Abstract:
A system and method are provided to analyze the value of an opportunity, including the dependence and interrelationship between opportunities. A computer-implemented system having a number of software modules is provided that facilitates the calculation of portfolio effects and enables, among other things, the modeling of opportunities, including generic nomenclature and procedures for describing and encoding a wide range of relationships between opportunities.

Description:
CROSS-REFERENCE TO RELATED APPLICATIONS 
     This application is related to co-pending U.S. patent application Ser. No. 09/706,097, filed Nov. 3, 2000, as well as co-pending applications U.S. patent application Ser. No. 10/224,393, entitled “Dynamic Construction of Business Analytics,” U.S. patent application Ser. No. 10/224,489, entitled “System and Method For Creating and Deploying Customized Web-Based Analytical Applications,” U.S. patent application Ser. No. 10/224,380, entitled “Business Portfolio Analytics,” and U.S. patent Ser. No. 10/224,368, entitled “Multi-Stakeholder Software Analytics,” all of which were filed concurrently with the present application. Each of the above-indicated applications is incorporated by reference herein. 
     FIELD OF THE INVENTION 
     The present invention relates to a system and method that enables the use of enterprise software to analyze the economics of an opportunity, including the dependence and relationships between opportunities. 
     BACKGROUND OF THE INVENTION 
     As used herein, the term “opportunity” includes, for example, any specific business deal, product, distribution channel, customer, or other decision around which an end-user wants to perform economic evaluations. The term “portfolio effect” includes, for example, the economic relationships between opportunities, where the result of at least one opportunity is dependent on or related to one or more other opportunities. 
     Typically, existing systems and methods of analyzing opportunities do not account for dependencies and relationships between two or more opportunities. For example, in existing systems, the profitability of a particular customer or particular product is analyzed “in isolation” based on a static model of inputs and outputs. Similarly, risk is generally limited to a sensitivity analysis that tests the impact of various assumptions on a result (e.g. a net present value calculation). Traditionally, each of the “Assumption” variables affects only the item (e.g. product, customer) being analyzed. These, and other, drawbacks limit the effectiveness of existing opportunity analysis methods. 
       FIG. 1  is an example of a tornado chart, generated using a typical opportunity analysis method that does not account for portfolio effects. As shown in  FIG. 1 , the probability of each assumption and the effect it may have on the Net Present Value (NPV) is independent of each other assumption and of other opportunities. 
     Another drawback of existing systems is that they do not provide generic nomenclature and procedures for describing and encoding relationships between opportunities, suitable for inclusion in and use by enterprise software. Thus, with existing systems it is not practical to evaluate on an economic basis the interrelationships between opportunities. These and other drawbacks exist. 
     SUMMARY OF THE INVENTION 
     The present invention overcomes these and other drawbacks of existing systems by enabling a system and method for using enterprise software to analyze the economics of an opportunity, including the dependence and relationships between opportunities. 
     According to one embodiment, the invention may comprise any suitable computer-implemented system, comprising a number of software modules that facilitate calculation of portfolio effects, where the results of one or more opportunities is dependent on or related to other opportunities. The invention may comprise modules that enable, among other things, the modeling of opportunities, including generic nomenclature and procedures for describing and encoding a wide range of relationships between opportunities, suitable for inclusion in and use by enterprise software the creation of database tables that enables the encoding of relationships, the evaluation of opportunities and the determination of portfolio effects. The database table may comprise a number of fields that facilitate the evaluation of relationships between opportunities. 
     Other aspects of the present invention will become apparent from the following detailed description considered in connection with the accompanying drawings that disclose embodiments of the present invention. It should be understood, however, that the drawings are designed for purposes of illustration only and not as a definition of the limits of the invention. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         FIG. 1  is an example of a tornado chart, generated using a typical opportunity analysis method that does not account for portfolio effects. 
         FIG. 2  is a schematic representation of a constraint-type portfolio effect according to one embodiment of the invention. 
         FIG. 3  is a schematic representation of a dependence-type portfolio effect according to one embodiment of the invention. 
         FIG. 4  is an example of database table coding relationships according to one embodiment of the invention. 
         FIG. 5  is a tornado chart illustrating opportunity analysis with portfolio effects according to one embodiment of the invention. 
         FIG. 6  is an example of a database table illustrating a most favored nation constraint according to one embodiment of the invention. 
         FIG. 7  is an example of a database table illustrating a cost dependence portfolio effect according to one embodiment of the invention. 
