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Adaptive Managment
Adaptive Management
THE PASTTHE PAST
REENGINEERINGTHE
CORPORATION
DE-DE-ENGINEERINGENGINEERING THE CORPORATIONTHE CORPORATION• A LOOK AT MANAGEMENT IN THEA LOOK AT MANAGEMENT IN THE
TECHNOLOGICALLY COMPLEX NEW TECHNOLOGICALLY COMPLEX NEW MILLENNIUMMILLENNIUM
• AN OPPORTUNITY TO LEAD THE FUTUREAN OPPORTUNITY TO LEAD THE FUTURE OF MANAGEMENTOF MANAGEMENT
THREE MAJOR THREE MAJOR THRUST AREASTHRUST AREAS
• USING NEW MANAGEMENT USING NEW MANAGEMENT APPROACHESAPPROACHES TO HARNESS THE POWER OF TO HARNESS THE POWER OF TECHNOLOGYTECHNOLOGY
– ADAPTIVE MANAGEMENTADAPTIVE MANAGEMENT• PRECISION DEFINITION OF TASK VALUEPRECISION DEFINITION OF TASK VALUE– VALUATED STATE SPACE/ KPIVALUATED STATE SPACE/ KPI
( 2nd level metrics ) ( 2nd level metrics )
• EVOLUTIONARY STRATEGIESEVOLUTIONARY STRATEGIES–EVOLVING SOLUTIONS VICE ENGINEERINGEVOLVING SOLUTIONS VICE ENGINEERING
ADAPTIVE ADAPTIVE MANAGEMENTMANAGEMENT
• EVOLVED FROM THE SCIENCE OF COMPLEXITYEVOLVED FROM THE SCIENCE OF COMPLEXITY
– OBSERVATIONS OF NATURE APPLIED TO OBSERVATIONS OF NATURE APPLIED TO SOLVING COMPLEX PROBLEMS.SOLVING COMPLEX PROBLEMS.
—
PRESIDENT
COMPTROLLERCOMPTROLLER
UNIVERSITYUNIVERSITY
BASEBASE
COMPTROLLERCOMPTROLLER
CO
LET’S LOOK AT ….LET’S LOOK AT ….
HOWHOW
NATURAL SYSTEMS EVOLVENATURAL SYSTEMS EVOLVE
“It’s not the strongest or the most intelligent of the species that survive, it’s the most adaptable.”
Charles Darwin,
FITNESS LANDSCAPESFITNESS LANDSCAPES
PRE-CAMBRIANPRE-CAMBRIAN
SINGLE CELL LIFESINGLE CELL LIFE
=
NO INTERACTION...NO INTERACTION......SIMPLE REPLICATION...SIMPLE REPLICATION
NO MEDIUMNO MEDIUM
POST-CAMBRIANPOST-CAMBRIAN
MULTI CELL LIFEMULTI CELL LIFE
INTERACTION=MUTATION,INTERACTION=MUTATION,EVOLUTIONEVOLUTION
FLUID MEDIUMFLUID MEDIUM
THE EVOLUTION OF INFORMATIONTHE EVOLUTION OF INFORMATION
GOODS AND GOODS AND WANTSWANTS
SERF/FEUDALSERF/FEUDAL
1ST WAVE1ST WAVEAGRICULTUREAGRICULTURE
-- SMALL VILLAGES SMALL VILLAGES-- FARMING FARMING-- LITTLE LITTLE INTERACTIONINTERACTION
• FOOT AND ANIMALFOOT AND ANIMAL
•ECONOMIES OFECONOMIES OF COOPERATIONCOOPERATION
• LITTLE GROWTHLITTLE GROWTH
LABOR /LABOR / MANAGEMENTMANAGEMENT
- - MOVE TO CITYMOVE TO CITY-- MORE MORE INTERACTIONINTERACTION-- MASS PROD MASS PROD
• TELEPHONES / TELEPHONES / TELEGRAPHS /TELEGRAPHS /• MASS MEDIA MASS MEDIA •ECONOMIES OFECONOMIES OF SCALE SCALE • MORE GROWTHMORE GROWTH
2ND WAVE2ND WAVEINDUSTRIALINDUSTRIAL
-- INFORMATION ISINFORMATION IS CENTER OFCENTER OF PRODUCTIVITYPRODUCTIVITY- - TRENDSTRENDS INFO IS POWERINFO IS POWER
• COMPUTER-COMPUTER- CENTRICCENTRIC•ECONOMIES OF ECONOMIES OF PRECISIONPRECISION• NON LINEARNON LINEAR GROWTHGROWTH
TQLTQL
3RD WAVE3RD WAVE
INFORMATIONINFORMATION
NEXT NEXT WAVEWAVEIDEA AGEIDEA AGE
-- NETWORK IS NETWORK IS CENTER OF CENTER OF PRODUCTIVITYPRODUCTIVITY-- COMPLEX COMPLEX ADAPTIVE SYS.ADAPTIVE SYS.
