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Key MBA Models by Dr. Julian Birkinshaw, Ken Mark

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Sensitivity analysis

‘Sensitivity analysis’ is a tool for mapping out the range of potential outcomes around a decision, and is especially useful when there is uncertainty around key variables. Since there may be several variables that could interact with one another, sensitivity analysis is typically aided by computer software.

When to use it

  • To get a better understanding of how a proposed plan might turn out, given knowledge of certain model inputs.
  • To identify errors in the proposed plan before it is carried out.
  • To understand the factors that have the most impact on results.

Origins

Sensitivity analysis emerged during the computer revolution. Before computers were available, the process of making quantitative estimates based on ...

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