         FIG. 8  is a schematic flow diagram illustrating a conventional method of evaluating an opportunity. 
         FIG. 9  is a schematic flow diagram illustrating one method for evaluating portfolio effects in the context of an opportunity evaluation. 
     
    
    
     DETAILED DESCRIPTION OF THE INVENTION 
       FIG. 8  illustrates a conventional method for evaluation of an opportunity. As shown in step  1000 , a general economic model for an opportunity is created. At step  1002 , specific assumptions for a specific opportunity may be developed. These assumptions are entered into the economic model (step  1004 ), out of which are calculated certain results ( 1006 ). In this process, each specific opportunity is evaluated entirely in isolation, on a “stand-alone” basis, and the economic evaluation process does not capture any interrelationships between opportunities. 
       FIG. 9  is a schematic flow diagram illustrating a method for evaluating portfolio effects according to one embodiment of the invention. As shown in  FIG. 9 , the process may include, as indicated at step  1000 , modeling an opportunity. Modeling of an opportunity may be done in any known manner, except that according to the invention the modeling takes into account the dependence between opportunities, as detailed below. As indicated at  1002 , specific assumptions for a specific opportunity may be developed, and entered into the economic model (step  1004 ). At step  1006 , any assumptions that trigger the creation of a new “dependence” are recorded in a database of dependencies. The economic model of the opportunity includes any calculations required to identify the new dependency. Preliminary results, that exclude portfolio effects, are then calculated at step  1008 . At step  1010 , the dependence database is queried—searched for any dependencies that impact the particular opportunity being evaluated. If any relevant dependencies are found, the information in the dependence database is used to modify the economic results of the opportunity (step  1012 ), allowing for a final set of economic results to be output that includes portfolio effects (step  1014 ). 
     According to one aspect of the invention, portfolio effects may be classified into at least two categories. For example, portfolio effects may be categorized as constraint-type portfolio effects or as dependence-type portfolio effects. If an opportunity is a constraint, an element or action of that opportunity affects (e.g. imposes, or creates, an impact on) the value of a set of one or more other opportunities. This type of effect is show schematically in  FIG. 2 . As shown in  FIG. 2 , an action or element of Opportunity A affects the value of Opportunities B-E. If an opportunity has a dependence, then that particular opportunity depends in some way on a set of other opportunities. The causality is reversed from the constraint-type effect. A dependence-type relationship is illustrated in  FIG. 3 , wherein the Opportunity A depends upon an element of one or more of Opportunities B-E. 
     An example of a constraint is a “Most Favored Nation” term in a business contract (or other) relationship. A Most Favored Nation term may be, for example, a contract term in an agreement with Customer A that imposes a constraint on contracts with all other Customers, namely that no customer will be offered a more favorable term than Customer A. Customer A has in effect imposed a constraint that affects the value of other Customer agreements. 
     One example of a dependency is where a project (e.g., Opportunity A) depends upon the successful completion of other projects (e.g., Opportunities B, C, D and E). Other dependency relationships are also possible. 
     According to one embodiment of the invention, portfolio effects may be generalized and coded through use of one or more database tables. For example, a database table may be used to define certain elements of each portfolio effect.  FIG. 4  is an illustration of a database table according to one embodiment of the invention. As shown in  FIG. 4 , a database table may comprise a number of fields that pertain to elements of the dependence or relationship between two or more opportunities. For example, a database table may comprise the following fields: name, description, origin, type, variable, comparison, value, filter and value model. Of course, other fields are possible and not all these fields need to be used. The Description field may represent a description of a dependence. An Origin field may identify the origin (source) of a business opportunities—this is a pointer to a particular business opportunity. The Type field may identity whether the dependence is a constraint or dependence type. This can signify whether the element constrains other opportunities, or whether it is dependent on other opportunities. The Variable field refers to a particular assumption or metric that is part of the business model of an opportunity. For example, some variables include “discount”, “quantity”, “profit”, etc. The Comparison field may include a comparative operator, such as “less than”, or “more than”, etc. The Value field may include a specific numeric value to be used in a comparison, in combination with the value of the Variable field and the operator of the Comparison field. The Filter field may identify a related set of opportunities. For example, “All Opportunities”, or “All Opportunities in Southeast Region”. The Value Model field is applicable for “Dependence” type relationships and specifies how the value of the dependent opportunity is affected by the other related opportunities. 