• NETWORK-NETWORK- CENTRICCENTRIC•ECONOMIES OFECONOMIES OF INTEGRATIONINTEGRATION
• EXPONENTIAL EXPONENTIAL GROWTHGROWTH
ADAPTIVEADAPTIVE MANAGEMENTMANAGEMENT
IDEAS AND WANTSIDEAS AND WANTS
99 9699
9593
2534
2439
3
0
20
40
60
80
100
1991
1998
HIGHER TECHNOLOGYHIGHER TECHNOLOGYPercentage of Inc. 500 CEOs using a Percentage of Inc. 500 CEOs using a particularparticular technology in 1998 compared with 1991:technology in 1998 compared with 1991:
LaptopsLaptops NetworkedNetworkedPCsPCs
CellularCellularPhonesPhones
The InternetThe InternetPagersPagers
THE TRAIL OF INFORMATION MEDIUMSTHE TRAIL OF INFORMATION MEDIUMS
• POST CAMBRIAN - FLUIDPOST CAMBRIAN - FLUID
• FIRST WAVE - FOOT AND FIRST WAVE - FOOT AND ANIMALANIMAL
• SECOND WAVE - TELEPHONES / SECOND WAVE - TELEPHONES / TELEGRAPHS / TELEGRAPHS / MASS MEDIAMASS MEDIA
• 3RD WAVE - COMPUTER3RD WAVE - COMPUTER
• 4TH WAVE - NETWORK4TH WAVE - NETWORK
Profound Phase Changes in Business
Industrial Revolution The Quality Revolution Overnight Packages: Fed Ex, UPS E-commerce (KOZMO.COM)
TOTAL QUALITY MANAGEMENTTOTAL QUALITY MANAGEMENT
( TQM )( TQM )
APPLYING QUANTITATIVE METHODSAPPLYING QUANTITATIVE METHODSAND PEOPLE’S KNOWLEDGE TO ASSESSAND PEOPLE’S KNOWLEDGE TO ASSESSAND IMPROVE THE ORGANIZATIONAND IMPROVE THE ORGANIZATION
TQM NORMALIZES SPIKES TQM NORMALIZES SPIKES AND STABILIZES PROCESSESAND STABILIZES PROCESSES
COMPLEXITY & CHAOSCOMPLEXITY & CHAOSBOUNDARY LAYER BETWEENBOUNDARY LAYER BETWEEN
TQMTQMTOOLSTOOLS
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
0
10
20
30
40
50
60
70
80
5 5 . 5 6 6 . 5 7
0
0 . 5
1
1 . 5
2
2 . 5
3
3 . 5
4
2nd Qtr 3rd Qtr
0
20
40
60
80
100
PARETOPARETO HISTOGRAMHISTOGRAM SCATTERGRAMSCATTERGRAM
HITTING THE RIGHT WALLM
OD
EM
ED
IAN
ME
AN
LIMITS TO OPTIMIZATION
PRACTICAL EXAMPLESHRS
4
3
1900 NOW
MALE VS. FEMALE MARATHON TIMES
WHY ARE THERE NO MORE .400 HITTERS?AVG
.400
.300
1890 NOW
GAMES OF RELATIVE PLAY ARE SIMILAR TO BUSINESS
.260
.200
WHY ARE THERE NO MORE .400 HITTERS?
