Kim Warren on Strategy

Strategy insights and living business models

"What is this 'digital twin' thing any way?"

Since posting about our digital twin business models recently, many people have asked "What the heck is this digital twin thing any way?" or even "How on earth can you make a claim like that?"
 

ENGINEERING MODELS 
Here's a definition (from Siemens) of a physical system digital twin ... a virtual representation of a physical product, process or system used to simulate, predict and optimize a real-world counterpart. Using real-time data, simulation and modeling techniques, a Digital Twin mirrors the behavior, characteristics and performance of its physical counterpart. This empowers teams to determine the impact of different designs, conditions and scenarios in less time. 

So all we are doing is replacing the phrase 'physical product' in that definition with 'business'.  Here is a summarised dynamic model playing out a product launch. 

This GIF shows about 10% of the whole model, plus a matching page for the company's competitor. The full model includes:

  • how marketing and word-of-mouth drive the capture of new customers and repeat sales
  • price and value-for-money impacting on the uptake and repeat-sales rate
  • changing affordability of the product as consumer incomes rise
  • 'experience-curve' cost reductions as product output grows
  • profit contribution and NPV results
  • a competitive race against a similar rival with its own launch timing and strategy

... and the model can capture parallel time-series for real-world results for any or all of its elements, as time passes, allowing continuous planning and management of the strategy.

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Now I get really annoyed when people make huge claims for feeble ideas or methods. So I have held off claiming that our dynamic business models [DBMs] are "digital twins" for a long time.
 
But - the more examples I see, the more confident I am that I can make this claim. Why?
 
FEATURES OF A DIGITAL-TWIN BUSINESS MODEL
Well, if done properly, a dynamic business model features:
  • items visible and measurable in the real world - not proxies or abstract items
  • actual time-series values on any of those items where data can be found or estimated
  • detailed, causal relationships that match the real world
  • calculated time-series values that match - with reasonable accuracy - those real-world values
  • ... and all of this over time-scales and in time-units that are useful for both strategic planning and operational management

What more would you want a digital twin business model to do?

Digital-twin business models are not just for whole-business plans. They can be used for a wide range of initiatives, functions and issues. See details of our short courses here on the following topics (more to come). Get 20% off any of these courses - just GBP32 - with coupon blog20.

 

Strategy Dynamics Essentials

Strategy Dynamics Essentials book cover

Strategic Management Dynamics

Strategic Management Dynamics - cover image