Design Thinking in Financial Modeling

5 min Read

Striking the right balance between the level of trust-inducing granular detail in a financial model and an institutions overarching financial position is critical to keeping any model usable year after year. Design thinking offers an experimentation focused approach to iteratively creating models with core-users in mind. This process yields faster communication and more informed decision making among key stakeholders. At Synario, we have taken core concepts from that approach and applied them to the financial modeling process. Below are several key higher education modeling topics where design thinking changes the game.

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Define Strategy and Scope 

We believe strategy should be dictated by an institution’s current position. While it would be ideal to have better data, more time, and more staff, in reality those resources are limited. When building a model, colleges and universities need to take current resources into account. An institution with a trained financial modeling team is going to have a different strategy than an institution that allocates a part-time resource. The same concept applies to data—some colleges and universities have legacy systems that make it difficult to get reliable data in a timely fashion, while others have robust data management platforms that minimize time between requesting and receiving data.

Additionally, users should keep the project scope manageable. It is crucial to identify your institutions key financial drivers, as well as operational areas that the model could impact. Creating a targeted model around a few key variables prevents scope-creep and makes the model more impactful when collaborating with stakeholders.

Build a Prototype

Once the project scope is set and the key variables determined, its time to build a prototype model. Start by quickly producing a basic model and pivot as needs change. In our experience, users tend to skip this important step, and instead try to produce a “perfect model” on their first attempt. Unfortunately, the desire to achieve perfection too early can often stagnate the entire planning process, leaving users with nothing to show. Dan Bricklin, the inventor of the modern-day spreadsheet, argues, “the act of making a simple, working version of what you’re trying to build, forces you to uncover key problems, and it lets you find solutions to those problems much less expensively.” Once created, selectively target the most important items that will move the needle at your institution and build in more robust functionality incrementally.

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Include Stakeholders

Once the prototype is complete, seek input from those involved in the strategic planning process. Involving stakeholders, boardmembers, and other strategic leaders early will provide greater insights into how to create models that remain impactful over a longer term.

Experimentation Yields Results

The dynamic nature of higher education institutions means strategic objectives change rapidly. The design thinking approach to financial modeling allows users to ideate, experiment, and communicate faster, creating increased adaptability to future challenges and opportunities. Standard spreadsheet modeling techniques can limit, if not stifle, this approach. Synario is designed around a collaborative and experimental approach to modeling, and 150+ institutions are actively reaping the benefits by creating strategic plans with Synario. Whether you are a sophisticated financial modeler or just starting out, applying design thinking disciplines to your financial modeling can make your planning process more efficient and effective