1990
1890
VARIATON OF BEST TO WORST BATTER
.25 .40 .50
GENERAL PLAY IS BETTER
EFFECTS OF DECREASED VARIATION
INF
OR
MA
TIO
N V
AR
IAT
ION
1900 NOW
PEERS
US
REDUCED OSSORTUNITYS
The double edge sword
We need increased levels of information to get better.
As we get better, so does the competition What happens when we hit the right wall? Phase state change; Chaos! How do we organize to take advantage?
Break time!
TIME
SY
ST
EM
ST
AT
ENON
EQUILIBRIUM
MORE COMPLEX
GREATER / BETTER INFO
HIGHER ORGANIZATION LEVELS
DYNAM ICSTABILITY
BIFURCATION
NEW DYNAMICSTABILITY
CRITICALINSTABILITY
INTRODUCTIONOF PERTURBATION
EQUILIBRIUM
HOW DO WE HOW DO WE MANAGEMANAGE
THE TRANSITION....THE TRANSITION....• FROMFROM managing stabilized processes managing stabilized processes
• TO TO managing dynamic complex systemsmanaging dynamic complex systems
BasesBases Stock MarketStock MarketShipsShips CombatCombatBusinessBusiness
ADAPTIVE MANAGEMENTADAPTIVE MANAGEMENT
LET’S LOOK AT SOME . . .LET’S LOOK AT SOME . . .
• • BACKGROUNDBACKGROUND • • THEORYTHEORY • • EXAMPLESEXAMPLES
C H A O S
• CHAOS - MINOR PERTURBENCESCHAOS - MINOR PERTURBENCES CAUSE CATASTROPHICCAUSE CATASTROPHIC CONSEQUENCESCONSEQUENCES
- EDWARD LORENTZ - MIT- EDWARD LORENTZ - MIT
CHAOS EXISTS BECAUSE WE CANNOTCHAOS EXISTS BECAUSE WE CANNOTPRECISELY CALCULATE THE INITIALPRECISELY CALCULATE THE INITIALSTATE OF ANY SYSTEM.STATE OF ANY SYSTEM.
– TRAVELING SALESMANTRAVELING SALESMAN
THETHE TRAVELING TRAVELING SALESMANSALESMAN
5 CITIES = 12 POSSIBILITIES5 CITIES = 12 POSSIBILITIES10 CITIES = 181,440 POSSIBILITIES10 CITIES = 181,440 POSSIBILITIES24 CITIES = A COMPUTER THAT EVALUATES 1 MILLION24 CITIES = A COMPUTER THAT EVALUATES 1 MILLION POSSIBILITIES PER SECOND WOULD TAKE 9.8POSSIBILITIES PER SECOND WOULD TAKE 9.8 BILLION YEARS OR 2/3 THE AGE OF THE UNIVERSEBILLION YEARS OR 2/3 THE AGE OF THE UNIVERSE
CityCity AA
CityCity BB
CityCity CC
CitCityy DD
COMPLEXITYCOMPLEXITY
• OPPORTUNITY TO LOOK AT GLOBALOPPORTUNITY TO LOOK AT GLOBAL IMPLICATIONS OF FUNDAMENTAL UNITIMPLICATIONS OF FUNDAMENTAL UNIT INTERACTIONS.INTERACTIONS. - ATOMS- ATOMS
- GENES ( DNA )- GENES ( DNA )
COMPLEXITYCOMPLEXITY
. . . . TO CREATE A SYNTHESIS THAT. . . . TO CREATE A SYNTHESIS THAT CROSSES THE BORDERS OFCROSSES THE BORDERS OF STOVEPIPED DISCIPLINES TO SEE . . .STOVEPIPED DISCIPLINES TO SEE . . .