     When an opportunity is created and evaluated ( FIG. 9 : Step  1006 ), any new dependencies that are being created are first identified. For example, an opportunity model might have an input assumption labeled “Pre-Requisite Opportunities?”, and if the user selects “Yes” they are then asked to select some other opportunity that is the pre-requisite. In this situation, a new dependence is being defined, and that dependence is recorded as a record in the dependence database. If the user selected “No”, then no dependence is being created and evaluation can proceed as normal. 
     Later during the evaluation process ( FIG. 9 : Step  1010 ), a search of the dependence database is conducted. The search checks for all records where the current opportunity is the “Origin”—in other words, all dependencies that are relevant to the current evaluation. Based on the information returned from the dependence database, the evaluation results for the opportunity are modified to include the portfolio effects. 
     By including portfolio effects using the described protocol, the economic analysis can include and display the impact of related opportunities, as illustrated in  FIG. 5 . For example, using a tornado chart analysis, one or more of the elements may comprise dependences or relationships. 
     Several features of the invention may be illustrated with reference to the following examples. In the first example, a bank is considering signing an agreement with a corporate customer (TravelCo.) in the travel industry for a line of credit. One term of the agreement is a so-called “Most Favored Nation” clause, that specifies that the bank cannot offer this same line of credit product to any other customer, in the same industry, at a lower rate than this particular customer is receiving (e.g. 5%). If the bank does, then that lower rate will apply to TravelCo also. The interest rate on the line of credit is referred to as “line_of_credit_rate” in the analytic models. 
     At  FIG. 9 , Step  1006 , the fact that the agreement contains a so-called Most Favored Nation clause triggers the recording of a new dependence in the dependence database. The details of this database record are shown in  FIG. 6 . With reference to  FIG. 6 , the name and description are recorded to represent the type of dependency (these are specified as part of Step  1000 , modeling the opportunity). The Origin field simply points to the current opportunity being evaluated. The Type, Variable, Comparison, Value, Filter, and Value Model are also recorded on the basis of the specific terms of the current opportunity being evaluated. In this example, the agreement specifies that no other customer in the travel industry shall have a line of credit interest rate lower than 5%. 
     Later during the evaluation process, ( FIG. 9 , Step  1010 ), the dependence database is queried for any records where the “Origin” field is the current opportunity. As a result, the record (shown in  FIG. 6 ) is identified. Based on this information, at  FIG. 9 , Step  1010 , the following sequence occurs: First, all other agreement with corporate customers in the travel industry are identified (based on the “Filter” field), and of these, any with an interest rate on a line of credit of less than 5% are identified (based on “Variable”, “Comparison”, and “Value” fields). Of agreements that do have an interest rate less than the 5% threshold, the system identifies the minimum of all of the interest rates and applies that minimum to TravelCo&#39;s evaluation (based on “Value Model” field). 
     In the second example, a company is evaluating a potential sale of a new class of jet engines to an airline (TransNational). Because the class of engines is quite new, the cost of the engines is highly dependent on the volume of other orders received from other airlines. If more other orders exist, the costs for the engines will be substantially lower. Manufacturing estimates that costs will be reduced 20% for each 100 engines ordered. 
     In this example, the database record shown in  FIG. 7  is recorded when the opportunity is being evaluated ( FIG. 9 , Step  1006 ). Later ( FIG. 9 , Step  1010 ), this record is identified as being relevant (based on the “Origin” field). At  FIG. 9 , Step  1012 , all other sales of engine XYZ are identified (based on the “Filter” fields). Of these sales, any with a quantity greater than 1 are identified (in this case, that will be all of the sales of engine XYZ). The field “Variable” in this case identifies the variable of interest for the other sales of engine XYZ. The field “Value Model” then specifies that an addition term should be MULTIPLIED to the engine_cost variable, and that the multiplier should be calculated as 0.8^Q/100 where Q is total quantity of the other sales. 
     The present invention is not to be limited in scope by the specific embodiments described herein. Indeed, various modifications of the present invention, in addition to those described herein, will be apparent to those of ordinary skill in the art from the foregoing description and accompanying drawings. Thus, such modifications are intended to fall within the scope of the following appended claims. Further, although the present invention has been described herein in the context of a particular implementation in a particular environment for a particular purpose, those of ordinary skill in the art will recognize that its usefulness is not limited thereto and that the present invention can be beneficially implemented in any number of environments for any number of purposes. Accordingly, the claims set forth below should be construed in view of the full breath and spirit of the present invention as disclosed herein.