

A simulation of the demand and supply system was developed then used to explore the consequences of different energy price levels and associated requirements, based on a number of key assumptions. Each assumption was debated by the policy makers and was continuously updated in the simulation to illustrate the longer term consequences. Assumptions with a significant impact on the model were researched and assessed further until a consensus was achieved.

The conclusion was that the long term consequences of the deal were not in Tasmania’s interests, mainly due to the poor long term multiplier impact of the deal on the future Tasmanian economy. Subsequent development of the Tasmanian economy has justified this decision. Interestingly, the simulation also significantly influenced the Hydro Commission’s future marketing strategies.

 

Simulation Development Process

  1. Development Requirements: The purpose, scope, timeframe and budget for developing the simulation are determined in collaboration with the project sponsor. Monitoring, measurement and control processes are specified and activated.

     
  2. Assemble Industry Intelligence: Essential organisational and industry data is collected to build the empirical foundation of the simulation model, typically through desk research and interviews with relevant stakeholders.

     
  3. Develop Pilot Industry Simulation: Using modelling language developed by MIT and the initial system model developed to facilitate industry information collection, the pilot industry simulation is developed incorporating a variety of assumptions that are progressively refined.

     
  4. Develop Dynamic Industry Simulation (optional): If required, the simulation is linked to external data and remains regularly updated with changes in organisational and industry data and other assumptions upon which the model is based, resulting in a model that refines its accuracy and continues to remain relevant over time.

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