“ “ THE MACRO VIEW” THE MACRO VIEW”
““
EXAMPLES OF EXAMPLES OF COMPLEXITY IN BUSINESSCOMPLEXITY IN BUSINESS
“ EVOLVING SOLUTIONS VICE ENGINEERING THEM ”
• GENERAL MOTORS SAVES 1.5 MILLIONGENERAL MOTORS SAVES 1.5 MILLION PER YEAR IN PAINT COSTS ALONE.PER YEAR IN PAINT COSTS ALONE.
• SCIENTISTS USE COMPLEXITY TO SCIENTISTS USE COMPLEXITY TO CALCULATE DRY TIME OF CALCULATE DRY TIME OF CONCRETE.CONCRETE. - CALIFORNIA EARTHQUAKE - CALIFORNIA EARTHQUAKE 1993 1993
• JOHN DEEREJOHN DEERE - WORK SCHEDULES- WORK SCHEDULES
AN ANALOGYAN ANALOGY
• THE NEW YORK TAXI CABTHE NEW YORK TAXI CAB– HOW WOULD YOU SIMULATE ITHOW WOULD YOU SIMULATE IT IF YOU WERE FROM MARS?IF YOU WERE FROM MARS?
° BIG DISPATCHER THEORYBIG DISPATCHER THEORY
• COMPLEX ADAPTIVE SYSTEMCOMPLEX ADAPTIVE SYSTEM
– SIMPLE RULESSIMPLE RULES
° STOP FOR ANYTHING THAT WAVESSTOP FOR ANYTHING THAT WAVES° GO WHERE IT SAYSGO WHERE IT SAYS° GET PAID !GET PAID !
• RANDOMNESS LEADS TO EVOLUTION AND SOLVING OF RANDOMNESS LEADS TO EVOLUTION AND SOLVING OF DIFFICULT PROBLEMSDIFFICULT PROBLEMS• EVOLUTIONARY STRATAGIESEVOLUTIONARY STRATAGIES
COMPLE
COMPLE
XX
ADAPTIVEADAPTIVESYSTEM
S
SYSTEMSLL
II
NN
EE
AARR
RR
AAEE
NNIILL
NNOO
NN
CCHHAAOOSS
MM
CCOO
PPLLEEXXIITTYY
TWO QUALITIES OF TWO QUALITIES OF COMPLEX ADAPTIVE COMPLEX ADAPTIVE
SYSTEMSSYSTEMS
• SELF ORGANIZING SELF ORGANIZING • EMERGENT BEHAVIOREMERGENT BEHAVIOR - - ANTSANTS
- - AIRPORT LAVATORY AIRPORT LAVATORY
-- AIRLINE SEATING-- AIRLINE SEATING
_ Audience Participation_ Audience Participation
TWOTWO REQUIREMENTS REQUIREMENTS FOR COMPLEX FOR COMPLEX
ADAPTIVE SYSTEMSADAPTIVE SYSTEMS
• NON - LINEARITY NON - LINEARITY
• FEEDBACKFEEDBACK
• USING REFINED METRICS TO ENHANCE THEUSING REFINED METRICS TO ENHANCE THE MACRO VIEWMACRO VIEW
FEEDBACK - VALUATED STATE SPACEFEEDBACK - VALUATED STATE SPACE
NON-LINEARITY - NON-LINEARITY - EVOLUTIONARY STRATEGIESEVOLUTIONARY STRATEGIES
• BIOLOGICAL APPROACH TOBIOLOGICAL APPROACH TO INFORMATION MANAGEMENTINFORMATION MANAGEMENT
• QUANTIFYING TO DISCRETE LEVELS WHATQUANTIFYING TO DISCRETE LEVELS WHAT EACH TASK IS WORTH AS IT RELATES TOEACH TASK IS WORTH AS IT RELATES TO MISSION.MISSION.
