An important part of effective business planning is knowing the expected result of any actions you might take. For example, if you lower the price of your product will sales increase? Will your conversion rate increase? If so, by how much? Without understanding the expected outcomes of decisions you might make during planning, it is hard to have confidence in your plans.
Impact Analysis is one way to understand what effect your decisions might have on your business, by helping you estimate their impact. It starts by building a model of the relationships between different parts of your business, a model that you can then use to understand how changes in one part will affect the rest of the business. This quantitative modeling approach means that you can quantify the impact of a specific change and use that as an input in your decision making.
As you can imagine, Impact Analysis can be complicated and time consuming. I will do my best to make it easy for you by breaking it down into a series of steps this week. Specifically we will cover:
- Part 2 – Relationship Modeling
- Part 3 – Historical Testing
- Part 4 – Relationship Testing
- Part 5 – Analyzing Impact
It can take some practice to get good at this process, so I recommend choosing a small and well-understood part of your business to use as an exercise for yourself while you follow along this week! Tomorrow we’ll get started with Relationship Modeling.