VALUATED STATE SPACEVALUATED STATE SPACE
– DOES 16 MINS HAVE VALUE ?DOES 16 MINS HAVE VALUE ?
– IN A BINARY SYSTEM, ANYTHINGIN A BINARY SYSTEM, ANYTHING GREATER THAN 16 HAS NO VALUE. GREATER THAN 16 HAS NO VALUE.
( SECOND LEVEL METRICS )
EXAMPLE:EXAMPLE: FUEL TO A / C WITHIN 15 MINS. FUEL TO A / C WITHIN 15 MINS.
EXAMPLEEXAMPLEFUEL TO AIRCRAFTFUEL TO AIRCRAFT
MINUTES VALUEMINUTES VALUE 2020 95 95 1919 96 96 1818 97 97 1717 98 98 1616 99 99
15 15 100 100 1414 101101 1313 102102 1212 103103 1111 104104 1010 105105
GOAL GOAL STATSTATEE
MINSMINS --------------- --------------- VALUE STATEVALUE STATE
DIGITAL DARWINISMDIGITAL DARWINISMEVOLUTIONARY STRATEGIESEVOLUTIONARY STRATEGIES
INITIAL STATEINITIAL STATE IDEASIDEASPOSSIBILITIESPOSSIBILITIESMEASURESMEASURESMETRICSMETRICS
ASSESS THE FITNESS OFASSESS THE FITNESS OFEACH SOLUTION ON THEEACH SOLUTION ON THELANDSCAPELANDSCAPE
KILL POOR PERFORMERSKILL POOR PERFORMERS
RANDOM MUTATIONRANDOM MUTATION STOPSTOPWHEN ONE WHEN ONE SOLUTION SOLUTION ACHIEVES ACHIEVES PREDETERMINEDPREDETERMINEDFITNESSFITNESS
OR A GOALOR A GOALVALUATED STATE SPACEVALUATED STATE SPACE.
FITNESS LANDSCAPESFITNESS LANDSCAPES
S 0 . . . . .S 0 . . . . .
• MANAGEMENT IN A CHANGING LANDSCAPEMANAGEMENT IN A CHANGING LANDSCAPE MUST BE MORE ADAPTIVEMUST BE MORE ADAPTIVE
• THE THE NETWORK NETWORK WILL BECOME THE WILL BECOME THE CONTROL TOOL FOR MANAGERSCONTROL TOOL FOR MANAGERS
TWO ASPECTS OF NETWORKSTWO ASPECTS OF NETWORKS - - COGNITIVECOGNITIVE - PHYSICAL- PHYSICAL
• THE MANAGEMENT STRUCTURE MUST BETHE MANAGEMENT STRUCTURE MUST BE
- SELF-ORGANIZING- SELF-ORGANIZING - ADAPTIVE- ADAPTIVE
Changes in organizational structures equal changes in speed
of adaptation. Sears- top down structure, offices in one of
the tallest buildings in the world. Information flow followed structure
Wal-Mart- Same old flat building, information flow moves via network, business moves and adapts at the speed of light. Second only to DOD in the use of supercomputers.
DataData DataData
KnowledgeKnowledge DecisionDecision
DataData
DataData
ExecutionExecution
KNOWLEDGEDECISION EXECUTION
Norman AuginstineCEO, BOEING
“Layer upon layer of bureaucracy will not leave the demise of the organization to chance”.
S O M E D E M O S . . . .S O M E D E M O S . . . .
ADAPTIVE MANAGEMENTADAPTIVE MANAGEMENT SOFTWARESOFTWARE
ADAPTIVE MANAGEMENTADAPTIVE MANAGEMENT- SIMPLE RULES GOVERN COMPLEX SYSTEMS- SIMPLE RULES GOVERN COMPLEX SYSTEMS
DEMANDDEMAND RESPONSERESPONSE
TASK 1TASK 1
MAGICMAGICNUMBERNUMBER
VALUATED STATE SPACEVALUATED STATE SPACE
STOPSTOP
RESOURCERESOURCESS
PEOPLEPEOPLETIMETIME$$$$$$EQUIPMENTEQUIPMENT
TRNGTRNGMANNINGMANNINGQUALIFICATIONQUALIFICATION
0102030405060708090
100
Your Org
Your Org.com (AGGGREGATE)Your Org.com (AGGGREGATE)
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
0102030405060708090
100
Your Org
Your Org.com(AGGREGATE)Your Org.com(AGGREGATE)
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
0102030405060708090
100
SUPPLY OPS AIMD
DEPARTMENTDEPARTMENT
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
0
10
20
30
40
50
60
70
80
90
100
SUPPLYSUPPLY
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
IS CBQ FUELS ASD GALLEY
0
20
40
60
80
100
Demand Response
ASDASD
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
Rotable Pool Effectiveness
SUPPLSUPPLY Y A S DA S D
ROTABLE ROTABLE POOLPOOL
AIMD EXREPAIMD EXREP
0102030405060708090
100
EXREPS BENCHES GSE
AIMDAIMD
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
0102030405060708090
100
100 Div 200 Div 400 Div 600 Div
AIMDAIMD
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
0102030405060708090
100
BENCH 1 BENCH 2 BENCH 3
DIVISION 600DIVISION 600
PERCENT PERCENT VALUATEDVALUATEDSTATE SPACESTATE SPACE
SO . . SO . . ..
WHAT DOES ADAPTIVE MANAGEMENTWHAT DOES ADAPTIVE MANAGEMENTMEAN TO MEMEAN TO ME
HELPS YOU TO UNDERSTAND THE HELPS YOU TO UNDERSTAND THE LANDSCAPELANDSCAPE
DE-ENGINEERS YOUR BUSINESS SPACEDE-ENGINEERS YOUR BUSINESS SPACE IDENTIFIES “ THE SIMPLE RULES “IDENTIFIES “ THE SIMPLE RULES “ DEVELOPS A VALUATED STATE SPACE DEVELOPS A VALUATED STATE SPACE
FOR EACH MISSION/COMMODITYFOR EACH MISSION/COMMODITY
WHAT LIES AHEAD?WHAT LIES AHEAD?
THE SPEED OF BUSINESS WILL INCREASE THE SPEED OF BUSINESS WILL INCREASE INNOVATION WILL DISPLACE QUALITYINNOVATION WILL DISPLACE QUALITY““ADAPTIVE” IS ANOTHER WORD FOR ADAPTIVE” IS ANOTHER WORD FOR
INNOVATIONINNOVATION
SUMMARSUMMARYY
DEVELOP TOOLS TO MANAGE IN A DEVELOP TOOLS TO MANAGE IN A DYNAMIC ENVIRONMENTDYNAMIC ENVIRONMENT
$$$ SAVINGS$$$ SAVINGS OUTPACE THE COMPETION
THROUGH INNOVATION
OVERALL OBJECTIVESOVERALL OBJECTIVES
INNOVATION
THE DEFINING MEASURE OF SUCCESS IN BUSINESS IN THE
FUTURE
“INCREMENTALISM IS THE WORST ENEMY OF INOVATION”
Reading List
Complexity- Roger Llewen
At Home in the Universe- Stuart Kaufman
QUESTIONS ?QUESTIONS ?
QUESTIONS ?QUESTIONS ?QUESTIONS ?QUESTIONS ?
QUESTIONS ?QUESTIONS ?QUESTIONS ?QUESTIONS ?
QUESTIONS ?QUESTIONS ?